Delaware’s ET International, Inc. was among 100 companies profiled in a new report released today by the Science Coalition – a nonprofit, nonpartisan organization of more than 50 of the nation’s leading public and private research universities, including the University of Delaware. The report, titled, “Sparking Economic Growth 2.0: Companies Created from Federally Funded University Research, Fueling Innovation and Economic Growth” highlights companies that trace their roots to federally funded university research. The companies in the report were self-selected by the member universities of the Science Coalition and are illustrative of how federal research can spur the creation of companies that bring innovations to market, create jobs, and contribute to economic growth.
ET International, Inc. (ETI) was founded in 2000 by Dr.Guang Rong Gao, a distinguished professor in computer and electrical engineering at the University of Delaware. The company originated in the university’s scientific labs and is now a leading provider of system software for advanced many-core computing systems ranging from supercomputers for highly scientific research to high-performance portable devices for smart phones. In a statement to the Science Coalition, the company noted that “Federally supported research completed at the University of Delaware and ETI” by Dr. Gao “allowed his deep-rooted belief in fundamental dataflow principles technologies to be successfully explored, designed and implemented…”
Indeed, ETI’s first phase of growth generated over $22 million in investments from the industry’s most renowned High Performance Computing organizations including The Defense Advanced Research Projects Agency, the Department of Defense, the Department of Energy, IBM, Intel, Cray, and Samsung. ETI’s software solutions increase performance, computing power, and efficiency to allow users to fully realize the power of many-core architectures. Built on a decade of highly complex research, ETI currently provides software, applications and custom engineering services for the energy, defense, semiconductor, digital media, and financial markets.
During a time when federal funding for R&D has been on the decline, with funding levels in 2013 at historic lows, ETI and the other companies highlighted in the report show the high return on investment yielded by federal funding of basic scientific research. Senator Coons is committed to ensuring that our nation continues to support innovative research and companies like ETI that create jobs and keep America on the cutting edge of technological innovation.
Senator Coons and 11 colleagues held a press conference on October 29, 2013 to announce the launch of Manufacturing Jobs for America, a campaign to refocus Washington's attention on manufacturing jobs. The effort comprises 40 bills from 22 senators, many of which are bipartisan, that will help America's manufacturers grow and prepare American workers for careers in advanced manufacturing.
Chris opened the press conference, discussing the need for progress on legislation that will strenghten America's modern workforce, secure a more level global playing field, expand access to capital for new and smaller-scale manufactuerers, and establish a national manufacturing strategy. Citing the success of Miller Metal Fabrication in Bridgeville, Delaware, which has won manufacturing work back from China, Italy, and other countries, Chris urged renewed bipartisan efforts to accelerate America's manufacturing revival.
Participants in Tuesday's press conference included Senators Debbie Stabenow (D-Mich.), Tammy Baldwin (D-Wis.), Richard Blumenthal (D-Conn.), Joe Donnelly (D-Ind.), Al Franken (D-Minn.), Jeff Merkley (D-Ore.), Chris Murphy (D-Conn.), Mark Pryor (D-Ark.), Jack Reed (D-R.I.), Brian Schatz (D-Hawaii), and Jeanne Shaheen (D-N.H.).
Watch Chris' opening remarks:
Watch a highlight reel of senators' remarks at the press conference:
From Roll Call: Senator Chris Coons, a member of the Senate Budget Committee and Congressional Manufacturing Caucus, authored an op-ed that appeared in Tuesday’s edition of Roll Call on the need for an R&D tax credit for innovative start-up businesses.
Over the past three decades, the research and development tax credit has helped tens of thousands of successful American companies create jobs by incentivizing investment in innovation. There is little doubt that it has strengthened our economy and deserves to be made permanent. But with America’s global manufacturing competitiveness at stake, it’s time Congress shows the same type of support for entrepreneurs and young companies.
Small and startup businesses are driving our nation’s economic recovery and creating jobs by taking risks to turn their ideas into marketable products. Over the past few decades, firms that were younger than five years old were responsible for the overwhelming majority of new jobs in this country.
There are plenty of federal programs designed to help traditional small businesses — retail stores, service providers, restaurants and others — grow from employing one person to employing 10 people, but how do we help the “gazelle” companies reach their potential and grow from employing five people to employing 50? Or 500? Or 5,000?
For these innovators to grow and create jobs, we have to support them in their critical early stages.
Senator Coons went to the Senate floor this afternoon to lay out an idea he's been working on to help entrepreneurs and the leaders of young businesses to grow their companies by investing in research and development.
The Research and Development Tax Credit has helped incentivize innovation at established businesses for 30 years, which is why Chris is such an ardent supporter of the credit and has twice introduced legislation to make it permanent. The problem is, young companies that aren't yet profitable can't benefit from the tax credit.
So how can the federal government help those businesses grow and create jobs?
Chris' idea would create a tradable version of the R&D Tax Credit. Innovative young companies looking to expand their research and development efforts would be eligible for this "innovation credit," which they would then be able to sell to a bigger, more established company. The bigger company gets the tax credit, while the young company gets a cash infusion.
It's win-win.
In his remarks Monday afternoon, Chris talked about two innovative Delaware companies that might be able to utilize such a tradable credit like this — Elcriton in New Castle and Evozym in Newark. You can watch the speech above or click here to read the full transcript.
The Senator is eager for feedback on the idea, and invited other legislators and business leaders to weigh-in and help shape the idea before he introduces it as legislation. You can share your own opinion on the idea by clicking here.
Delaware's largest newspaper, the News Journal, on Saturday published an editorial voicing support for the Job Creation Through Innovation Act -- Senator Coons' first bill, which he introduced last week.
"By increasing the R&D tax credit from 14 percent to 20 percent and making it refundable, the "little guy" has an incentive to be innovative in markets ruled by bigger companies," the paper wrote.
"Being able to quickly hire workers to design products and conduct quality assurance testing also recycles some of that tax credit back into local economies."
Senator Coons' first bill, the Job Creation Through Innovation Act, will help jumpstart domestic manufacturing and create conditions to help businesses grow and create high-quality, high-paying middle-class jobs. Here are answers to seven key questions about the bill:
Q: What will this bill to do help Delaware?
The Job Creation Through Innovation Act will help Delaware businesses innovate, create jobs and stay globally competitive. First, it increases and makes permanent the research and development tax credit. It creates a Domestic Manufacturing Credit to provide an incentive for companies to invest and create jobs here at home. Right now many new, small businesses are ineligible for the R&D tax credit because they aren’t profitable yet, so this bill creates a new Small Business Innovation credit to provide tax relief to these businesses. Finally, it extends two programs created by the Recovery Act designed to promote clean energy technology and investment.These incentives were heavily used and critical to energy project developers and Delaware manufacturers, as well as to the production of clean and green energy, and the expansion and retrofit of clean and green production capacity.
Q: Why is a permanent R&D tax credit needed?
The R&D tax credit has beentemporarily extended 14 times since it was enacted 30 years ago and it is currently set to expire at the end of the year. This lack of permanence is problematic. Many R&D projects have multi-year planning horizons. If firms aren’t assured they will benefit from the credit over the expected life of an R&D project, they are unlikely to include it in their determination of annual R&D budgets. This renders the credit essentially irrelevant, given its purpose is to incentivize firms to invest more in R&D than they otherwise would have.
Q: Why is research and development important to the U.S.?
The formula for our economic success has long been the unstoppable combination of an innovative citizenry and investment in cutting-edge research. This is what generates companies that invent new products, often high-tech and research-driven products, and, along with these, create skilled jobs right here in the United States. Many of these jobs are in the manufacturing sector. According to the National Association of Manufacturers, the average manufacturing worker in our country earned roughly twenty-five percent more than workers in all other sectors – that’s over seventy-two thousand dollars last year, including pay and benefits, while the average non-manufacturing worker earned less than fifty-nine thousand. Manufacturing jobs, created as a result of R&D investment and innovation, mean higher wages and better benefits.
Q: How does the Domestic Manufacturing Credit work? How would you target this at manufacturers?
The provision incentivizes keeping jobs in the United States by increasing the existing R&D tax credit for companies that produce most of their goods domestically. The Domestic Manufacturing Credit would increase incrementally to reward a higher percentage of domestic production – an additional 2 percentage points for 50% to 60% of sales from domestically-produced goods; up to a 10 percentage point increase for companies with 90% to 100% of their receipts from domestic production. For example, a company with 100 percent domestic production that would normally receive a 20% R&D tax credit would receive a 30% credit under this proposal.
Q: Why does the legislation include a new Small Business Innovation Credit?
Under current law, the R&D tax credit is non-refundable, which is to say that only profitable firms can benefit from credit. This poses a special problem for small, fledgling research-intensive firms. In recent decades, numerous commercially successful technological innovations have originated with such firms. Many of these firms spend substantial sums on R&D during their first few years, despite experiencing large financial losses. For this reason, the legislation would create a new small business innovation credit by allowing firms with 500 employees or less to claim a new, refundable R&D credit.
Q: What Delaware businesses could benefit from this proposal?
Delaware firms, both small and large, that invest significantly in R&D in the United States and create high-paying jobs associated with that R&D stand to benefit the most from this legislation. Delaware’s agricultural, biotech, chemical, energy and manufacturing sectors rely on the R&D tax credit to grow and create jobs.
Q: There are a number of energy tax incentives in place, why are the two energy incentives so important to Delaware?
It is important to send a longer more certain signal if we are going to reduce our dependence on fossil resources by producing clean energy in the U.S. The renewable energy production and advanced energy manufacturing tax credits were critical to keeping clean energy projects and jobs in place in the last several years. The incentives for in the Act work in tandem to send that signal.
During the meltdown, the tax equity market was frozen which threatened to sideline thousands of renewable projects. Through the Treasury Grants Program for renewables, Delaware companies have been able to support dozens of solar and wind projects. At the same time, Senator Coons wants the U.S. to be a leader in sourcing products for renewable energy from domestic manufacturers. Thus, the advanced energy manufacturing credit supports a range of clean tech manufacturing projects such as building materials, wind turbine towers and blades, solar equipment, batteries and many other clean tech projects.