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2006 Nano Biz...in depth... im detail


US Federal and State nanotechnology advocates told to fund their California Innovation Initiative from the $300 billion repatriated under the Homeland Investment Act.

By Nick Massetti

San Jose , CA

Silicon Valley's ( US ) Congressman Mike Honda and California State Controller Steve Westly received advice this week on how to fund their California-focused nanotechnology initiatives. The proposal, from a small nanotechnology consulting group, came on the heels of other recommendations made by Honda and Westly's Blue Ribbon Task Force on Nanotechnology. (BRTFN).

A year in the making, their BRTFN consolidated its findings and made eight recommendations in a report titled: “NANOTECHNOLOGY. THINKING BIG ABOUT THINKING SMALL ”. The government leaders lauded the report with assurances that it would figure into their pursuit of “innovative state and federal strategies to ensure that nanotechnology thrives in California .”

One marquee recommendation called for the launching of “a ‘California Innovation Initiative' to take advantage of the powerful convergence of the very strong base of bio, info, and nanotechnology assets in California .” However, given that the cost of the proposals could easily reach the $1billion, the report was a bit light on identification of non-governmental funding sources. In most instances, relying on governmental spending is a way to insure there is someone else to blame for lack of funding later on. The most creative one called for exploring the use of California Pubic Employee and State Teacher Retirement assets as a “'funder of funds' for seed and early-stage investments in converging technologies”.

But instead, the unaffiliated consulting group urged these government officials to tap into a more practical and immediately available pot of gold. The path to this front-end of the nanotechnology rainbow is provided within the American Jobs Creation Act of 2004. Intended to “in-source” US jobs and dubbed by some as “The Homeland Investment Act”, it provided a significant tax incentive for U.S. companies with operations abroad to bring home or “repatriate” their earnings from those operations. Available only for 2005, the reduced tax rate of 5.25% (IRS Code Sec. 965) resulted in actual repatriated capital of nearly double what Congress had initially estimated.

The benefit for nanotechnology falls out of the Department of the Treasury's Set of Repatriation Guidance under Section. 965. ( http://www.treas.gov/press/releases/js2436.htm ) There the IRS significantly narrowed the field of investments to those specifically intended by Congress, i.e. high-tech R&D, educating and retraining the workforce, building facilities, funding startups, etc. Although participating companies were also required to have a Board of Directors approved “domestic reinvestment” plan, typically the only public disclosure has been through the required tax filings. Within those filings the clue has been when the 5.25% tax has been reported as a special one-time charge.

However, in an October 2005 report titled “Homecoming Victory”, the American Shareholders Association (ASA) provided the answer to just how many of these new dollars now reside in corporate bank accounts. See: http://www.americanshareholders.com/news/article.php?article=194

The ASA quoted the Wall Street Journal saying: “In nine months the law has increased the flow of repatriated foreign capital by a whopping $225 billion. J.P. Morgan estimates that another $75 billion will return to America in the fourth quarter. About half of these returning funds were profits from pharmaceutical companies and much of the rest from such high-tech firms as Dell, IBM and Intel.” “Intel CEO Paul Otellini says that some of the $6 billion that his company repatriated will finance expansions of semiconductor plants in Arizona , Colorado and Massachusetts , creating 1,600-new and high-paying jobs. Dell used $100 million of its capital to build a 1,500-worker factory in North Carolina .” During the same month the San Jose Mercury News reported repatriations by Merck of $15 billion! Pfizer added $36.9 billion. “Who better to invest some of this money into our nanotechnology initiatives than companies like the pharma-giants? Won't they reap the biggest returns from the nanotech engineered biomeds?” said Paul Hilton of Pico-Technologies, one of the supporters of the funding proposal.

Unfortunately the ASA also identified a potential loophole that could be draining a lot of these dollars away from potentially financing nanotechnology initiatives. It reported: “It's true that much of this cash has gone to clean up balance sheets, either buying back stock or retiring debt, but companies that are stronger financially tend to create more jobs.” Given that 2005 was a year of blockbuster profits, using Homeland Investment funds in that way seems by all accounts more like hiding something under the sheets. At the bottom line, the recommended funding proposal envisions all of the BRTFN recommendations being amply funded if even only 1% of that $300 billion is applied to their intended purposes, i.e. investing in high-tech R & D, education & retraining, and seed funding.

Representative Honda and State Controller Westly were asked to use their unique positions, as well as those of their own prominent BRTFN members, to ensure that the investments planned for some of that banked capital underpins their strategies to help nanotechnology thrive in California . Furthermore it was suggested that they seek out the help of The Silicon Valley Leadership Group, who now represent 203 of Silicon Valley 's most respected employers , and were founded on the premise that local employers should be actively involved in working with government to find innovative solutions .

Indeed they were encouraged to THINK BIG, tap that pot of gold, and enable nanotechnology's rainbow of possibilities right now.

Contact:Nick Massetti



This story has been adapted from a news release -
Diese Meldung basiert auf einer Pressemitteilung -
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