Thursday, October 25, 2018

Tax Breaks and $220 Million for California Stem Cell Agency

The California stem cell agency, which is facing its financial demise, is seeking assurances of "continued tax breaks" for private donors who are being courted for $220 million to support the enterprise, Bloomberg Law reported this week. 

The article by Joyce Cutler referred to the effort to bridge a looming and major stem cell funding gap. The agency says it will run out of cash for new awards at the end of next year. But it does not see additional public funding until November 2020, when the agency hopes that California voters will refinance it with $5 billion from a yet-to-be written ballot initiative. 

Cutler wrote,
"Closing the deal, however, involves getting assurances from elected officials of continued tax breaks to get donors to open their checkbooks and keep CIRM operating until another bond measure can be passed." 
CIRM is the abbreviation for the California Institute for Regenerative Medicine, the formal name of the stem cell agency. It was created in 2004 by voters who provided it with $3 billion in state bonds, but no more. 

Asked for comment by the California Stem Cell Report, Kevin McCormack, senior director for communications at CIRM, said,
"With regard to the tax deductibility issue, that’s really out of our hands but, of course, we’re hopeful that all incentives to potential donors are preserved going forward."
Cutler wrote, 
"Contributions to state agencies currently are deductible from income under state and federal law, H.D. Palmer, state Department of Finance spokesman, told Bloomberg Law in an email.
"'Going forward, that’s going to fall to the next folks who get the keys to the car' in the governor’s office and Legislature, who will decide whether the California deductions remain.
"But the federal Internal Revenue Service is considering regulations to disallow deductibility if the tax credit is for more than 15 percent of the contribution. The Tax Cuts and Jobs Act of 2017 limits the amount of state and local taxes (SALT) an individual can deduct on taxes to $10,000 a year. The proposed regulations crack down on state workarounds to the SALT deduction cap."
Jonathan Thomas, chairman of the CIRM board, is leading the effort to raise funds privately. Bob Klein, who preceded Thomas as chairman, has a role but the agency has declined to go into details. Klein is a real estate investment banker and founder and chairman of Americans for Cures, a nonprofit organization supporting stem cell research. 

Klein has said he has a poll that shows that more than 70 percent of Californians support refinancing the agency. But he has declined to release the poll or identify the firm that provided it when asked by the California Stem Cell Report.  

Klein oversaw the writing of the ballot initiative that created the stem cell agency in 2004 and led the electoral campaign on its behalf. He has said he will try again in 2020 if polls show sufficient support. 

At last week's CIRM board meeting, Thomas gave a short report on the private fundraising effort, which has been underway for many months. He did not announce any contributions or discuss the tax break issue. 

At the meeting, board member Jeff Sheehy expressed concern about progress on a possible 2020 bond measure, noting that there is a relatively short amount of time to mount a major political effort.

Art Torres, vice chairman of the board and a former state legislator, said no real effort can be mounted until after the elections next month. Torres and CIRM general counsel Scott Tocher also noted there are legal limits on what the agency can do in terms of a ballot campaign. 
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