Reporter Bernadette Tansey of the San Francisco Chronicle produced a primer on the royalty tax law issue affecting the California stem cell agency. Here are a few excerpts.
"A state would be barred from using tax-exempt bonds to build a sewage treatment system tailored to the needs of a manufacturing plant in an area where few other ratepayers need such service.
"To guard against such selective private boons, the IRS looks not only at who is benefiting from the bond money but also at who is repaying the state bond debt. If private business involvement is too high on both counts, the IRS withholds tax-exempt bond status.
"The question is whether these rules could raise any barriers for the stem cell institute, whose grants can be sought by private biomedical firms as well as private research institutions and state-funded universities. The grants to businesses might not pose a problem by themselves, unless the state also repays the bonds with a significant level of revenue coming back from the businesses."
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