LANSING – Most of an aid package for start-up businesses was vetoed Friday by Gov. Jennifer Granholm, though she signed a credit aimed at encouraging development of high-tech companies because she said it was focused and fiscally responsible.

The action came two days after Senate Majority Leader Ken Sikkema (R-Wyoming) first indicated the governor’s proposed cigarette tax increase (HB 5632) would be passed only in conjunction with approval of the GOP’s JOBS II package providing a variety of tax breaks and other incentives intended to encourage business growth.

The governor said the start-up measure she signed (HB 5331, PA 126), one of two main bills in the package, provides a limited, focused single business tax credit to companies that will play a key role in the state’s economic future. Unlike criticisms of other bills she vetoed, she said this measure also bases the credit on the current financial conditions of a qualifying business.

The bill, which defines businesses eligible for all the tax breaks provided in other measures in the package, provides an SBT credit equal to a company’s tax liability if it has no profit for two consecutive years. The credit would be applied for five tax years, beginning in 2006.

Eligible businesses are those with up to 25 workers, sales of less than $1 million, has research and development expenses equal to 15 percent of total expenses, is not publicly traded, and was in the first two years of liability to contribute to the state’s unemployment fund.

“We’re disappointed to see Gov. Granholm provide tax dollars by the boatload to a small number of hand-picked companies, but offer nothing to help smaller start up businesses. These bills received overwhelming support from both legislative Democrats and Republicans,” said House Republican spokesperson Keith Ledbetter.

The second main bill in the package, SB 863 applying income tax credits to start-up firms, was targeted because it purports to provide relief to businesses with no tax liability, she said. Another bill, HB 5342, purports to give tax breaks to start-up businesses in an enterprise zone, but the governor said no firm currently eligible would qualify for an exemption.

“I share the goal of job creation in Michigan and applaud the effort to look for ways to grow our economy,” Granholm said. She said she could sign some of the bills if the deficiencies are corrected.

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