Quantum technology companies set for big tax incentives under new law

[June 27, 2024]  By ANDREW ADAMS
Capitol News Illinois
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CHICAGO – Gov. JB Pritzker on Wednesday gave final approval to a plan to bolster the state’s tech industry, including an incentives package – backed by $500 million in the state budget – aimed at making Illinois the nation’s leader in quantum computing.

The package also expands tax credits for the film industry, extends a tax credit program for research and development by five years, and broadens the eligibility for companies seeking tax credits under programs initially launched to help the electric vehicle and microchip industries.

Proponents of the legislation, which include a who’s who of business leaders and representatives of organized labor, say it will help attract businesses to the state, encourage growth and generate jobs. The programs will generate an estimated $21 billion in new state revenue over the next 30 years, according to the governor’s office.

The largest new program set up in the legislation would designate a “quantum campus” somewhere in the state. Businesses in that area would receive tax breaks on construction, materials purchase and use taxes, similar to an existing enterprise zone program.

This is tied to $500 million in capital funding, which was approved earlier this month as part of the state’s budget for the upcoming fiscal year. That includes $100 million in funding for construction at the site, $200 million for a cryogenic facility and $200 million in matching funds for federal grant programs. That’s on top of $200 million the state spent on quantum computing four years ago.

The legislation signed Wednesday also opens up some existing programs to quantum computing companies, notably the Manufacturing Illinois Chips for Real Opportunity, or MICRO, program, created in 2022 to boost the semiconductor industry.

While site selection for the quantum campus is underway, it will likely be in or near Chicago, which is already home to the Chicago Quantum Exchange, a partnership between major universities in the region and Chicagoland’s two national labs, as well as the Bloch Quantum Tech Hub, a federally supported research hub. The city is also home to several quantum startups such as EeroQ, qBraid and memQ.

The technology has attracted significant attention – with governments around the world putting billions into researching it – for its potential to upend computing, communications and several fields of research.

Quantum technologies rely on the often counterintuitive behavior of subatomic particles, which exist in multiple positions at once until they are observed and can be “entangled” so that when an action is taken on one particle, the same effect is felt by another particle. These properties, if properly engineered, result in machines that can be orders of magnitude more powerful than building-sized supercomputers.

“Even modestly sized quantum computers can store more information than atoms in the observable universe,” David Awschalom, professor of quantum science and engineering at the University of Chicago, told Capitol News Illinois.

Other benefits of the technology when compared to traditional computing come from the speed at which it operates. In 2019, a research team at Google published a paper claiming that their computer conducted a task in 200 seconds that would have taken a modern supercomputer roughly 10,000 years to complete.

That machine utilized 53 qubits – short for quantum bit, the basic unit of information in computing. With each additional qubit, according to Awschalom, machines double in performance, leading to exponentially more powerful computers.

Last year, researchers at IBM unveiled what they say is a quantum computer chip with 1,121 qubits.

Still, the field is young enough that its future remains uncertain. Quantum machines can be “noisy,” since simply observing their components causes them to change their behavior. This requires that the core pieces of the machine be sealed off from the outside world, making a subfield of research into quantum error correction an unsolved technical issue.

At this early stage, it’s also hard to nail down exactly how quantum technology will be used. Awschalom said the development of quantum technology could be as impactful as early research into the transistor in the 1940s and 50s – a component that makes modern computers possible.

“No one at the time thought about integrated circuits, no one could see putting billions of them on a chip. That wasn't even on people's radar” he said. “Now what about GPS? Now what about my cell phone? So today with the birth of this new technology, one of the most exciting things is it's likely the very highest impact things are still in front of us. We may not even see them yet.”

Gov. JB Pritzker signs a package of economic development legislation into law, surrounded by lawmakers, business leaders and representatives of organized labor. (Capitol News Illinois photo by Andrew Adams)

Pritzker said the state needs to capture the industry at this early stage – when few people can explain what a quantum computer is and practical use cases are still theoretical – to avoid repeating mistakes made 30 years ago with the internet. He pointed out that the first web browser and early internet startups like PayPal and YouTube were created in Illinois.

“We were poised in the early 90s and late 80s to be the leading state for development of the internet and most people had no idea what the internet was in 1990…” Pritzker said. “Nobody in the state had a strategy for ‘how do we keep those companies or the development of that industry in Illinois?’ There was no strategy and it got up and left.”

In an application for a funding designation from the federal government, the Bloch Quantum Tech Hub – Chicago’s federally supported research hub – claimed that by 2035, it would generate “$8.7B in annual economic output and create 5,300-8,000 high-paying jobs.”

Incentives for green tech, film, R&D

The Pritzker administration and Illinois lawmakers’ attention to quantum computing mirrors state involvement in other industries, such as electric vehicles, semiconductors and the film industry.

Under one of the newest of these, the Reimagining Energy and Vehicles Program, the state has given $1 billion in credits to 10 manufacturing companies in Illinois that have some connection to the electric vehicle industry or renewable energy. These deals are expected to create 4,600 new jobs and require companies to retain 7,200 existing jobs, according to the Department of Commerce and Economic Opportunity.

The law signed Wednesday expands the program to now include companies in their research and development phases, steel manufacturers with net zero carbon emissions and companies that build electric aircraft.

Intersect Illinois, an economic development agency created by then-Gov. Bruce Rauner, has brokered many of the largest business deals in the state since its creation 8 years ago. Its chairman told Capitol News Illinois that tax credit programs are a “key part” of the state’s toolkit, but not the only reason companies set up shop in the state.

“State incentives such as the REV (Reimagining Energy and Vehicles) Act have helped to attract significant investment and thousands of good paying jobs from EV companies including Rivian, Gotion and TCCI,” Intersect Illinois chair John Atkinson said in a statement. “At the same time, those companies noted the state’s infrastructure and workforce as reasons for growing here, along with state support – it’s the complete package.”

Pritzker defended this industry-specific model of economic development as a way to give Illinois the edge in industries where the state has a “right to win” and expand the number of industries Illinois can rely on during economic downturns.

“When we go through difficult economic times as a nation or across the world, Illinois tends not to get, you know, drawn down as much as some other places that have one or two industries that they rely upon,” Pritzker said Wednesday.

In addition to programs boosting Illinois’ industrial strategy, the new law also expands one of Illinois’ most popular and longest-running tax credit programs.

The Economic Development for a Growing Economy program, or EDGE, created 25 years ago to incentivize business relocation and expansion, will now offer 15-year benefits packages for companies set to create over 100 jobs, five years longer than what is currently offered.

In 2022, the most recent year for which data is available, the program handed out $38.2 million in credits to 38 companies around the state, according to reports filed with the Department of Commerce and Economic Opportunity.

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of print and broadcast outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.