Published June 7, 2013
Startups could receive a boost with a recently passed bill that provides tax credits to those who invest in new ventures in South Carolina.
The S.C. House of Representatives passed the High Growth Small Business Access to Capital Act (H.3505) Wednesday by a 94-10 vote. The legislation has been sent to the Governor’s Office, and is awaiting signature.
The bill provides a state income tax credit of 35% of investments in qualified startups. The credit is to be taken half within the year of the investment and the remaining half in the following year.
The bill aims to encourage individual angel investors to invest in early-stage, high-growth businesses; increase the number of high-quality, high-paying jobs within the state; expand the economy by enlarging its base of wealth-creating businesses; and support businesses seeking to commercialize technology invented in the state’s higher education institutions, according to the bill.
Matt Dunbar, managing director of the Upstate Carolina Angel Network, said entrepreneurs and startup companies create net job growth in the state and nation, but they face huge hurdles to finding access to early-stage capital in South Carolina.
“The passage of this legislation marks an important day for the economic future of South Carolina,” Dunbar said in a news release. “This legislation will encourage potential angel investors to provide our entrepreneurs with the capital they need to create jobs, grow companies and fuel the economic future of our state.”
There is an annual cap of $100,000 per investor and $5 million in aggregate. Investors must meet the U.S. Securities and Exchange Commission's definition of an accredited investor, and no brokerage fees or commissions are allowed.
For businesses to qualify for investments under the bill, they must be headquartered in the state; started within the last five years; employ fewer than 25 people and accrue annual revenues of less than $2 million.
Greenville Chamber and Upstate Chamber Coalition lobbyists, together with Next entrepreneurs and allies, have been advocating this bill since its introduction as the Bill Wylie Entrepreneurship Act in 2011.
These entities want to attract and retain both investors and entrepreneurial talent in South Carolina.
“Early-stage, high-growth companies are major drivers of quality job growth and wealth in our state,” said John Moore, the Greenville Chamber executive vice president and head of Next, in a news release. “By providing tax credits to those who invest in these new ventures, South Carolina is enabling its most promising young businesses to compete more effectively with companies in other states for capital necessary to grow and become significant employers for the state.”
Approximately 25 other states have passed similar legislation, including Georgia and North Carolina, and have provided data to demonstrate that these programs are effective in attracting capital, growing jobs and creating economic growth and revenue for the state, according to a news release.
“South Carolina’s version of the legislation is unique in that the state will recover the value of the tax credit when an investor realizes a capital gain from an investment, so it’s truly a win-win-win for entrepreneurs, the state and the communities where these startup firms will have the chance to grow and prosper,” Dunbar said.