In a move aimed at sparking job growth, a South Carolina House panel is considering a measure that would provide a tax credit to angel investors who invest in the State. While the details of the two versions of the bill (H.3044 or H.3270) are still being debated, it has several goals that it hopes to accomplish. Among those are encouraging individual investors to invest in early stage, high growth, job-creating businesses in South Carolina and enlarging the number of high quality jobs within the State.
While the details of the bill are still being debated, both of the current versions of the act limit the credit to $100,000 per individual. In addition, the credit is nonrefundable – meaning that the credit can not exceed the individuals total income tax liability. And unused credit amount is allowed to be carried forward for ten years from the taxable year in which the qualified investment was made.
One important detail is that in order for an angel investor to qualify for the proposed credit, they must file an application for the credit by December 31st of the year in which the qualified investment was made. This is means that the investor can not wait to file this with his/her tax return which isn’t due until April 15th of the following year.
Also, in order to receive the credit, the investors application must be approved by the Department of Revenue. They will look at the type of investment, the qualifications of the investor and several other factors detailed in the act to determine if the investor qualifies. The aggregate amount of all of the credits allowed to all taxpayers can not a specified amount (one version of the bill says $3 million, and the other version says $6 million). If the total amount of approved applications exceeds that specified, then investors will only receive a portion of their credit – so that the total calculates to whatever the maximum amount is.
When asked about the act, our local Representative from SC House District 47, South Carolina Representative Tommy Pope, said “Hopefully this and similar measures will create an environment in our state that will draw the investment capital needed to re-start our local economy. At a minimum, these measures are needed to keep us competitive with our border states. Some decry the tax break for the “angel” investor but unfortunately the reality is they will put their money where they can get the best return, and we sorely need such investments.”
Almost half the states, including neighboring North Carolina, already have similar credits in place (N. C. Gen. Stat § 105-163. 010). Passage of a similar act in South Carolina could be one more thing that the state must do to lure investment dollars into the State. North Carolina allows for a credit equal to 25% of the investment, just as is considered in South Carolina, but it has a maximum of $50,000 per investor per year and only allows for a 5 year carry-forward.
The Act defines an angel investor in the same manner that the US Securities and Exchange Commission defines one – an individual with a net worth of more than $1 million, or who makes at least $200,000 a year personally or $300,000 as a couple.
Keep in mind that this Act is still not law. Lawmakers must agree on a version of the bill and it must be signed by Governor Haley.
SC bill would give tax breaks to wealthy investors
State Angel Investor Tax Credit Programs – Summary from the State of Connecticut’s Website