Provides for an angel investor income tax credit

Summary of provisions

Section 1: Amends section 606 of the tax law to establish an angel investor tax credit

-Credit will be twenty-five percent of the investment in a qualifying business, but not exceeding two hundred fifty thousand dollars

-a qualifying business is one that: (1) has gross revenues of less than one million dollars immediately preceding the year the credit is allowed for; (2) has no more than twen- ty five full time employees, sixty percent of whom must be a NYS resi- dent; (3) has operated in the state for no more than seven consecutive years; (4) has received no more than two million dollars in investments eligible for the credit from one or more than one angel investor

-an angel investor is an accredited investor as defined in rule 501 of regulation D of the Federal Securities Act of 1933 except for those who: (1) controls fifty percent or more of the qualifying business; (2) a venture capital company or any bank, savings and loan association, trust, insurance company or similar entity, whose normal business activ- ities include venture capital investment

Section 2: Amends section 210 of the tax law to establish an angel investor tax credit

-Credit will be twenty-five percent of the investment in a qualifying business, but not exceeding two hundred fifty thousand dollars

-a qualifying business is one that: (1) has gross revenues of less than one million dollars immediately preceding the year the credit is allowed for; (2) has no more than twen- ty five full time employees, sixty percent of whom must be a NYS resi- dent; (3) has operated in the state for no more than seven consecutive years; (4) has received no more than two million dollars in investments eligible for the credit from one or more than one angel investor

-an angel investor is an accredited investor as defined in rule 501 of regulation D of the Federal Securities Act of 1933 except for those who: (1) controls fifty percent or more of the qualifying business; (2) a venture capital company or any bank, savings and loan association,

trust, insurance company or similar entity, whose normal business activ- ities include venture capital investment

Section 3: Amends subparagraph (B) of paragraph 1 of subsection (i) of section 606 of the tax law to establish an angel investor tax credit

Section 4: This act shall take effect immediately and shall apply to personal income taxable years beginning on and after January 1, 2013.

Justification

New York has made significant progress in its economic recovery. In fact, for the seventh straight quarter venture capitalists invested more money and closed more deals with New York-based internet startups than ones in Boston. Last quarter, New York Internet tech companies closed $434 million worth of funding in 60 deals compared with Boston's $303 million in 40 deals. If this momentum is to continue, New York must look to adopt policies that will give individuals further incentives to invest in our State.

One way to spur this kind of investment is by adopting an Angel Investor tax credit. This credit would allow investors to take a credit against the New York State income tax for investments of at least $25,000 in a qualifying business. Wisconsin offers a 25 percent credit and has seen angel investments statewide increase from $30 million in 2005 to $180 million in 2010.

Angel investment tax credits are a win-win-win proposition. New business ventures benefit from an infusion of capital from the angel investors. The investors/taxpayers benefit from the tax credit, which effectively serves as an immediate return on their investments. Lastly, states bene- fit because the creation of new businesses increases employment and drives innovation, which ultimately enhance the local economy. Clearly, as an alternative to risking their funds in the Stock market or real estate, investors looking for that "sure thing" should consider angel investments.

Legislative history

None.

Fiscal implications

Undetermined.

Effective date

This act shall take effect immediately and shall apply to personal income taxable years beginning on and after January 1, 2013.