Bill S7403-2011

Provides for an angel investor income tax credit

Provides for an angel investor income tax credit for investments in qualified businesses that exceed $25,000.

Details

Actions

  • May 9, 2012: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Memo

BILL NUMBER:S7403

TITLE OF BILL: An act to amend the tax law, in relation to providing for an angel investor tax credit

PURPOSE: To institute an angel investor tax credit to incentivize business investments in New York State

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 twenty five full time employees, sixty percent of whom must be a NYS resident; (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 activities 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 twenty five full time employees, sixty percent of whom must be a NYS resident; (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 activities 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 benefit 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.


Text

STATE OF NEW YORK ________________________________________________________________________ 7403 IN SENATE May 9, 2012 ___________
Introduced by Sen. ROBACH -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Govern- ment Operations AN ACT to amend the tax law, in relation to providing for an angel investor tax credit THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 606 of the tax law is amended by adding a new subsection (uu) to read as follows: (UU) ANGEL INVESTOR CREDIT. (1) ALLOWANCE OF CREDIT. A TAXPAYER, WHO IS AN ANGEL INVESTOR, AS DEFINED BY SUBPARAGRAPH (II) OF PARAGRAPH THREE OF THIS SUBSECTION, SHALL BE ALLOWED A CREDIT, TO BE COMPUTED AS HEREIN- AFTER PROVIDED, AGAINST THE TAX IMPOSED BY THIS ARTICLE, FOR INVESTING TWENTY-FIVE THOUSAND DOLLARS OR MORE IN A QUALIFYING BUSINESS. THE AMOUNT OF THE CREDIT SHALL BE TWENTY-FIVE PERCENT OF THE INVESTMENT IN THE QUALIFYING BUSINESS UP TO BUT NOT EXCEEDING TWO HUNDRED FIFTY THOU- SAND DOLLARS. (2) APPLICATION OF CREDIT. IF THE AMOUNT OF CREDIT ALLOWABLE UNDER THIS SUBSECTION FOR ANY TAXABLE YEAR SHALL EXCEED THE TAXPAYER'S TAX FOR SUCH YEAR, THE EXCESS MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS, AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS. (3) DEFINITIONS. FOR PURPOSES OF THE CREDIT DESCRIBED IN THIS SUBSECTION: (I) "QUALIFYING BUSINESS" SHALL MEAN A BUSINESS ENTERPRISE, INCLUDING A SOLE PROPRIETORSHIP, PARTNERSHIP OR CORPORATION THAT: (A) HAS NOT YET GENERATED REVENUE OR HAS GROSS REVENUES, ALONG WITH THE GROSS REVENUES OF ITS AFFILIATES AND RELATED MEMBERS, NOT EXCEEDING ONE MILLION DOLLARS FOR THE TAXABLE YEAR IMMEDIATELY PRECEDING THE YEAR THE TAXPAYER IS ALLOWED A CREDIT UNDER THIS SUBSECTION. FOR PURPOSES OF THIS PARAGRAPH, THE TERM "RELATED MEMBER" SHALL HAVE THE SAME MEANING AS SET FORTH IN CLAUSES (A) AND (B) OF SUBPARAGRAPH ONE OF PARAGRAPH (O) OF SUBDIVISION NINE OF SECTION TWO HUNDRED EIGHT OF THIS CHAPTER, AND THE TERM "AFFILIATES" SHALL MEAN THOSE CORPORATIONS THAT ARE MEMBERS OF THE
SAME AFFILIATED GROUP (AS DEFINED IN SECTION FIFTEEN HUNDRED FOUR OF THE INTERNAL REVENUE CODE) AS THE TAXPAYER; (B) HAS NO MORE THAN TWENTY-FIVE FULL-TIME EMPLOYEES, OF WHICH AT LEAST SIXTY PERCENT ARE EMPLOYED IN NEW YORK STATE; (C) HAS OPERATED IN THE STATE FOR NO MORE THAN SEVEN CONSECUTIVE YEARS; AND (D) HAS RECEIVED NO MORE THAN TWO MILLION DOLLARS IN INVESTMENTS ELIGIBLE FOR THE CREDIT DESCRIBED IN THIS SUBSECTION FROM ONE OR MORE THAN ONE ANGEL INVESTOR; (II) "ANGEL INVESTOR" SHALL MEAN AN ACCREDITED INVESTOR AS DEFINED IN RULE 501 OF REGULATION D OF THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED; BUT SHALL NOT INCLUDE: (A) AN INVESTOR WHO CONTROLS FIFTY PERCENT OR MORE OF THE QUALIFYING BUSINESS RECEIVING THE INVESTMENT SUBJECT TO THE CREDIT DESCRIBED BY THIS SUBSECTION; OR (B) A VENTURE CAPITAL COMPANY OR ANY BANK, SAVINGS AND LOAN ASSOCI- ATION, TRUST, INSURANCE COMPANY OR SIMILAR ENTITY, WHOSE NORMAL BUSINESS ACTIVITIES INCLUDE VENTURE CAPITAL INVESTMENT. S 2. Section 210 of the tax law is amended by adding a new subdivision 45 to read as follows: 45. ANGEL INVESTOR CREDIT. (A) ALLOWANCE OF CREDIT. A TAXPAYER, WHO IS AN ANGEL INVESTOR, AS DEFINED BY SUBPARAGRAPH (II) OF PARAGRAPH (C) OF THIS SUBDIVISION, SHALL BE ALLOWED A CREDIT, TO BE COMPUTED AS HEREIN- AFTER PROVIDED, AGAINST THE TAX IMPOSED BY THIS ARTICLE, FOR INVESTING TWENTY-FIVE THOUSAND DOLLARS OR MORE IN A QUALIFYING BUSINESS. THE AMOUNT OF THE CREDIT SHALL BE TWENTY-FIVE PERCENT OF THE INVESTMENT IN THE QUALIFYING BUSINESS UP TO BUT NOT EXCEEDING TWO HUNDRED FIFTY THOU- SAND DOLLARS. (B) APPLICATION OF CREDIT. THE CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR SHALL NOT REDUCE THE TAX DUE FOR SUCH YEAR TO LESS THAN THE HIGHER AMOUNT PRESCRIBED IN PARAGRAPHS (C) AND (D) OF SUBDIVI- SION ONE OF THIS SECTION. HOWEVER, IF THE AMOUNT OF CREDIT ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE TAX TO SUCH AMOUNT, ANY AMOUNT OF CREDIT THUS NOT DEDUCTIBLE IN SUCH TAXABLE YEAR MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS. (C) DEFINITIONS. FOR PURPOSES OF THE CREDIT DESCRIBED IN THIS SUBDIVI- SION: (I) "QUALIFYING BUSINESS" SHALL MEAN A BUSINESS ENTERPRISE, INCLUDING A SOLE PROPRIETORSHIP, PARTNERSHIP OR CORPORATION THAT: (A) HAS NOT YET GENERATED REVENUE OR HAS GROSS REVENUES, ALONG WITH THE GROSS REVENUES OF ITS AFFILIATES AND RELATED MEMBERS, NOT EXCEEDING ONE MILLION DOLLARS FOR THE TAXABLE YEAR IMMEDIATELY PRECEDING THE YEAR THE TAXPAYER IS ALLOWED A CREDIT UNDER THIS SUBDIVISION. FOR PURPOSES OF THIS PARAGRAPH, THE TERM "RELATED MEMBER" SHALL HAVE THE SAME MEANING AS SET FORTH IN CLAUSES (A) AND (B) OF SUBPARAGRAPH ONE OF PARAGRAPH (O) OF SUBDIVISION NINE OF SECTION TWO HUNDRED EIGHT OF THIS CHAPTER, AND THE TERM "AFFILIATES" SHALL MEAN THOSE CORPORATIONS THAT ARE MEMBERS OF THE SAME AFFILIATED GROUP (AS DEFINED IN SECTION FIFTEEN HUNDRED FOUR OF THE INTERNAL REVENUE CODE) AS THE TAXPAYER; (B) HAS NO MORE THAN TWENTY-FIVE FULL-TIME EMPLOYEES, OF WHICH AT LEAST SIXTY PERCENT ARE EMPLOYED IN NEW YORK STATE; (C) HAS OPERATED IN THE STATE FOR NO MORE THAN SEVEN CONSECUTIVE YEARS; AND
(D) HAS RECEIVED NO MORE THAN TWO MILLION DOLLARS IN INVESTMENTS ELIGIBLE FOR THE CREDIT DESCRIBED IN THIS SUBDIVISION FROM ONE OR MORE THAN ONE ANGEL INVESTOR; (II) "ANGEL INVESTOR" SHALL MEAN AN ACCREDITED INVESTOR AS DEFINED IN RULE 501 OF REGULATION D OF THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED; BUT SHALL NOT INCLUDE: (A) AN INVESTOR WHO CONTROLS FIFTY PERCENT OR MORE OF THE QUALIFYING BUSINESS RECEIVING THE INVESTMENT SUBJECT TO THE CREDIT DESCRIBED BY THIS SUBDIVISION; OR (B) A VENTURE CAPITAL COMPANY OR ANY BANK, SAVINGS AND LOAN ASSOCI- ATION, TRUST, INSURANCE COMPANY OR SIMILAR ENTITY, WHOSE NORMAL BUSINESS ACTIVITIES INCLUDE VENTURE CAPITAL INVESTMENT. S 3. Subparagraph (B) of paragraph 1 of subsection (i) of section 606 of the tax law is amended by adding a new clause (xxxiv) to read as follows: (XXXIV) ANGEL INVESTOR CREDIT AMOUNT OF CREDIT UNDER UNDER SUBSECTION (UU) SUBDIVISION FORTY-FIVE OF SECTION TWO HUNDRED TEN S 4. This act shall take effect immediately and shall apply to personal income taxable years beginning on and after January 1, 2013.

Comments

Open Legislation comments facilitate discussion of New York State legislation. All comments are subject to moderation. Comments deemed off-topic, commercial, campaign-related, self-promotional; or that contain profanity or hate speech; or that link to sites outside of the nysenate.gov domain are not permitted, and will not be published. Comment moderation is generally performed Monday through Friday.

By contributing or voting you agree to the Terms of Participation and verify you are over 13.

Discuss!

blog comments powered by Disqus