Investor Tax Credit To Be Extended

The following article appeared in the Phoenix Business Journal on July 21:

AZ Gov. Doug Ducey recently signed a bill that will extend the Small Business Capital Investment Incentive, a program commonly called the angel tax credit that’s designed to encourage investment into startups by giving a tax break to the people writing checks to fund them.

The program, which is run by the Arizona Commerce Authority (ACA) is now reauthorized for $25 million in investor tax credits until June, 2031. The bill says that the ACA can authorize no more than $2.5 million in tax credits each fiscal year. Under the law the ACA must certify both the investors seeking the credits and the small businesses receiving angel funding.

The program was started in 2006, and has had 455 applications since its inception, 140 since being reauthorized in 2017. (JH Note: There was no note of how many were approved during any time period, but it seems rather low)

The program is risky, with a fairly high failure rate, although the tax credits do encourage encourage investors because of the Federal tax laws. There is no indication whether the ACA uses a ‘murder board’ such as Solutions Forum, to review candidates, which was done some years ago.

The bill states that investors get a 10% tax break for three years for their investment,totalling 30%, and is open to non-Arizona investors. The credit is slightly higher for bioscience investments, or investments in rural AZ companies.

The ‘qualified investor’ may be an individual, an LLC investment company, partnership or a corporation, and investments must be at least $25,ooo.

For more details, contact Andy Blye of the Business Journal, [email protected], or the ACA.