Increased angel investment tax credits proposed

Business investors could receive increased tax credits under a bill heard by the Revenue Committee Feb. 5.

Currently, investors can apply for up to $3 million in annual refundable tax credits for investments made in a business with at least 51 percent of its workforce and payroll in Nebraska and 25 or fewer employees primarily engaged in researching, developing or using products and services in the high-tech field.

LB156, introduced by Gering Sen. John Stinner, would increase the annual maximum available amount of the angel investment tax credit to $5 million. Stinner said the bill would fund the tax credit program at its original proposed amount.

“The angel investment tax credit fills the identifiable key gaps in Nebraska’s economic development program,” he said. “[LB156] is about growing Nebraska, creating good paying jobs and rebuilding the middle class.”

State statute defines high-tech field to include aerospace, agricultural processing, renewable energy, energy efficiency and conservation, environmental engineering, food technology, cellulosic ethanol, information technology, materials science technology, nanotechnology, telecommunications, biosolutions, medical device products, pharmaceuticals, diagnostics, biologicals, chemistry and veterinary science.

Eric Dinger, cofounder of Lincoln company Powderhook, spoke in favor of the bill. He said the angel investment tax credit program helps local startups to compete nationally.

“Businesses like mine, the startups of the world, are the economic development that’s really working,” Dinger said. “This is investment in businesses that will hire high-tech workers in the state.”

To qualify for tax credits, an individual must invest at least $25,000 in a calendar year and qualified funds—composed of three or more investors—are required to invest at least $50,000.

Refundable credits equaling 35 percent of the investment are granted to investors with caps of $350,000 for married couples filing joint returns and $300,000 for all other filers.

Refundable credits of 40 percent are offered for investments made in a business located in a distressed area, which is defined as: a city; a county with a population of fewer than 100,000 residents; an unincorporated area within a county; or a census tract that has an unemployment rate that exceeds the statewide average, a per capita income below the statewide average or a population decrease between the two most recent censuses.

No one testified in opposition to the bill and the committee took no immediate action on it.