U.S. Sen. Chris Murphy is making another attempt to pass legislation that would create a federal tax credit for “angel” investors in technology startup businesses.
Murphy, D-Conn., reintroduced the Angel Tax Credit Act Thursday, a bill to provide incentives for new investments in startup businesses and funding to help small businesses grow and create new jobs in the science, technology and engineering fields. Earlier in the day, Murphy introduced another bipartisan piece of legislation, Helping Angels Lead Our Startups Act (HALOS), which is designed to compliment the Angel Tax Credit Act.
“Just like the HALOS Act I introduced earlier today, this Angel Tax Credit Act will make it easier for investors to back new businesses and support job creation and innovation across the nation,” Murphy said in a telephone interview.
Murphy first introduced the Angel Tax Credit Act last year. The federal legislation modeled after a state tax credit Connecticut established in 2010 and has proved successful in attracting investors for new companies.
“We introduced it fairly late in the session last year,” he said. “With the additional time, I think we stand a better chance.”
An “angel” investor is defined as someone who lends money to small startups and entrepreneurs at more favorable terms than other investors. In many cases, angel investors are members of an entrepreneur’s family or their friends.
The Angel Tax Credit Act would allow investors in startup companies to claim a tax credit equal to 25 percent of their aggregate qualifying equity investments of $25,000 or more to new U.S.-based high-tech companies.
The Connecticut tax credit Murphy’s federal legislation is modeled after has supported more than 200 investments by 90 angels in more than 50 companies since it was established. When Connecticut’s angel tax credit threshold was lowered from $100,000 to $25,000 in 2012, investment pledges grew from $2.4 million in 9 companies to $8.6 million in 23 companies.
Murphy introduced the HALOS Act, with fellow Senators John Thune, R-S.D., Pat Toomey, R-Pa., Brian Schatz, D-Hawaii, and Angus King, I-Maine. Connecticut’s junior senator said this one of the few areas that Democrats and Republicans agree can move the nation’s economy forward.
“Senate Majority Leader (Mitch) McConnell has expressed a desire to move on bipartisan bills,” Murphy said. “If the Republicans want to prove they can govern, this is an opportunity for them to prove it.”
Startup companies are high-growth businesses that support millions of jobs throughout the country, he said. But according to the U.S. Bureau of Labor Statistics, the creation of startups is on the decline, due to lack of access to the kind of seed capital that angel investors would provide.
It is estimated that angel investment contributed to the growth of over 274,000 new jobs in 2012 alone.