A Band-Aid for the Georgia Angel Tax Credit
February 4th, 2015
In my previous post on the Georgia Angel Tax Credit I took a look at the numbers to see what kind of impact the credit made for 2011. Unsurprisingly (for me, at least) there was essentially no impact. This credit was written as a tax credit to help wealthy people and is obviously functioning that way.
If you remember, last time we talked about how 12 investors got this credit for $746,014 of qualified investment leading to a tax credit of $261,105. In 2012 the numbers don’t improve much. In 2012, 28 investors invested $2,055,671 for a tax credit of $694,517. For both years that was out of an allocated tax credit of $10 million. Less than 3% and 7% of the credit was used each year, respectively.
Also note that the entire universe of people getting this credit is, at a maximum, 40 people. 40 people in a state of nearly 10.1 million people. This isn’t the top 1% - it’s the top 0.00039% in our state.
Never mind the fact that Georgia’s gross state product is roughly $403 billion. Not maximizing the use of this credit means that there is no chance that this effort is going to make a positive impact in our overall economy. So let’s do something about it.
I’m happy to say that I’ve had the pleasure of working with Rep. Dar’shun Kendrick and Rodney Sampson to craft HB 109 with the hope of tweaking the Georgia Angel Tax Credit to do more good than what is currently happening.
In a nutshell, this bill will remove the requirement that investors getting the credit be accredited investors. Why is this important? Because Georgia is one of only a few states legally allowing equity crowdfunding campaigns for non-accredited investors.
This opens up the ability for non-accredited (read: not super wealthy) investors to invest $10,000 per year in equity crowdfunding campaigns and receive up to $3,500 back as a tax credit (35% of the amount invested not including money paid, directly or indirectly, to broker fees, etc.). I believe that making not wealthy individuals more aware of startups is a good thing. And making these folks a little (or hopefully, a lot!) more wealthy is better for the economy than making wealthy people richer.
But In An Ideal World
Okay, let me be honest. In my ideal world this tax credit - for rich people or for not-rich people - wouldn’t exist. I don’t think this tax credit is going to solve the systemic issues that we have. The place that I think we need the most help is starting more venture funds that are headquartered or officed out of Georgia.
The Invest Georgia fund is supposed to do this but continuing viability of the program is in question since it remains unfunded. I’ll withhold further comment other than to say the executive director of Invest Georgia claims to have “written” (whatever that means) the Georgia Angel Tax Credit legislation.
Back in the dot-com bubble days we had numerous venture funds based out of Atlanta. Most of those funds have disappeared during the dot-com collapse or limped along until they were put out of their misery. True we have a number of new funds that have recently opened up and are doing great work but for a state our size, the number of funds with offices in Georgia is abysmally low.
But I see encouraging signs. I’ve recently met some folks that are moving to Atlanta (from out west and up north) while affiliated with venture funds from elsewhere. Why? Because they see the opportunity to invest here. I hope this is just the beginning of the next wave of money to Georgia. If so, 2015 is going to be a scorcher.
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