Georgia House Bill 1069 was signed into law by Governor Perdue early in June. Section Two of the new law, known as the “Angel Investor Tax Credit,” provides for a Georgia tax credit of up to $50,000 annually for investors of early-stage startup companies in Georgia. Angel investors provide capital for startup businesses in exchange for equity or convertible debt and, unlike venture capitalists, typically invest their own funds.
Access to early-stage growth in young companies is often difficult to obtain, and the purpose of this tax credit is to encourage direct investment from individuals in high-tech businesses. It aims to expand the economy of Georgia by enlarging its base of wealth-creating business, thus increasing the number of quality and high-paying jobs.
Smart Business spoke to Mitchell Kopelman, chair of the Tax Group and Technology Practice, and Jeff Weinkle, an associate in the tax research group, at Habif, Arogeti & Wynne, to learn more about the credit and what it means for Georgia businesses.
What are the details of the credit?
The credit equals 35 percent of the amount invested in the startup company and is available for investments made in 2011, 2012 and 2013. However, the credit cannot be used until the second year following the year the investment is made. Investments can be made by either individuals or pass-through entities with no business operations that manage less than $5 million in capital.
The aggregate amount of credit allowed against taxable income for any number of qualified investments is $50,000 at the individual level annually. If the taxpayer does not have a large enough tax liability to use the entire credit, it may be carried forward for five years.
In short, the annual maximum credit of $50,000 can be obtained by investing $142,857 into one or more eligible businesses per year. At this level, the credit will offset $833,333 in Georgia taxable income.
Georgia has budgeted $10 million to the credits annually. If investors apply for more than this amount in aggregate during a single year, the $10 million will be allocated to all timely applicants on a pro-rata basis.
