Senators Snowe and Kerry, chair and ranking member of the Senate Committee on Small Business and Entrepreneurship, have introduced legislation for a proposed tax credit aimed at spurring investment in start-up companies. The proposed legislation would give angel investors a 25 percent tax credit to offset up to $500,000 of investments a year.

With similar tax credits in 21 states, the “Access to Capital for Entrepreneurs Act of 2006” limits investments to $250,000 per business investment — which means an angel would have to invest in at least two companies to receive the full credit. To qualify, the investor must meet the rule for set forth by the SEC for accredited investors.
The legislation (S. 3950) is meant to fill a funding gap for seed-stage companies as venture capitalists increasingly target older, more mature companies. They point to recent research which shows that of the $21.7 billion invested by venture capitalists in 2005, just 3.3 percent was allocated to start-up small businesses.

However there were mixed reactions from leaders of the angel and venture capital communities. For more information related to this proposed legislation please read the Biz Journals article.

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