Tax Credit For Angel Investors Would Encourage Funding For Entrepreneurs

Federal legislation that would provide a tax credit to angel investors could substantially help entrepreneurs secure much needed seed capital for their ventures and stimulate growth in moving ideas from the laboratory to the marketplace, according to Jeffrey Sohl, professor of entrepreneurship and decision sciences, and director of the Center for Venture Research at the University of New Hampshire.

Sohl recently was invited to testify in support of HR 5198, The Access to Capital for Entrepreneurs Act of 2006, authored by U.S. House Small Business Committee Chairman Don Manzullo (R-IL) and U.S. Rep Earl Pomeroy (D-ND). The legislation would create a 25 percent tax credit for individuals and groups that make equity investments in small early-stage companies.

“The tax credit proposed in HR 5198 is a judicious use of public policy since it targets the incentive at exactly the time it is needed by both the entrepreneur and the angel investor. For the entrepreneur, HR 5198 increases the potential for securing seed capital and for the investor, the act indirectly provides a slight reduction in the risk of seed stage investing. For the entrepreneurial economy, HR 5198 mitigates, in part, the primary seed stage capital gap,” Sohl said.

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