Turning Innovation Into Enterprise

TCWV in the News

Anne Barth: State needs tax credit for ‘angel’ investors

February 27, 2012

The Herald-Dispatch

The decision by Progenesis to open an office in downtown Huntington is the latest success story in our state’s ongoing efforts to create home-grown innovation businesses.

This success is due to a variety of initiatives that are helping to facilitate a robust system of university research and boosting commercialization of that research. However, our state still has a missing ingredient, and that is adequate early stage and seed capital funding.

Securing funding for start-up firms based in research and innovation can be an especially tough challenge because banks do not generally lend money for intangible assets. Providing an incentive for investors to back these fledgling companies is a proven way to solve that problem, and it will help West Virginia compete in the new economy.

A key solution for this is Senate Bill 419, which has been introduced by West Virginia Sens. Robert Plymale, Richard Browning and Art Kirkendoll. The bill would reinstate a tax credit previously on the books in West Virginia for qualified investors, often referred to as “angel investors.”

The bill proposes a state tax credit to qualified investors for 50 percent of their investment, up to $100,000 with a maximum $50,000 credit per person. What this means is that West Virginians who invest in West Virginia start-up companies and create West Virginia jobs would receive a credit on their West Virginia taxes. The credit will encourage investment in start-up companies, which are by definition more risky ventures.

Of West Virginia’s neighboring states, Ohio, Maryland and Virginia have angel investor tax credits, while lawmakers in Kentucky and Pennsylvania are currently considering similar legislation.

More than 22 states across the country use an angel investor tax credit to generate start-up companies, which result in capital investment of three to 15 times the tax credits issued. Having this tax credit on the books is a way to grow companies — and good-paying jobs — here at home.

TechConnect West Virginia encourages lawmakers to reinstate an angel investor tax credit to give West Virginia another tool to compete in today’s new economy.