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Turning Innovation Into Enterprise

TCWV in the News

Anne Barth and Andrew Zulauf: Investment tax credit would aid job growth

CHARLESTON, W.Va. — In order to successfully compete in today’s economy, many states are implementing strategies and programs aimed at helping entrepreneurs and start-up ventures compete on a level playing field. They are doing this by ensuring a robust system of university research, boosting commercialization of that research, and making sure that this innovation “ecosystem” has all the components needed to create and sustain high wage jobs.

One of the biggest hurdles faced by any entrepreneur with an idea for a new business is finding early stage and seed capital funding. For start-up firms based in research and innovation that 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.

Senate Bill 419, introduced by West Virginia Senators Richard Browning, Robert Plymale and Art Kirkendoll, 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. However, these are just the kind of new economy firms that also hold great potential for fast-paced growth and high-wage jobs.

The timing is right for this legislation to be reinstated in West Virginia for two compelling reasons. The recently established West Virginia Angel Investor Network (WVAIN) provides a forum for entrepreneurs who are qualified and ready to raise capital to meet willing investors. It’s a 21st Century model of West Virginia’s long tradition of neighbor-helping-neighbor, and it provides the infrastructure needed to make an angel investor tax credit program successful.

A second pressing reason to reinstate the high growth business investment tax credit is the recent launch of the state’s Capital Access Program, funded with $13.1 million from the U.S. Treasury Department’s State Small Business Credit Initiative. The funds will be used to leverage private lending to help small businesses and manufacturers create and expand jobs. The program is designed to produce a minimum of $10 in new private lending for every $1 in federal funding. An angel tax credit could serve as a powerful incentive to help generate the required matching investments and ensure that West Virginia is able to deploy all of the $13.1 million in federal funding.

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 and the West Virginia Jobs Investment Trust Board encourage lawmakers to reinstate an angel investor tax credit to give West Virginia another tool to compete in today’s new economy.

Barth is executive director of TechConnect West Virginia, and Andrew Zulauf is executive director of the West Virginia Jobs Investment Trust Board.