Mind to Market

Monday, March 26, 2007

A Blessing for Angels

The Access to Capital for Entrepreneurs Act of 2007, (H.R. 578) was introduced to congress last January. This bill would provide a 25% tax credit on up to $500,000 in investments per year in start-up businesses. So far the bill has received favorable response from the Kauffman Foundation, the Angel Capital Association, Women Impacting Public Policy and the National Association for the Self-Employed.

The beauty of this bill is that it provides tax incentive at the front end of the investment, where the incentive is sorely needed, rather than the partial capital gains exclusion given investors now. The Wall Street Journal quoted Susan Preston of the Kauffman Foundation as saying that the bill would double the number of angel investors.

Will this type of incentive cause investors to throw caution, and cash, to the wind? Does spending $500,000 to buy $125,000 in tax credits sounds like a good deal to you? Although the tax incentive reduces the upfront risk, getting a return on the investment is still essential. But with the reduced risk, maybe more investors would be willing to pull their money out of CD's and invest in the next Google.

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