(Historic downtown Annapolis by Steven Frame via Shutterstock)
For the second straight year, state legislators from Baltimore are backing an effort to create a tax credit for angel investors in Maryland.
The bills, filed by State Sen. Catherine Pugh and Del. Brooke Lierman, would create a tax credit of 50 percent of an investment made in a startup. The bills create a reserve fund to distribute the tax credit, which could be up to $5 million per year, an analysis states.
The difference in this year’s legislation is in the length of the program. The bill calls for an initial three-year pilot.
“If after three years, we’ve seen the results, and it’s as fabulous as I think it’s going to be, we can keep it going,” Lierman told the House Ways and Means Committee during a hearing on Tuesday.
Lierman was joined at the hearing table by tech community members like Emerging Technology Centers President Deb Tillett, Chesapeake Regional Tech Council Executive Director Tami Howie, Startup Maryland’s Mike Binko and Social Toaster CEO Brian Razzaque.
To receive the credit, the investor must be accredited with the SEC, and put at least $10,000 (or $20,000 for a married couple filing jointly) toward a company. In turn, the amount of the tax credit is capped at $50,000 for an individual and $100,000 for a couple.
Before the House Ways and Means Committee on Tuesday, Razzaque talked about raising the Social Toaster’s initial rounds of outside capital. While the company received money from state-backed programs like InvestMaryland, he said angel investors ended up providing the bulk of the capital in the company’s first round. The majority of those investors were from Virginia, Razzaque said.
“We could not have gotten the InvestMaryland dollars or the Propel Fund dollars unless we had received the angel investment first,” he said.
Del. Frank Turner noted existing tax credits in biotech and cybersecurity, as well as other programs in the Department of Commerce. Greater Baltimore Committee CEO Don Fry said the Angel Investor Tax Credit widens the types of companies that can receive money. Lierman said the credit also incentivizes earlier stage investment than current state programs offer.
“With the passage of this legislation, when the next ‘hot’ industry comes along, Maryland will be at the forefront of innovation as other states struggle to create a new industry-specific incentive,” Fry wrote in a message distributed Monday. Like last year, the Greater Baltimore Committee is backing the tax credit as its top legislative priority.
Fry also noted that 29 other states have similar tax credits, and that it could also be used as an economic development tool, and provide a way for universities to incentivize tech transfer.
Similar bills filed last year did not pass, and legislators questioned whether the state should be providing more money to already-wealthy investors. Investors and entrepreneurs who were behind the bill last year showed up at House and Senate committee hearings in Annapolis.-30-