A bill to consider creating a tax credit for angel investors who back Maryland startups is under consideration in Annapolis during the state’s ongoing 90-day legislative session.
HB526 is the latest attempt to create a program that would incentivize more investors to get involved with early stage companies. After a push from the Greater Baltimore Committee and attempts to pass the bill in 2015 and 2016 that were unsuccessful, there was not a proposal for a tax credit last year. But it returned this year with sponsorship from Del. Brooke Lierman (D-Baltimore). A corresponding bill in the Senate, SB 955, is sponsored by Sen. Adelaide C. Eckardt, a Republican representing multiple Eastern Shore counties.
The bill would create a 50 percent tax credit to accredited investors who back a qualified “innovation business” based in the state. The credit is not to exceed $50,000 for an individual, or $100,000 for a couple or pass-through business. The bill calls for a fund of $5 million to be established to provide the credits. Companies who receive funding would have to have revenue of less than $5 million, and be no more than five years old. Startups that received tax credits from separate programs for biotech and cybersecurity wouldn’t be eligible.
On February 14, a House committee hearing featured speakers supporting the bill including UM Ventures Director Jim Hughes, Rural Maryland Business Council Executive Director Charlotte Davis and Katie Nash of the Maryland Hispanic Chamber of Commerce, as well as Lierman and a GBC representative.
Proponents said angel investor tax credit programs are used in 29 other states.
“It creates the incentive needed, like a shot in the arm, for investors in our region to start taking angel investing more seriously,” Lierman said. “And when they’re starting to think about how to spend their money, to invest in Maryland businesses.
Answering questions on the bill, Del. Jay Walker (D-Prince George’s County) asked if proponents would be open to a set-aside from the funds for businesses started by women and people of color. Lierman said she would be open to that idea. A separate set-aside for businesses from rural counties was also discussed.
Committee members didn’t immediately vote. A hearing on the Senate version of the bill is scheduled for March 13 at 1 p.m.