HOUSE DOCKET, NO. 613        FILED ON: 1/13/2015

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 2473

The Commonwealth of Massachusetts

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PRESENTED BY:

Claire D. Cronin

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To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:

The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:

An Act relative to angel investor tax credits.

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PETITION OF:

HOUSE DOCKET, NO. 613        FILED ON: 1/13/2015

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 2473

The Commonwealth of Massachusetts

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In the One Hundred and Eighty-Ninth General Court
(2015-2016)

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An Act relative to angel investor tax credits.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
 

SECTION 1.  Said section 6 of said chapter 62, as appearing in the 2012 Official Edition, is hereby further amended by adding the following subsection:-

(t) (1)  As used in this subsection, the following words shall have the following meanings unless the context clearly requires otherwise:-

“Business”, a profession, sole proprietorship, trade partnership, corporation, general partnership, limited liability company, limited partnership, joint venture, business trust, public benefit corporation, non-profit entity or other business entity.

“Gateway municipality”, a gateway municipality as defined in section 3A of chapter 23A.

“Qualifying business”, a business which: (a) has its principal place of business in the commonwealth; (b) has at least 50 per cent of its employees located in the business’s principal place of business; (c) has a fully developed business plan that includes all appropriate long-term and short-term forecasts and contingencies of business operations, including research and development, profit, loss and cash flow projections and details of angel investor funding; (d) employs 20 or fewer full-time employees at the time of the taxpayer investor’s initial qualifying investment as provided for in paragraph (2); (e) has a federal tax identification number; and (f) has gross revenues equal to or less than $500,000 in the fiscal year prior to eligibility.

“Qualifying investment”, a monetary investment that is at risk and not secured or guaranteed; provided, however, that a “qualifying investment” shall not include venture capital funds, hedge funds and commodity funds with institutional investors or investments in a business involved in retail, real estate, professional services, gaming or financial services.

“Taxpayer investor”, accredited investors, as defined by the United States Securities and Exchange Commission pursuant to section 2(15)(ii) of the Securities Act of 1933, 15 U.S.C. 77b(15)(ii) and who is not the principal owner of the qualifying business who is involved as a full-time professional activity.

(2)  A taxpayer investor who makes a qualifying investment in a qualifying business shall be allowed a credit against the taxes imposed by this chapter in an amount equal to 20 per cent of the amount of the taxpayer’s qualifying investment. A taxpayer investor who makes a qualifying investment in a qualifying business with its principal place of business located in a gateway municipality shall be allowed a credit against the taxes imposed by this chapter in an amount equal to 30 per cent of the amount of the taxpayer’s qualifying investment. Taxpayer investors may invest up to $125,000 per qualifying business per year with a $250,000 maximum for each qualifying business. The total of all tax credits available to a taxpayer investor under this subsection and section 38GG of chapter 63 shall not exceed $50,000 in any 1 tax year.

(3)  Qualifying investments may be used by a qualifying business for the following purposes: (a) capital improvements; (b) plant equipment; (c) research and development; and (d) working capital. Qualifying investments shall not be used to pay dividends, fund or repay shareholders’ loans, redeem shares, repay debt or pay wages or other benefits of the taxpayer investor.

(4)  The credits allowed under paragraph (2) may be taken against income tax due in either the tax year of the initial investment or in any of the 3 subsequent taxable years. Any amount of the tax credit that exceeds the tax due for a taxable year may be carried forward by the taxpayer investor to any of the 3 subsequent taxable years. If the qualifying business ceases to have its principal place of business in the commonwealth within such 3 year period, the taxpayer investor shall not claim any further credits and shall repay the total amount of credits claimed to the commonwealth.

(5)  The commissioner of revenue in consultation with the executive office of housing and economic development shall authorize annually for the 4-year period beginning January 1, 2016 and ending December 31, 2019, pursuant to this subsection together with said section 38GG of said chapter 63, an amount not to exceed $10,000,000 per year for the credits allowed.

(6)  The executive office of housing and economic development in consultation with the commissioner of revenue shall authorize, administer and determine eligibility for this tax credit and allocate the credit in accordance with the standards and requirements as set forth in regulations promulgated pursuant to this subsection. The executive office of housing and economic development shall allocate the total available tax credit among as many qualified commonwealth businesses as fiscally feasible with the goal of creating and maintaining jobs in the commonwealth.

(7)  The commissioner of revenue and the executive office of housing and economic development shall promulgate regulations necessary to carry out this subsection.