The South Carolina House of Representatives passed a bill Wednesday that would offer a tax credit for those who make certain high-risk investments in start-up companies. Known as “angel investments,” they help finance small companies in the early years. Supporters pushed the bill as a way to create jobs in South Carolina.
The final bill passed the House by a 78-18 vote after brief debate. It is known as the “Bill Wylie Entrepreneurship Act” in honor of the former Greenville legislator who died last year. Wylie helped push for the legislation prior to his death.
Some opponents worried the bill created yet another loophole in a state tax code which had more than $2.7 billion in exemptions last year.
Rep. Bill Herbkersman (R-Beaufort) says he thinks the state will eventually be able to make up the lost revenue.
We’ve got readily available angel capital for small companies to start up with. I think the overall effect of this is going to be a tax benefit for the state because, if we can get new capital in, we can help some of these entrepreneurs start with their businesses.
Under the bill, a person could apply 35 percent of the money they invest towards the credit. The credits would be capped at $5 million statewide each year, with no more than $100,000 per person. An investor could recoup the amount over ten years. The state Department of Commerce would determine which investors receive the credit.
Rep. Dwight Loftis (R-Greenville) said the proposal is meant to help start-up companies get easier access to money.
The purpose of this bill is to reach out and entice the money that is out there… to invest in something… the banks would not invest in.
Some legislators were concerned about the possible $5 million price tag for the state. Republican B.R. Skelton (R-Pickens) worried it meant less money for education.
Supporters said it was unlikely the credit would have such a high financial impact in its early years.
Rep. Laurie Funderburk (D-Kershaw) said she thought the bill had good intentions, but worried it contributed to the state’s overcomplicated tax code. She pointed to a Taxation Realignment Commission (TRAC) report last year that lawmakers have all but ignored.
Funderburk said legislators have not shown they are serious about truly reforming the system.
When exactly do we decide that we are going to exercise the discipline and say, “Hold on, we have a first task to perform?” That first task ought to be… whether or not we’re going to put South Carolina on solid ground as far as our tax structure is concerned.
13 Democrats and 5 Republicans voted against the final bill, which now heads to the Senate.