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Harrisburg, February 13, 2013 – The state Senate Finance Committee today approved Sen. Wayne D. Fontana’s (D-Allegheny) legislation that would provide tax credits for those who invest in start-up Pennsylvania businesses.
“This measure is about generating private investment to help budding businesses grow and hire more workers,” Fontana said. “I am pleased with the committee’s bipartisan support and look forward to final Senate approval in the weeks ahead.”
Under Senate Bill 141, the state would use excess Keystone State Innovation Zone dollars to provide a 25 percent tax credit for so-called “angel” investors who provide early stage financing for businesses that are less than five years old. An angel investor is an individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
The Allegheny County lawmaker said angel investors play a crucial role in the economy that few people are willing to fill. He said they make personal, risky investments in start-up companies that have the potential to create jobs. He added that most banks and venture capitalists typically shy away from newer companies until they are safer and have more of a track record.
Fontana’s tax credit program would be limited to businesses that are headquartered and operate in Pennsylvania and have a majority of Pennsylvania workers. The measure encourages out-of-state investors by allowing them to sell unused tax credits to Pennsylvania taxpayers.
Fontana said the bill is patterned from a law in place in Wisconsin. That state’s seven-year-old program has increased five-fold and created nearly 1,000 jobs with an average annual salary of $83,000. He said 26 other states offer angel investment tax credit programs.
“Economists argue the companies that attract angel investment generally have the potential to employ far more people than those that muddle through their early years without any help from angels,” Fontana said. “Without angels, many budding companies that employ dozens of people or more might not have ever made it past infancy.”
Fontana said the state Department of Community and Economic Development would be responsible for administering the program. Similar legislation was introduced in both the Senate and House last session, but stalled out in committees.
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