Financial Foundations: Tax Credits Billow the Wings of Angel Investors
Tax Credits Billow the Wings of Angel Investors The Kansas Angel Investor Tax Credit Program encourages much-needed investment in early stage companies.
By Tracy Taylor
The Kansas Angel Investor Tax Credit Program is an innovative statewide initiative developed as part of the 2004 Kansas Economic Growth Act. Through this program, Kansas-based accredited angel investors are allowed a 50 percent tax credit on seed or early stage cash investments of up to $50,000 in Kansas-based companies certified by the Kansas Technology Enterprise Corporation (KTEC).
By fostering seed and early-stage capital financing for emerging Kansas businesses, this program cultivates the development, implementation and commercialization of innovative technologies, products and services in Kansas.
Kansas has seen resounding results since the inception of the program in 2005. In the past two years, tax credits worth $3.7 million have been issued, resulting in $36.9 million in capital for companies with $13.5 million in payroll.
Getting Involved Kansas angel investors who qualify as "accredited investors" as defined under Regulation D Rule 501 of Securities and Exchange Commission (SEC) regulations, are eligible for this credit. The SEC defines an accredited investor as any natural person whose individual net worth, or joint net worth with that person's spouse exceeds $1,000,000; or any natural person who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with that person's spouse in excess of $300,000 in each of those years, and who has a reasonable expectation of reaching the same income level in the current year.
Kansas companies seeking angel tax credits for their investors must meet the following criteria:
The business has a reasonable chance of success and potential to create measurable employment within Kansas.
In the most recent tax year of the business, annual gross revenue was less than $5,000,000.
The business has been in operation less than five years.
The business has an innovative and proprietary technology, product or service.
The existing owners of the business have made a substantial financial and time commitment to the business.
The securities to be issued and purchased are qualified securities.
The company agrees to adequate reporting of business information to KTEC.
The ability of investors in the business to receive tax credits for cash investments in qualified securities of the business is beneficial, because funding otherwise available for the business is not available on commercially reasonable terms.
Beyond Tax Credits Three active Kansas "angel" groups, the Mid-America Angels (www.midamericaangels.com) in Kansas City, the Midwest Venture Alliance (www.midwestventure.com) in Wichita and the Southeast Kansas Venture Alliance (www.sekansasventure.com) in Pittsburg, facilitate raising capital for entrepreneurs and early seed stage companies by allowing businesses to meet with multiple investors at one time.
Companies interested in qualifying as a Kansas business, or potential investors who want information on how to apply for the credits, can visit, www.kansasangels.com, or contact Michele Weigand, KTEC's Chief Investment Officer, at
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Tracy Taylor is president and CEO of the Kansas Technology Enterprise Corporation (KTEC). You can reach him at (785) 296-5272 or by e-mail at . KTEC is a private/public partnership established by the state of Kansas to promote technology based economic development.
