December 10, 2010

Panel Gives Wings to Push for Missouri Angel Tax Credit - KC Business Journal

From Kansas City Business Journal - by David Twiddy

A governor-appointed panel advocating dramatic cutbacks in Missouri tax incentives has rekindled the hopes of Kansas City-area economic development leaders looking for a way to attract angel investment to the Missouri side of the state line.
In its report, the bipartisan Missouri Tax Credit Review Commission recommended that the General Assembly in the 2011 session create a tax credit for angel investors — typically, private investors who provide relatively small amounts of capital to startups. The panel suggested that lawmakers take money from a $4.5 million fund used to attract film and television productions.
The angel tax credit would “address the financing gap that serves as an obstacle to growing new businesses in the state,” wrote the group, appointed by Gov. Jay Nixon. The film tax credit, on the other hand, “serves too narrow of an industry and fails to provide a positive return on investment to the state,” the report said.
John Carlson, founder of the Show Me Angels investment group in Eastern Jackson County, welcomed the suggestion.
“The ability to level the playing field for entrepreneurs here in the Kansas City area is very good,” said Carlson, whose group has had trouble finding deals and has seen some of its investors put money in Kansas companies, where there is an angel tax credit. “Hopefully we’ll see more exciting, high-growth companies stay on the Missouri side of Kansas City, and the residents who are investing in those exciting, high-growth startups will be able to more readily keep their capital here in Missouri rather than putting their capital to work in Kansas.”
Because of the Kansas tax credit, a number of high-tech startups with Missouri roots have planted their stake in the Sunflower State to more readily attract investment. The Kansas tax credit is transferable, so Missouri residents who don’t have a Kansas tax bill can sell the credit to someone who does.
Jeff Kaczmarek, CEO of the Economic Development Corp. of Kansas City, said an angel tax credit has been on the group’s legislative wish list for three or four years and would make the area ­— and Missouri — more competitive.
“Most states that are trying to advance the technology industry in their state have a tax credit of some type to help companies in their early stages,” Kaczmarek said.
The question is whether the General Assembly, which has rejected earlier efforts to create an angel tax credit, will be more amenable at a time of budget cuts. The review of the state’s tax credits was done to save money, not to find new incentives.
“The environment in Jefferson City toward any new program is probably not very good unless they take some of those recommendations from that report and say, ‘OK, these tax credits aren’t being fully utilized,’” said Tom Lesnak, president of the Independence Council for Economic Development, which is searching for biotech and high-tech companies for its new Regional Ennovation Center. “They’ve got to free up some money somewhere to make the angel investor tax credits viable. I’m not sure that’s going to happen in the next 12 months or the next legislative session, but I could be surprised.”
Incoming state Sen. Will Kraus, R-Lee’s Summit, who has favored angel tax credits while a member of the House, said he and several other “pro-job creation” lawmakers are headed to the Senate, which typically has been much more circumspect about the idea. He said he liked that the commission report recommended a current source of money for the tax credits and hoped that would help the issue gain support.
“It’s obvious that we’re lacking in initial investment in business in the state of Missouri,” he said. “Four and a half million? That’s not a huge amount when you’re talking about a $23 billion budget.”