Next Missouri, a statewide coalition that advocates for legislation that benefits entrepreneurship, is lobbying for legislation that would offer tax credits for angel investments.
Next Missouri has backed legislation being considered by the Missouri General Assembly that would provide state tax credits to angel investors, saying the creation of a tax credit program would further incentive high-net-worth individuals and early-stage investors to financially support promising new companies.
“Angel capital is really critical in Missouri in helping early companies get traction and build roots in the state,” said Ben Johnson, president of Next Missouri and senior vice president of program at BioSTL, the St. Louis nonprofit innovation hub.
Lawmakers in the Missouri House and Senate have filed bills in their respective chamber called the Angel Investment Incentive Act, with the legislation designed to create a tax credit program for angel investments. The legislation calls for the tax credit program to be administered by Missouri Technology Corp. (MTC), the public-private partnership that promotes entrepreneurship and provides investment to startups and entrepreneur support organizations. The creation of an angel tax credit program was among the recommendations outlined in MTC’s 2022 "Catalyzing Innovation: Strategies for Missouri to Drive Innovation and Entrepreneurship” strategic report.
Next Missouri in 2023 also pushed for an angel tax credit, but legislation filed in the Missouri General Assembly did not advance far enough for it to pass.
“Last year our goal was just to get it reintroduced and sort of socialize it again, but we got quite a bit of positive momentum,” Johnson said.
Johnson said he is hopeful legislation to create an angel tax credit program can advance further this year in the state General Assembly’s ongoing session, which runs until May.
The legislation being considered by state lawmakers would provide a 40% tax credit on angel investments, with a 50% credit for investments made in businesses based in rural locations of the state. The credit could climb higher if made in specific rural areas, according to the filed legislation. Tax credits for investors would be limited to specific amounts for investments into a single company, as well as on an annual basis for investors. The tax credit program would be authorized to provide up to $6 million in tax credits in 2024 and 2025, with an ability to increase that figure by 20% annually in the following years. Tax credits would be eligible for investments into companies that have annual revenue under $5 million and are less than 5 years old. Bioscience companies would be eligible if they are under 10 years old.
The House and Senate versions of the legislation have slight difference in the caps on the tax credit.
Rep. Travis Smith, R-Dora, sponsor of the tax credit legislation in the Missouri House, said he believes a tax credit for angel investments would help fund more startup companies statewide.
“We want to give startups a chance to really happen,” Smith said.
Smith said supporting new businesses in Missouri is critical, citing a 2022 jobs report that found 81% of new jobs in Missouri in the last five years have been created by startup companies. Johnson and Smith also said an angel tax credit would help make Missouri more competitive to its peer states, citing that seven of Missouri’s border states have angel tax credit programs. The creation of a program would help keep the “best and brightest” in Missouri, Smith said.
Smith said his goal with tax credit policy is that a tax credit helps to generate at least a 4-to-1 ratio in new tax revenue. With the $6 million angel investment tax credit program, Smith said he’d hope it would generate at least $24 million in new tax revenues through income taxes and sales taxes generated by startups and their employees.
Smith’s bill, HB 2226, has been referred to the House’s Financial Institutions Committee. Sen. Denny Hoskins, R-Warrensburg, is sponsoring companion legislation, SB 1178, that has been referred to the Senate’s Economic Development and Tax Policy Committee.
Next Missouri, comprised of a coalition of innovation and entrepreneur-focused groups, launched in 2020. Johnson said the advocacy group's efforts in Jefferson City are aided by lobbying firm Gamble & Schlemeier and Noel Torpey, principal at Husch Blackwell Strategies. Next Missouri, a nonprofit organization, reported total revenue of $43,500 and total expenses of $50,000 for the year ended Dec. 31, 2022, according to its most recent IRS filing.
