The House Ways and Means Committee in Congress is considering a bill sponsored by Representative Chris Van Hollen of Maryland that would provide a 25% credit to investors in some types of technology.
The credit would apply to equity investors who invest in a company that has already qualified for a grant under the Small Business Innovation Research (SBIR) program. The Federal government provides grant funding under the SBIR program to support some high priority technology and biotech research. SBIR grants typically range from $100,000 to $750,000. The credit for investors would also be capped at 50% of the SBIR grant award in a particular company, and would also be limited to a total of $500 million in tax credits per year.
The bill, which was introduced on July 15, 2010 and co-sponsored by three other House members, is called the Innovative Technologies Investment Incentive Act. SBIR grants are directed toward small businesses, so the impact of this bill would be seen at the small business level.
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comments on proposed tax credit: appears to be a tax credit for stock investments, in essence a credit for speculative spending. Not sure investors will be the “middle class”. If the investors are the rich, they do not need a tax break to invest. In addition, they look for quick returns and invest millions, mind you billions. If the value proposition is creation of jobs, there is a need for patience. The “middle class” has spent their last patient nickel and are heavily leveraged in the stock market with low returns that is coupled with a low “passbook” savings rate to boot. All in all, it does boil down to demand vs supply. The “lack of confidence in the economy indicator” shows demand is very inadequate/dismal. Tax credits are not enough to take the risk to invest with the above as a backdrop. Consumer confidence is at all time low, companies are not certain about the future considering the current regulatory environment. You want this tax credit to have positive impact on the economy, but history does not support a connection between tax credits and an improved economy as a result. Are people patient enough to see if there would be long term positive impact to economy, are they willing to take the risk…..maybe, maybe not.