A tax credit crafted to encourage angel investors to sink their money into South Carolina technology startups phased out last year, and supporters say efforts to bring it back are being delayed by the coronavirus pandemic.
The break allows startup backers to write off a portion of their investments as a credit on their state income tax. Many states have their own versions of the incentive. But South Carolina’s, originally passed in 2013, hit its sunset date on Dec. 31.
Nearly 300 companies have applied and qualified for the credit, according to VentureSouth, a venture capital firm that works with companies around the Southeast. Last year, investors shelled out nearly $31 million on those businesses, which, among other requirements, must be less than 5 years old and maintain their headquarters in South Carolina in order to qualify under the now-expired tax credit program.
Charlie Banks, a VentureSouth managing director, said raising capital is hard enough during a pandemic. The firm and other interested organizations have been lobbying in the Statehouse to restore the credit.
He added that the proposal had near-unanimous support before the General Assembly took a recess because of the virus. Legislators will be back this spring with the directive to pass a budget.
The credits can’t exceed $5 million in value in a calendar year. For financial backers, the goal is to give them an incentive to put some of their money toward the development of home-grown tech industry rather than real estate and other common asset classes.
A study conducted by the University of South Carolina in 2013 found that more companies in the state were being acquired compared to the number that were acquiring other businesses, a sign that many startups choose to cash out rather than try to grow to scale by themselves.
Jason Zacher, senior vice president of business advocacy for the Greenville Chamber of Commerce, said the expired tax credit has been vital to helping startups gain footing.
“It’s a little hard for these companies to go get venture capital in New York or Silicon Valley,” Zacher said.
The event doesn’t take place until October, but Daniel Island-based Blackbaud Inc. has already decided to move its annual bbcon summit to the web.
It made the move in part because of the possibility that cases of coronavirus disease could re-emerge in the fall, and partly because many possible attendees may not be able to make it to the event in person.
“We understand that risks associated with large-scale live events this year remain unknown, and we also recognize that many organizations face tough budget decisions, especially related to travel and professional development opportunities,” Blackbaud announced on its website.
The software company develops tech products for the philanthropic industry and employs 3,400 workers worldwide. Its in-person conference was to be held in Seattle this year.
Reach Mary Katherine Wildeman at 843-607-4312. Follow her on Twitter @mkwildeman.