On October 1, 2013, the South Carolina Department of Revenue (the “Department”) released the application for angel investors to apply for South Carolina’s angel investor tax credit.
South Carolina Governor Nikki Haley signed the High Growth Small Business Job Creation Act of 2013 (the “Act”) on June 14, 2013, which provides a nonrefundable income tax credit of up to 35 percent for qualified investments by certain angel investors in certain qualified businesses headquartered in South Carolina. Qualifying angel investors may claim up to $100,000 in angel tax credits in a year. Fifty percent of such tax credit may be applied to the angel investor’s income tax liability in the first year the qualified investment is made, and the remainder may be carried forward for up to 10 years. Such tax credits may be transferred subject to certain limitations. The total amount of credits available from the state is limited to $5 million per year.
Angel investors must meet certain criteria in order to qualify for the tax credit under the Act. Venture capital funds, commodity funds with institutional investors and hedge funds do not qualify as angel investors under the Act.
In order for a company to be eligible to receive an investment that qualifies for this tax credit, the company must first submit the application for registration as a “qualified business” with the South Carolina Secretary of State. In order to be a qualifying business, the business must meet certain criteria, including the following:
- Is headquartered in South Carolina;
- Was formed no more than five years before the qualifying investment was made;
- Had gross income of $2 million or less on a consolidated basis in any complete fiscal year before registration;
- Employs 25 or fewer people in South Carolina at the time of registration as a qualified business; and
- Is primarily engaged in manufacturing, processing, warehousing, wholesaling, software development, information technology, research and development and certain business services.
Once the company is qualified by the Secretary of State, certain angel investors may then claim a tax credit for a qualified investment in such company by submitting the application for angel investor credit to the Department. Applications must be filed with the Department on or before December 31 of the calendar year when the qualifying investment was made. The Department will allocate tentative credits on or before January 31 of the following calendar year. If total credits exceed $5 million, then the Department will allocate tentative credits on a pro rata basis.
Click here for the application for registration as a qualified business.
Click here for the application for angel investor credit.
Click here for our prior alert about this angel investor tax credit.