Senator Mark Pryor has introduced legislation that would give angel investors in qualifying small businesses (broadly defined) a federal income tax credit equal to 25% of the amount invested. You can find the text of the proposed legislation here and quoted in full below.

Senator Pryor’s bill is a great idea. However, there are certain things about it that I would suggest changing.

First, the way the bill is currently drafted companies will have to apply to participate in the program. There is an overall cap on the dollar amount of the tax credits available under the program per year, and the government is going to play a role in deciding which companies qualify, including taking into account geographic areas that have traditionally been underserved by angel and venture capital investment. I would change this to a per taxpayer limit, to avoid the government having to run an application and approval process that will undoubtedly be very political.

Second, I would not limit the credit to only “accredited investors.”

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