By Tom Still
MADISON, Wis. – Not all government programs aimed at spurring business and job growth are successful, to say the least. However, those initiatives that spur private investment and multiply public seed dollars can work well for taxpayers.
One example in Wisconsin is the 20-year-old Qualified New Business Venture tax credit program, which has enhanced growth of young technology-based companies by making it easier for angel and venture capital investors to take the risk.
It’s time for an update in the law, which has levered $882 million in private investment since taking effect Jan. 1, 2005. With two timely updates, it could become an even bigger success for Wisconsin.
Here’s how the program works: It provides tax credits to eligible angel investors and venture capital fund investors who make cash equity investments in qualified early-stage businesses. If all eligibility requirements are met, investors receive a Wisconsin income tax credit equal to 25 percent of the value of the investment made in the certified company.
In other words, it offers $1 in tax credits for every $4 invested.
The investments provided by the QNBV program provide the capital necessary for emerging growth companies to develop new products and technologies, move products to market and provide high-quality jobs.
The Wisconsin Economic Development Corporation administers the program and certifies how investors can qualify for tax credits. Under current rules, those investors must put money into companies headquartered in Wisconsin; that have fewer than 100 employees; have strong potential to create jobs and to attract more capital; and have been in operation for 10 or fewer consecutive years.
Two other provisions have outlived their effectiveness over time. One is the requirement that at least 51% of employees live in Wisconsin, which ignores the advent of remote work. Employees of state-based companies may still pay Wisconsin income taxes if they live in states with a reciprocal revenue agreement.
The other is a $12 million cap on total eligible investment in any one company. Inflation alone has changed that threshold. A proposal making the rounds in the Wisconsin Legislature would raise that limit to $20 million, more in line with today’s capital needs. That same bill draft (LRB-4913 in the Senate and LRB-4809 in the Assembly) would eliminate the 51% requirement.
Republican Sen. Dan Feyen of Fond du Lac and GOP Rep. Robert Wittke of Caledonia are the sponsors thus far, but if history repeats itself, they will find support across the partisan aisle.
Supporters of the original law, passed as Act 255, included then-Commerce Secretary Cory Nettles, then-Financial Institutions Secretary Lorrie Keating Heineman and the late Sen. Ted Kanavas, R-Brookfield. Nettles and Heineman were part of Democratic Gov. Jim Doyle’s administration.
The law is most often used by homegrown angel investors, although investments made by venture capital firms with Wisconsin tax liability can qualify, too. Total QNBV tax credits claimed in 2024 rebounded sharply to $16.75 million, nearly tripling the prior year’s total and representing one of the highest levels in the program’s history. Those credits levered more than $67 million in total investments.
From just a handful of early stage investors in 2005 to about 45 today, the law has helped build the base of Wisconsin risk-takers.
About 700 early stage companies in Wisconsin have been certified over time, which is one reason why eight state cities showed up among the top 64 in the Midwest in rankings by M25, a Chicago venture firm. Madison was ninth on the list and Milwaukee 14th.
Because the company vetting process is so rigorous, it’s the early stage investment equivalent of a “Good Housekeeping Seal of Approval” for young companies. Potential investors in Wisconsin often won’t consider companies that are not QNBV-certified because they trust in the process enough to know it’s worth taking a closer look.
When it was enacted as Act 255 in late 2003, the Qualified New Business Venture law was a leader among states. Today, it is time for Wisconsin lawmakers to update the law to ensure the state remains competitive as a place for early stage companies to launch, grow and do business.
Still is past president of the Wisconsin Technology Council.