Two bills being circulated for co-sponsorship by GOP lawmakers would make changes to the state’s Qualified New Business Venture program, which provides a 25 percent tax credit to early-stage investors in certain startup companies.
Under the program, businesses must currently employ at least 51 percent of its workforce in Wisconsin to be QNBV-certified by the Wisconsin Economic Development Corp. One of the bills would enable companies to remain eligible for the program without meeting that percentage, as long as they satisfy a handful of other requirements.
These include: maintaining headquarters in Wisconsin; increasing the number of in-state employees following the merger or acquisition; WEDC determining that the merger or acquisition wasn’t done in order to relocate the business outside of Wisconsin or to “cease the business’s efforts” to grow in the state; and satisfying the 51 percent in-state employment requirement within “approximately” one year after the merger or acquisition.
“This bill … recognizes that for a tech-based company to succeed, it must often add talent and resources in markets much bigger than Wisconsin,” Wisconsin Technology Council President Tom Still told WisBusiness.com.
He explained the second bill would allow for out-of-state angel investors to sell or transfer the tax credits provided through the program.
The Wisconsin Startup Coalition is backing the second bill, arguing these investors are currently discouraged from investing in startups in the state because the QNBV tax credit incentives are not transferable. By allowing those tax credits to be transferred to an entity or person with a state tax liability, the legislation would incentivize angel investors from around the country to invest in startups in Wisconsin, the coalition argues.
“That ability to sell or transfer credits is already allowed for QNBV’s ‘early stage’ credits, but not for the angel side,” Still said, adding the legislation “would simply bring the full law into alignment.”
The state’s QNBV program has been amended several times since it was created in 2005, and Still notes the Tech Council “has been a part of the evolution” of that program. He says the bills being circulated build on concepts introduced as part of the council’s white papers report released in January. The group’s board “has long been on record as supporting bills to improve the law,” he said.
In their co-sponsorship memo for the first bill, Sen. Dan Feyen, R-Fond du Lac, and Rep. Shannon Zimmerman, R-River Falls, noted that $660 million in private investment has been raised by QNBV-certified companies in Wisconsin since 2005. More than $164 million in related tax credits has been authorized and granted between then and 2020.
“These are private dollars that might otherwise stay on the sidelines and not get involved in the early-stage economy if not for the availability of Wisconsin’s tax credit law, which is a model other states have followed,” the lawmakers wrote.
The second bill is being spearheaded by Feyen and Rep. Mike Kuglitsch, R-New Berlin.