THE COMMITTEE ON SMALL BUSINESS AND INFORMATION TECHNOLOGY February 8, 2018 THI KENTUCKY Cabinet for Economic Development ENTREPRENEURISM IN KENTUCKY Kentucky ranks 39th nationally in entrepreneurial activities Source: ITIF New Economy THE DECLINE OF ENTREPRENEURISM • Startups near a 40-year low • Expected rebound in activity since the Great Recession has not happened. • New and young companies are the primary source of job creation in the American economy KENTUCKY ANGEL INVESTMENT ACT Tax credit program passed in 2014, with the award of tax credits beginning in calendar year 2015. THE GOAL: Spur investment and job creation in innovative small businesses in Kentucky. ANGEL INVESTMENT TAX CREDIT Eligibility • Qualified investors who provide startup capital for qualified small businesses Recovery Method • Individual income tax credits of up to 50% of the investment, depending on geographic area of investment • Credits may be transferred and carried forward for up to 15 years Requirements • Small businesses must be engaged in a qualified activity with fewer than 100 full-time employees • Investors and small businesses must be qualified by Cabinet • Minimum investment of $10,000 • Statutory limit of $3,000,000 per calendar year, and program limit of $40 million (includes KIFA) ANGEL INVESTMENT TAX CREDIT Since 2015 Total Program Limit $40 Million Angel Awards $12 Million KIFA Awards $27.6 Million Remaining Funds Available $1.4 Million ANGEL INVESTMENT TAX CREDIT Since 2015 $23 MILLION in qualified investments 426 Qualified investors 28% Out-of-state investors (From 22 states and Canada) 157 Qualified small businesses (located in 23 KY counties) $9 MILLION In tax credits ANGEL INVESTMENT TAX CREDIT Since 2015 Largest single investment by an investor $1.1 Million Average single investment by an investor $65,000 Average tax credit per investor $37,000 Largest investment in a business $1.4 Million Average investment in a business $391,000 RESULTS ANGEL INVESTMENT TAX CREDIT (2015-2016) Increased Revenue $16.6 Million Other Private Investment $43 Million Jobs Created 183 (Awaiting 2017 Reports) POPULARITY OF ANGEL INVESTMENT TAX CREDIT • Began accepting 2018 applications on December 11, 2017 • Requests for 2018 tax credits exceeded our $3 million annual cap before the end of the first day • KEDFA awarded $3 million in incentives in January 2018 • 58 qualified investors, making $7.5 million+ in investments in 22 qualified small businesses PROPOSED CHANGES CURRENT PROPOSED • 60 days to make investment; 20 days to provide proof • 80 days to make investment and provide proof • $40 million program cap • Removal of program cap • 50% credit in enhanced counties; 40% in non-enhanced • 50% credit in enhanced counties; 25% in non-enhanced • $3 million annual cap for Angel • $5 million cap for Angel • No cap for KIFA • $3 million cap for KIFA THANK YOU Cabinet for Economic Devetopment f!