Bill Overview
Title: Angel Tax Credit Act
Description: This bill allows a new business-related tax credit for 25% of equity investments of $25,000 or more in a domestic corporation or partnership that (1) has its headquarters in the United States, (2) has gross revenues for the taxable year of less than $1 million, (3) employs fewer than 25 full-time employees, (4) has been in existence for less than 7 years as of the date of the investment, (5) has more than 50% of its employees performing substantially all of their services in the United States, and (6) is engaged in a high technology trade or business. The bill limits the allowable amount of such credit to $250,000 in any taxable year and imposes an overall limitation on such credit of $500 million for each of calendar years 2023 through 2027.
Sponsors: Sen. Murphy, Christopher [D-CT]
Target Audience
Population: Investors and employees of U.S.-based high-tech startups
Estimated Size: 2000000
- The bill targets new small businesses with less than 25 employees and revenue under $1 million, which are engaged in high technology sectors.
- These businesses must have been established for less than 7 years and be based in the U.S., employing mainly in the U.S.
- It is likely that these businesses are innovative startups, often in industries like information technology, biotech, or advanced manufacturing.
- Investors eligible for the tax credit are those investing $25,000 or more in such businesses, thereby encouraging funding of early-stage tech companies.
Reasoning
- The policy is aimed at supporting small, high-tech businesses that are startups and investors interested in those businesses.
- This type of tax credit will mostly impact affluent individuals or those familiar with venture capital and startup investment since a minimum of $25,000 investment is required.
- Employees in these small high-tech firms may see some indirect benefits if the business receives additional funding, potentially impacting their job security or growth opportunities.
- Some people, including those in tech-savvy urban areas, may be more likely to come into contact with potential new investments.
- A significant portion of the US population may be unaffected either because they are non-investors or work outside the tech sector.
Simulated Interviews
Software Engineer (San Francisco, CA)
Age: 32 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 5/20
Statement of Opinion:
- The tax credit could make it easier for my startup to attract investors, which is crucial for our growth.
- I am somewhat skeptical as tax credits do tend to benefit investors more than employees directly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 7 |
Venture Capitalist (New York, NY)
Age: 45 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- This policy incentivizes me to increase my portfolio in early-stage tech companies, which I've been hesitant to expand due to current risks.
- It might contribute to a more vibrant startup ecosystem in high potential technology sectors.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 7 |
Startup Founder (Austin, TX)
Age: 28 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 7/20
Statement of Opinion:
- This policy provides a meaningful potential boost to my funding prospects.
- However, securing investments is still primarily about proving company viability, not just tax incentives.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Angel Investor (Seattle, WA)
Age: 50 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- The Angel Tax Credit Act could simplify decision-making processes concerning risk-taking when deciding to invest in young startups.
- It provides fiscal encouragement to diversify my investments into biotech and clean tech.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 9 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 8 |
UX Designer (Denver, CO)
Age: 22 | Gender: other
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 9/20
Statement of Opinion:
- I don't think this policy directly affects me, but it might help my company secure funds and grow.
- Any growth helps my job stability.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Retired (Rural Kansas)
Age: 60 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 20/20
Statement of Opinion:
- I'm not really involved in startups or tech investments, so I don't see how this policy affects me.
- It seems more beneficial for those already involved in such ventures.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Tech Entrepreneur (Silicon Valley, CA)
Age: 34 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 4/20
Statement of Opinion:
- This would help greatly as I'm planning multiple funding rounds, and it makes my pitch to investors more attractive.
- Access to credit could substantially aid in scaling operations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Freelancer (Remote)
Age: 29 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 10/20
Statement of Opinion:
- This tax credit could encourage more startups to hire freelancers like me, as they secure equity funding.
- However, my work is quite diversified across various industries, so the impact might not be as direct.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 5 |
Financial Advisor (Chicago, IL)
Age: 52 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- This policy might make high tech startups a more attractive option for my clients when considering investment opportunities.
- Could increase my advisory workload by helping clients navigate this space.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Digital Marketer (Los Angeles, CA)
Age: 38 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- More funding through this initiative could mean the company is willing to invest more in marketing, benefiting my role.
- I believe it could positively impact innovation and the marketing industry as a whole.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 7 |
Cost Estimates
Year 1: $500000000 (Low: $400000000, High: $500000000)
Year 2: $500000000 (Low: $400000000, High: $500000000)
Year 3: $500000000 (Low: $400000000, High: $500000000)
Year 5: $500000000 (Low: $400000000, High: $500000000)
Year 10: $0 (Low: $0, High: $0)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- The cap of $500 million per year limits the maximum fiscal impact.
- Economic activity generated from new investments could boost the economy and employment years down the line.
- There is a significant emphasis on high-tech sectors, which could advance U.S. global competitiveness.