,,ii #aafth ,,congress #b;d ,session ,s4 #dfcg ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,september #bb1 #bjbj,mr4 ,murphy introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to allow a credit against income tax for equity investments by angel investors4 #a4 ,short title ,this ,act may be cited as the ,angel ,tax ,credit ,act4 #b4 ,angel investment tax credit 7a7 ,in general ,subpart ,b of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #cj;,e4 ,angel investment tax credit 7a7 ,allowance of credit ,there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to #be percent of the qualified equity investments made by a qualified investor during the taxable year4 7b7 ,limitation ,the amount of the credit allowed under subsection 7a7 for any taxpayer for any taxable year shall not exceed #bej1jjj4 7c7 ,qualified equity investment ,for purposes of this section-- 7#a7 ,in general ,the term qualified equity investment means any equity investment in a qualifying business entity if-- 7,a7 the aggregate amount of such investments made by the taxpayer during the taxable year is #be1jjj or more1 7,b7 such investment is acquired by the taxpayer at its original issue 7directly or through an underwriter7 solely in exchange for cash1 and 7,c7 such investment is designated for purposes of this section by the qualifying business entity4 7#b7 ,equity investment ,the term equity investment means-- 7,a7 any form of equity1 including a general or limited partnership interest1 common stock1 preferred stock 7other than nonqualified preferred stock as defined in section #cea7;g77#b771 with or without voting rights1 without regard to seniority position and whether or not convertible into common stock or any form of subordinate or convertible debt1 or both1 with warrants or other means of equity conversion1 and 7,b7 any capital interest in an entity which is a partnership4 7#c7 ,redemptions ,a rule similar to the rule of section #abjb7;c77#c7 shall apply for purposes of this subsection4 7d7 ,qualifying business entity ,for purposes of this section-- 7#a7 ,in general ,the term qualifying business entity means any domestic corporation or partnership if such corporation or partnership-- 7,a7 has its headquarters in the ,united ,states1 7,b7 has gross revenues for the taxable year preceding the date of the qualified equity investment of less than #a1jjj1jjj1 7,c7 employs less than #be full-time equivalent employees as of the date of such investment1 7,d7 has been in existence for less than #g years as of the date of the qualified equity investment1 7,e7 has more than #ej percent of the employees performing substantially all of their services in the ,united ,states as of the date of such investment1 7,f7 is engaged in a high technology trade or business related to-- 7i7 advanced materials1 nanotechnology1 or precision manufacturing1 7ii7 aerospace1 aeronautics1 or defense1 7iii7 biotechnology or pharmaceuticals1 7iv7 electronics1 semiconductors1 software1 or computer technology1 7v7 energy1 environment1 or clean technologies1 7vi7 forest products or agriculture1 7vii7 information technology1 communication technology1 digital media1 or photonics1 7viii7 life sciences or medical sciences1 7ix7 marine technology or aquaculture1 7x7 transportation1 or 7xi7 any other high technology trade or business1 as determined by the ,secretary of the ,treasury1 and 7,g7 has equity investments designated for purposes of this paragraph4 7#b7 ,designation of equity investments ,for purposes of paragraph 7#a77;,g71 an equity investment shall not be treated as designated if such designation would result in the aggregate amount which may be taken into account under this section with respect to equity investments in such corporation or partnership exceeds #b1jjj1jjj1 taking into account the total amount of all qualified equity investments made by all taxpayers for the taxable year and all preceding taxable years4 7e7 ,qualified investor ,for purposes of this section-- 7#a7 ,in general ,the term qualified investor means an accredited investor1 as defined by the ,securities and ,exchange ,commission4 7#b7 ,exclusion ,the term qualified investor does not include-- 7,a7 a person controlling at least #ej percent of the qualifying business entity1 7,b7 any venture capital fund 7within the meaning of section #bjc7l7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#c7l7771 or 7,c7 any bank1 savings association1 loan association1 trust company1 insurance company1 or similar entity whose business activities include making similar investments to investments of a venture capital fund 7as so defined74 7f7 ,national limitation on amount of investments designated 7#a7 ,in general ,there is an angel investment tax credit limitation of #ejj1jjj1jjj for each of calendar years #bjbj through #bjbd4 7#b7 ,allocation of limitation ,the limitation under paragraph 7#a7 shall be allocated by the ,secretary among qualified business entities selected by the ,secretary4 7#c7 ,carryover of unused limitation ,if the angel investment tax credit limitation for any calendar year exceeds the aggregate amount allocated under paragraph 7#b7 for such year1 such limitation for the succeeding calendar year shall be increased by the amount of such excess4 ,no amount may be carried under the preceding sentence to any calendar year after #bjbi4 7g7 ,application with other credits 7#a7 ,business credit treated as part of general business credit ,except as provided in paragraph 7#b71 the credit which would be allowed under subsection 7a7 for any taxable year 7determined without regard to this subsection7 shall be treated as a credit listed in section #ch7;b7 for such taxable year 7and not allowed under subsection 7a774 7#b7 ,personal credit 7,a7 ,in general ,in the case of an individual who elects the application of this paragraph1 for purposes of this title1 the credit allowed under subsection 7a7 for any taxable year 7determined after application of paragraph 7#a77 shall be treated as a credit allowable under subpart ,a for such taxable year4 7,b7 ,carryforward of unused credit ,if the credit allowable under subsection 7a7 by reason of subparagraph 7,a7 exceeds the limitation imposed by section #bf7;a7 for such taxable year1 reduced by the sum of the credits allowable under subpart ,a 7other than this section7 for such taxable year1 such excess shall be carried to each of the succeeding #bj taxable years to the extent that such unused credit may not be taken into account under subsection 7a7 by reason of subparagraph 7,a7 for a prior taxable year because of such limitation4 7h7 ,special rules 7#a7 ,related parties ,for purposes of this section-- 7,a7 ,in general ,all related persons shall be treated as #a person4 7,b7 ,related persons ,a person shall be treated as related to another person if-- 7i7 the relationship between such persons would result in the disallowance of losses under section #bfg or #gjg7;b71 or 7ii7 for purposes of subsection 7e71 the person is an individual who is the spouse of a lineal descendant of an individual described in subsection 7e77#b77;,a74 7#b7 ,basis ,for purposes of this subtitle1 the basis of any investment with respect to which a credit is allowable under this section shall be reduced by the amount of such credit so allowed4 ,this subsection shall not apply for purposes of sections #abjb and #acig;,b4 7#c7 ,recapture ,the ,secretary shall1 by regulations1 provide for recapturing the benefit of any credit allowable under subsection 7a7 with respect to any qualified equity investment which is held by the taxpayer less than #c years1 except that no benefit shall be recaptured in the case of-- 7,a7 transfer of such investment by reason of the death of the taxpayer1 7,b7 transfer between spouses1 7,c7 transfer incident to the divorce 7as defined in section #ajda7 of such taxpayer1 or 7,d7 a transaction to which section #cha7;a7 applies 7relating to certain acquisitions of the assets of one corporation by another corporation74 7i7 ,regulations ,the ,secretary shall prescribe such regulations as may be appropriate to carry out this section1 including regulations-- 7#a7 which prevent the abuse of the purposes of this section1 7#b7 which impose appropriate reporting requirements1 and 7#c7 which apply the provisions of this section to newly formed entities4 4 7b7 ,credit made part of general business credit ,subsection 7b7 of section #ch of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 in paragraph 7#cb71 by striking plus2 7#b7 in paragraph 7#cc71 by striking the period at the end and inserting 1 plus2 and 7#c7 by adding at the end the following new paragraph3 7#cd7 the portion of the angel investment tax credit to which section #cj;,e7g77#a7 applies4 4 7c7 ,conforming amendments 7#a7 ,section #ajaf7;a7 of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of paragraph 7#cg71 by striking the period at the end of paragraph 7#ch7 and inserting 1 and1 and by inserting after paragraph 7#ch7 the following new paragraph3 7#ci7 to the extent provided in section #cj;,e7h77#b74 4 7#b7 ,the table of sections for subpart ,b of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new item3 ,sec4 #cj;,e4 ,angel investment tax credit4 4 7d7 ,effective date ,the amendments made by this section shall apply to investments made after ,december #ca1 #bjai1 in taxable years ending after such date4