Business groups present $1.7B argument for venture tax credit

With the qualified business venture tax credit set to expire at the end of 2007, the North Carolina Biosciences Organization and the North Carolina Entrepreneurial Association argued Tuesday before the North Carolina House Finance Committee that the credit should be extended.

The two organizations presented a study to the committee showing that companies eligible for the tax credit raised approximately $1.7 billion in equity financing from 1999 to 2006. Legislation under review by the House Finance Committee would extend the qualified business tax credit until the end of 2010.

Angel investors who put money into qualified startup companies receive a 25 percent credit against their personal income tax. Credits are capped at $50,000 per investor and at $7 million per year for all investments statewide.

To qualify for investment, a small business must have less than $5 million in annual revenue and be engaged primarily in manufacturing, processing, warehousing, wholesaling or research and development.

The study presented to the House says that credit-eligible companies raised $178.9 million in 2006, $121.4 million in 2005 and $111.1 million in 2004.

The presentation also says that in 2007, 18 companies qualify for the credit. Those businesses report, on average, having 10 full-time employees each, with an average salary of $72,879, according to the North Carolina Biosciences Organization and the North Carolina Entrepreneurial Association.

One company that qualified for the credit is Durham-based Affinergy Inc., which licensed its core technology from Duke University in 2004. The company which uses a biomaterial coating technology to regulate which materials stick to a medical device's surface, has raised more then $5 million in venture capital.