South Carolina Angel Investor Tax Credit
If you are an entrepreneur or angel investor doing business in South Carolina, you need to know about the SC angel investor tax credit. There aren't many guides about it, so we hope the information below is useful.
To qualify for the credit, an angel investor must make an investment in a company that has been recognized as qualified by the South Carolina Secretary of State. The company must:
be less than five years old
be headquartered in SC
have 25 or fewer employees
have gross income under $2 million in any previous fiscal year
be engaged in manufacturing, processing, warehousing, wholesaling, software development, IT services, R&D, and certain service-related facilities
complete an application with the Secretary of State and receive approval prior to receiving a qualifying investment
In addition, the angel investor must:
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For a qualified investment, an angel investor can claim a tax credit that:
is equal to 35% of the investment amount (e.g. a $10,000 investment would be eligible for up to a $3,500 credit)
can be taken up 50% in the year of the investment, with the remainder available in subsequent years (up to 10 years from the year of investment)
is a maximum of $100,000 for a single taxpayer in a single tax year - so an individual investor can claim a tax credit for up to $285,714 of qualified investments in a single year ($285,714 times 35% = $100,000). Married taxpayers can take $100,000 each
is eligible to be carried forward for up to ten years if not used
may be sold, exchanged, or transferred, but only once. Non-SC investors (with no SC income tax liability) or SC investors that cannot use the credit can sell their credit to a SC taxpayer
It takes some preparation to ensure you receive the credit, so we strongly recommend you contact us, your tax adviser, or an accounting firm on our partners page before you invest.
1) The form for a business to apply to the Secretary of State to become a "qualified business" is on the Secretary of State's website.
Entrepreneurs: complete this before you take an angel investment.
Investors: make sure the company has become qualified before you make an investment.
2) The application form for an investor to apply for an allocation of the tax credit (Angel Investor Credit 1350 / SC SCH.TC-56A) is located on the Department of Revenue's website. Complete this once you make the investment - in the same calendar year.
3) Once you have your allocation from the Department of Revenue (by January the following year), include your amount in the tax credit form here filed with your tax filing.
5) If you need assistance selling your tax credit, please let us know and we will be pleased to help.
Or, join VentureSouth. VentureSouth members get their applications (for investments made through VentureSouth) filed automatically as part of their membership.
As well as the documents above, you can read the original bill, The High Growth Small Business Job Creation Act of 2013.
More information is available in the SC Department of Revenue's Revenue Ruling #14-6.
And you can hear VentureSouth's Paul Clark chat with Ben Glenn at Bauknight Pietras & Stormer about tax issues for angel investments, including the SC angel investor tax credit, here.