It’s that time of year again: South Carolina angel investor tax credit (SCAITC) award letter time!!
For the last couple of years we have shared data on the amounts of the SC angel investor tax credits being awarded. You can see the original posts from April 2020 and the follow up from last year explaining the angel investor tax credits.
Here is the 2021 awards update based on letters received this week.
For 2021, applicants received a tax credit of 30.3% of their investment amount. As we explained in the prior series, this means that people are receiving a tax credit of 30.3%, rather than the 35% that they would receive if the $5M cap on credits awarded was not being hit.
An updated table of “proration factors” for the last few years is shown in this table, with the inferred total amount of tax credit applications, and therefore the total implied investment amount, for each year. 2021 is added in green.
In 2021, the proration factor is 0.86486, meaning approximately $5.8M of applications were made, and therefore around $16.5M of qualified investments into eligible South Carolina startups were completed.
This is “down” considerably from 2020 (with the proration factor quite a lot higher) as applications and investing activity were lower by nearly 40%. In 2020 the claimed credits fell a little as the pandemic hit; this year the impact of a global pandemic and economic shutdowns in response was much greater, reducing levels down to the lowest since 2018.
On the positive side, this is the third year in a row that the $5M of credits was fully awarded, and for investors this year the good news is they are getting more credit (30%) per dollar of investment than in recent years. But the fall in activity this year overall is interesting.
Was it from the shift in the application system mid-way through the year? Will it change as denied applicants appeal? Was it that angels simply invested less in South Carolina last year? (This was not the case with VentureSouth; our investment into the state increased by 33% in 2021 over 2020. South Carolina’s share of our overall invested capital also rose from 27% to 35% over the same period.) Or directed their investments to later stage, larger companies, or otherwise ineligible deals? (For VentureSouth, our SCAITC-qualifying investment total also rose from 2021 to 2020, by 15%.) It’s hard to know to why the fall, but it raises some questions…