Governor Ducey Signs HB 2191 Bill to Allocate $10 Million Back into the Program
PHOENIX, May 22, 2017 — Governor Doug Ducey signed House Bill 2191 today, authorizing $2.5 million a year for the next four years into the Angel Investor Tax Credit program for capital infusions into early-stage startup companies. The Arizona Technology Council and its Public Policy Committee were successful in gaining support for the bill by rallying Arizona’s technology community and leading efforts to lobby for recapitalization.
“The recapitalization of the Angel Investor Tax Credit program has been a top priority for the Council since the original $20 million in tax credits ran out in 2015,” said Steven G. Zylstra, president and CEO of the Arizona Technology Council. “The initial program showed a direct return on investment of more than 2.2 to 1 in tax revenue. Today’s signing is a major success for our startup technology community and reinforces that Arizona is open for business.”
The Angel Investor Tax Credit program helps to incentivize investment for Arizona startups by giving individual investors a 30 percent state credit on qualifying investments or 35 percent for investments in rural or bioscience startups. The Council worked with local technology and entrepreneurial leaders to gather testimonials and statistics on the success of the program since its launch.
When the $20 million cap was met in summer 2015, Arizona experienced a dramatic decrease in angel investing. Desert Angels, a Tucson-based nonprofit organization of accredited investors who seek opportunities to invest in Southwest regional startup or early-stage companies, reports a 40 percent drop in membership since the credits expired and overall investment for its current members is only half the level of when the program was active.
“When the Angel Investors Tax Credit Program was introduced, it helped transform Arizona into one of the fastest growing technology hubs in the nation,” said Curtis Gunn, Chairman, Desert Angels. “It was imperative that the state recapitalize this program to bring investments back to Arizona and to keep fueling our startup community.”
The following results highlighting the success of the Angel Investor Tax Credit Program since 2006 were presented to the Arizona House, Senate and Governor’s Office by the Council, its Public Policy Committee and the Arizona Commerce Authority (ACA):
- 213 small businesses and 972 separate investments have been certified by ACA.
- $420 million: Total amount of early-stage capital raised from companies that received the $20 million in tax credits. That’s a ratio of 21 to 1.
- 120 of the firms have received nearly $62 million in certified investments from the $20 million in tax credits. That’s an ROI of 2,100%.
- $44 million: Total tax revenue generated from $20 million in tax credits. The state has already been paid back more than twice (2 to 1).
- $69,000: Average wage of the employees working for these firms.
- An economic impact study commissioned by the Arizona Commerce Authority ran a model to estimate the program’s fiscal and economic impact. Results include:
- Total economic output of $1.3 billion since inception with $332 million per year going forward, which will keep growing as employment grows
- Total tax revenue of $44 million and growing
Infusionsoft is just one success story, thanks to the program. “Without the angel investor tax credit, our company would have struggled to receive the funding we needed,” said Clate Mask, CEO and co-founder of the company. “When the $20 million was appropriated to the tax credit 11 years ago, we were fortunate to receive $500,000 worth of investment as a result of the program, which is $150,000 of the total cap (less than 1 percent of the tax credit). Today, Infusionsoft employs 600 people and the state has received more than $22 million in tax revenue. I look forward to seeing the opportunities our growing community of innovative startups will receive because of the recapitalization.”
For more information on the Arizona Technology Council and its Public Policy Committee, visit www.aztechcouncil.org.