Senators question 'Angel' tax benefit

LINCOLN — Granting a 40 percent tax benefit for high-risk investments in startup businesses drew concern from some state lawmakers Monday.

Gov. Dave Heineman has made the tax benefit for “angel investing” one of his top economic-development initiatives for 2011. Legislative Bill 389, or the Angel Investment Tax Credit Act, seeks to reverse Nebraska’s low standing for assistance to entrepreneurs by offering incentives that are better than in most states.

Nebraska would be one of only two states offering a refundable tax credit, meaning investors could receive money regardless of whether they owed state income tax. Individual investors would have to invest at least $25,000. In a compromise, the amount to be offered annually under LB 389 was pared from $5 million to $3 million.

Lincoln Sen. Danielle Conrad, who led a legislative study last year on how to improve the “economic ecosystem” for entrepreneurs, said Nebraska has done well attracting larger businesses but needs to be just as aggressive helping innovators capitalize on a good idea or a new invention.

But Schuyler Sen. Chris Langemeier questioned whether the state should spend $3 million on such tax benefits when it is cutting spending elsewhere.

He called LB 389 “a slot machine.” Research shows that up to 75 percent of such projects fail.

“I’m not against this. I just don’t think today is the day to make this investment,” said Langemeier, who drafted an amendment to kill the bill.

Holdrege Sen. Tom Carlson asked if all the money would flow to Omaha, Lincoln and Sarpy County.

Funds for the program would come from another incentive program, the Nebraska Advantage Rural Development program, which gets $4 million a year.

Debate on LB 389 was scheduled to resume Tuesday.

Contact the writer:

402-473-9584, paul.hammel@owh.com

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