Angel Tax Credits Can Help Missouri Startups

New businesses need capital to bring their ideas to market and hire workers. Yet, the inability to access capital remains a top barrier for small startups flourishing in Missouri. 

To improve access to capital, NEXT Missouri is advocating for legislation sponsored by Senator Denny Hoskins and Representative Travis Smith that would create an angel investor tax credit.

Read on for more information about angel investor tax credits and the current proposal being considered in Jefferson City.

What is an angel investor tax credit?

• An angel investor tax credit is a state-level financial incentive designed to encourage investment in early-stage, innovative companies operating within the state.

How does an angel investor tax credit work?

• Investors get to claim a credit on their state income taxes for a percentage of the money they invest in qualifying startups. Early-stage, innovative companies get much-needed capital to fuel business growth.

What are some benefits of an angel investor tax credit?

• Angel investor tax credits stimulate local economic growth by making it easier for startups–the source of 81% of new jobs in Missouri–to access capital, thereby increasing job creation and fostering innovation within the state.

Do other states have angel investor tax credits?

• Yes: about half of all states have an angel investor tax credit, including 6 of the 8 states neighboring Missouri.

What are the bill numbers?

• H.B. 2226

• S.B. 1178

What is the amount of the proposed credit?

• 40% base tax credit; 50% for investments made in rural businesses.

Is there a proposed limit on the amount of credit an investor may claim?

• Yes: $75,000 per investor per business and $300,000 total per investor per year.

What is the overall cap of this proposed tax credit program?

• $6 million/year in its initial year, with the potential for the amount of available credits to grow in future years.

Does the bill incentivize investment in certain types of businesses?

• Missouri businesses engaged in research, development, implementation, and commercialization of innovative technologies, products, and services for use in the commercial marketplace will be eligible to participate in the tax credit program.

• Rural businesses (see credit amount above).

Does the bill target particular business owner demographics?

• No

Will the proposed tax credit be transferable?

• Yes, credits are saleable and transferable.

Will individual and institutional investors both be able to utilize the proposed tax credits?

• Yes

Will investors outside Missouri be able to use the proposed tax credits?

• Yes, though the credits only offset Missouri tax liability. Tax credits may be sold to those with Missouri tax liability.

Updated March 11, 2024.