A bill to extend the Qualified Business Venture (QBV) Tax Credit is up for review by the North Carolina House Finance Committee on Tuesday, June 12, 2007.
The QBV provides critical capital formation support to emerging, innovation-based small companies in North Carolina. This credit, which was originally adopted in the late 1980s and has since been renewed by the legislature on several occasions, will expire December 31, 2007. House Bill #1598 seeks to extend QBV to January 1, 2011.
According to CED partner NCBIO, the QBV Tax Credit provides a 25% credit against personal income tax for individual investments in qualifying small businesses. Credits are capped at $50,000 per individual investor per year, and at $7 million per year for all investments statewide.
To qualify for the credit, businesses must have less than $5 million in revenues annually and be engaged primarily in manufacturing, processing, warehousing, wholesaling, or research and development. The QBV credit effectively stimulates angel and other early stage investments that are critical to moving new technologies from universities and other research laboratories to commercialization and, ultimately, to profitability. The credit has become especially important in recent years as venture capital funds have shifted emphasis to later-stage start-up companies.
The resulting void in funding opportunities is often called the “valley of death� for entrepreneurs launching new businesses. Since 1999 QBV companies have attracted tens of millions of dollars each year in follow-on investment from venture companies. Most of the follow-on investments are not eligible for the QBV credit because they are made by pass-through entities that do not qualify for the credit under the law.
Altogether, between 1999 and 2006, angel investors and venture funds made a total of more than $1.4 billion in non-qualifying investments in QBV companies, bringing total investments in QBV firms during the period to $1.7 billion. In a 2007 survey, QBV companies responding to a survey had an average of 10 employees with an average salary of $72,879 per year.
Qualified Business Venture Companies are important to North Carolina because they create large numbers of high-paying jobs, attract – and spend – large amounts of capital, and create a large demand for goods and services in the community.
Contact the House Finance Committee members and encourage them to pass HB 1598 to extend the QBV. If you have any other questions about the bill, contact NCBIO's Sam Taylor, 919-281-8960, staylor@ncbioscience.org.