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Deborah Tillett, President and Executive Director of the Baltimore Emerging Technologies Centers. (Maximilian Franz / The Daily Record)

Md. startup community disappointed as angel investor bill sinks

To the disappointment of Maryland’s startup community, the Angel Investor Tax Credit Bill is still in committee in both the House and the Senate and is likely to stay there as the 2016 session ends next week.

House bill sponsor Del. Brooke Lierman declined to comment on the record about the bill’s fate last week. Sources familiar with the bill said it will not come out of committee this year. Committee hearings were held in both chambers in February and March but discussion on the bill did not go beyond that.

House Bill 471 and Senate Bill 622, which seek to offer tax incentives to angel investors, was originally introduced last year. This year the bill drew support from the state’s startup community, which cited difficulty getting local funding for early stage businesses.

The bill proposed a three-year pilot project that would create a tax credit against the state income tax for angel investors, wealthy individual investors who provide capital for startups. The credit would be equal to 50 percent of the qualified investment, not exceeding $50,000 for individuals and $100,000 for married couples. The amount of credits, awarded by the Department of Economic Competitiveness and Commerce, would not go above the amount of money set aside in a reserve fund established by the bill.

For the startup community, which rarely takes an interest in what’s happening in Annapolis, the death of this bill this session maintains a roadblock many new companies face in getting initial funding.

“I think it’s really all about economic development,” said Deb Tillett, president and executive director of the Baltimore Emerging Technologies Centers, adding that it’s something legislators have had a “tin ear” about.

The House Ways and Means Committee and Senate Budget and Taxation Committee did not return calls requesting comment on the fate of the bill.

“One of the things that every startup needs is early stage capital,” said Tillett, who testified in favor of the bill.

While most people reach out to friends and family for capital when starting a company, angel investors provide the muscle startups need to get on their feet. Studies show angel investors make up 90 percent of early stage equity not provided by friends and family. That’s typically a stage before venture capitalists are comfortable giving money. Angel investors also help people who may not have friends and family members with cash to spare.

In 2015, companies based at ETC helped create 1,300 high-skilled technology jobs in the region plus corresponding support jobs, Tillett said.

“That’s the piece that I found frustrating,” Tillett said. “It’s that they do not understand the economic development impact of what this could do.”

ETC along with a handful of startups testified in favor of the bill. The Greater Baltimore Committee has also been a strong supporter of the legislation.

Legislative analysts estimated that if the tax credit is funded at $5 million, state general fund expenditures would increase by $5 million from fiscal 2017 to 2019 while administrative costs would increase $91,500 in fiscal 2017.