A change that Indiana lawmakers made this spring to a tax incentive for startups is being hailed as a big win for the tech industry because it promises to make it easier for fledgling businesses to attract out-of-state investors.
Legislation signed by Gov. Eric Holcomb will allow investors to transfer Indiana’s Venture Capital Investment tax credits starting next year. Transferring the credits will allow out-of-state investors to essentially sell them to someone in the state who can take advantage, the Indianapolis Business Journal reported.
Many tech community leaders believe the change will encourage out-of-state investment in Indiana startups.
The state’s VCI tax credit program allows an individual who invests in an Indiana startup to claim a tax credit worth 20% of the investment. Someone investing $500,000 in an eligible startup can receive a $100,000 cut in income taxes owed to the state. The credit is capped at $1 million.
Startups eligible for the program have to register with the Indiana Economic Development Corporation and set a venture capital fundraising goal. Investors can receive the 20% credit until the company reaches its target, which is capped at $5 million.
The development group can only award $12.5 million in tax credits each year. The total credits haven’t yet reached the cap. The change also gives Indiana a selling point over neighboring Illinois, Michigan and Ohio, where the tax credit is not transferable.
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