High Growth Small Business Job Creation Act
On June 14, 2013, Governor Nikki Haley signed into law the High Growth Small Business Job Creation Act. The intent behind passage of the Act was to encourage investment in early stage, high-growth job creating businesses; increase the number of high-quality, high-paying jobs in South Carolina; and ultimately expand the state’s economy by enlarging the base of wealth-creating businesses.
The High Growth Small Business Job Creation Act, also known as the Angel Investor Act, provides tax credits to angel investors who make qualified investments in qualified businesses. Under the Act, an angel investor may be entitled to a tax credit of up to 35% of its qualified investment in a qualified business.
Although angel investors must apply for tax credits through the South Carolina Department of Revenue, qualified businesses must register with the Secretary of State. S.C. Code of Laws §11-30-5 defines “qualified business” as a business that has registered with the Secretary of State, and that meets all of the following requirements:
• The business must be a corporation, limited liability company, general partnership, or limited partnership located and headquartered in the state of South Carolina.
• The business must have been organized for no more than five years before the qualified investment was made.
• The business must have 25 or fewer employees.
• The business must have had a gross income of $2 million or less in any complete fiscal year before registering as a qualified business.
• The business must be primarily engaged in one of the following activities:
o Software development
o Information technology services
o Research and development
o Ambulatory health care services
o Nursing and residential care facilities
• The business must not substantially engage in any of the following activities:
o Retail sales
o Real estate or construction
o Professional services
o Natural resource extraction
o Financial brokerage, investment activities, or insurance
o Entertainment, amusement, recreation, or athletic or fitness activity for which an admission or fee is charged
Once approved by the Secretary of State’s Office, the qualified business is registered for a period of 12 months. A qualified business may renew its registration as long as it continues to meet the statutory requirements for a qualified business.
First-time registrants should file the Initial Application for Registration as a Qualified Business that is available by following this link. Businesses that were previously approved to register as a qualified business and that are seeking to renew their registration should file the Renewal Application for Registration as a Qualified Business that is available here. For a listing of qualified businesses registered with the Secretary of State, please follow this link. You may also use the Secretary of State’s online corporation search engine to look up a business by name to see if it has registered as a qualified business. The corporation search engine may be accessed here.
Pursuant to Section 11-44-60 of the High Growth Small Business Job Creation Act, the Secretary of State is required to publish an aggregated statewide report of qualified businesses on an annual basis. This aggregated statewide report must contain the following information:
o The number of qualified businesses
o The amount of capital raised by the qualified businesses including the amount of qualified investment
o The number of full time, part time, and temporary jobs created by the qualified businesses
o The average wage of the jobs created by the qualified businesses
To view the most recent aggregate statewide report, click here.
In order to apply for a tax credit under the High Growth Small Business Job Creation Act, angel investors must complete the Angel Investor Credit Application provided by the South Carolina Department of Revenue. This application is available on the Department of Revenue’s website.