Seeding Venture Capital: Insights into State-by-State Equity Tax Credit Legislation

In general, states have recognized the need to diversify state economic incentives from solely targeting transient businesses to relocate into the state to creating knowledge-based homegrown economies. The intent is to reward and motivate investment and, in the process, create high-growth, high-wage employment opportunities. Currently, 26 states have enacted legislation to incent equity investors to invest in high-risk, early-stage ventures in an attempt to stimulate state economies. The practice is widespread, growing, and competitive. The credits are legislated state by state, creating unique features and rules based on state-specific incentives. The drafted legislation also reflects the hoped-for effect on state-specific economic outcomes. This article highlights state equity tax credit activity and its application to the investment community.