The Taxman…"Leaveth?"

Although the political headlines of many states seem to indicate taxes might be on the rise, it appears that Indiana's state government might not be following suit, at least not when it comes to investments made in certain early stage Indiana companies. Indiana State Representatives Jerry Torr (District 39), Kathy Heuer (District 83) and Rebecca Kubacki (District 22) introduced House Bill No. 1008, which proposes certain pro-investment changes to Indiana's Venture Capital Investment Tax Credit legislation. House Bill No. 1008 was approved by the Indiana House of Representatives on February 17, 2011 and was then referred to the Indiana Senate where it is being sponsored by Brandt Hershman (District 7), Luke Kenley (District 20), and Jim Arnold (District 8).

The Indiana Venture Capital Investment Tax Credit seeks to improve access to capital to fast growing qualified Indiana companies by offering individual and corporate investors who supply qualified debt or equity capital to qualified Indiana companies a credit against their Indiana income tax liability. House Bill No. 1008 proposes to amend the Venture Capital Investment Tax Credit statute in three ways. First, it proposes to increase the maximum amount of venture capital investment tax credits available for the provision of qualified investment capital to a particular qualified Indiana business from $500,000 to $1 million. Second, if enacted as currently drafted, it will extend the outer limit of the window in which investments eligible for the Venture Capital Investment Tax Credit may be made from Jan. 1, 2013, to Jan. 1, 2015. Third, it would suspend the application fee for applications submitted between July 1, 2011, and June 30, 2013, seeking certification for the Indiana Venture Capital Investment Tax Credit.

House Bill No. 1008 is still in its infancy in the Indiana Senate and subject to change before the taxpayers see a final product. It was first read to the Indiana Senate on February 21, 2011, and was referred to the Committee on Commerce and Economic Development for comment and amendment. Nevertheless, it appears that Indiana's state government is attempting to provide a pro-investment business climate by providing financial incentives in the form of tax credits to those individual and corporate investors willing to make investments in qualifying, emerging Indiana companies that have the potential to bring substantial capital to the state, create jobs and diversify the state's business base.

Ice Miller LLP will track House Bill No. 1008 as it makes its way through the legislative process. If you have any questions or comments on the Indiana Venture Capital Investment Tax Credit or are interested in the legislative monitoring of its proposed amendments found in House Bill No. 1008 please feel free to contact Kristine Danz at kristine.danz@icemiller.com.

Kristine C. Danz is a partner in the Firm's Business Group. She focuses her practice on entrepreneurial legal issues, start-up commercialization, private equity/venture capital financing transactions, and mergers and acquisitions.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

March 9, 2011