WASHINGTON – Today, U.S. Senators Chris Murphy (D-Conn.) and Brian Schatz (D-Hawaii), joined Congressmen Steve Chabot (R-Ohio) and Patrick Murphy (D-Fl.) to announce the introduction of the Angel Tax Credit Act, a bill that would provide investors with further incentive to invest significant capital in startup businesses.

Startups are high-growth businesses that support millions of jobs throughout the country. But according to the U.S. Bureau of Labor Statistics, the creation of startups is on the decline, likely due to lack of access to seed capital. In order to encourage angel investors to support startup businesses, the Angel Tax Credit Act would allow them to claim a tax credit equal to 25 percent of their aggregate qualifying equity investments of $25,000 or more to U.S.-based high-tech startups. Establishing this incentive would help create a funding pipeline to grow startups and target job growth in the science, technology, and engineering fields so the United States can continue its leadership in these fields.

This tax credit is modeled after a state tax credit in Connecticut that has supported more than 200 investments by 90 angels in more than 50 companies since it was established in 2010. When Connecticut’s angel tax credit threshold was lowered from $100,000 to $25,000 in 2012, investment pledges grew from $2.4 million in 9 companies to $8.6 million in 23 companies.

Investors in startup companies, commonly referred to as “angel investors”, fund the majority of startups in the United States and significantly contribute to small business job growth. It is estimated that angel investment contributed to the growth of over 274,000 new jobs in 2012 alone. The angel community demonstrates incredible investment power by reinvesting their own success back into the economy to help grow young businesses, create new jobs, and revitalize our economy.

Murphy has held a series of roundtable discussions with entrepreneurs and angel investors throughout Connecticut to get their feedback on what support they need from the federal government to help create startup jobs. Most recently, he visited with entrepreneurs at Stamford Innovations and The Grove in New Haven. This legislation was developed with their feedback.

“Small businesses and startups are the backbone of our economy. We need to be doing everything we can to help create jobs in high-growth industries, especially in fields like science and technology where innovation is limitless,” said Senator Chris Murphy. “Connecticut is leading by example with its Angel Tax Credit, which has generated millions of dollars in capital for startup businesses. I’m proud to bring a concept that has helped so many businesses in Connecticut to Washington and I urge my colleagues to support it.”

“Hawai‘i’s unique location and creative environment make it an ideal place for tourism, defense, energy, and technology startups,” Senator Brian Schatz said. “Our bill will encourage angel investors to fund Hawai‘i startups that help grow our local economy and create jobs.”

“Small businesses, and startups in particular, are the key to economic growth in this country,” said Congressman Steve Chabot. “Right now, the biggest impediment to job creation confronting startups is the difficulty they experience accessing adequate capital to grow and expand. By incentivizing more investment by angel investors, this bipartisan, bicameral tax credit will help to provide the startup community with the needed capital to grow, innovate and create quality jobs across the nation.”

“Startups and small businesses are the most efficient jobs creators in the United States. American entrepreneurs are known the world over for their spirit of innovation and for their ability to quickly develop and commercialize new technologies. But the greatest single bottleneck preventing these businesses from taking off is access to capital,” said Congressman Patrick Murphy. “Startups are inherently risky endeavors and often cannot get a traditional loan from a bank. This is where angel investors step in – these individuals and small groups are willing to take the financial risk. Especially during this fragile economic recovery, angel investors are an essential piece of the capital ecosystem. This is why I have joined a bipartisan, bicameral coalition to introduce the Angel Tax Credit Act, which will incentivize angel investors to make smart investments and stimulate job creation.”

“Well designed tax credits in many states and other countries have led to increased investment in job creating innovative startups,” said Marianne Hudson, Angel Capital Association executive director. “Some studies have found that credits help attract new people to investing in startups, lead to more total investment dollars and also provide government returns in the form of employment taxes paid by the growing companies that benefited from these programs.”