Tuesday, March 1, 2011

Guest Column: NC's Qualified Business Venture Tax Credit

In the first of a three-part guest column series, Max Koss provides an overview of North Carolina’s Qualified Business Venture Tax Credit (QBV). In the following guest columns, Koss reviews how the QBV applies to investors and which business are "qualified".

Finding early stage investment capital can be difficult and costly for entrepreneurs and risky for Angels. The state of North Carolina’s Qualified Business Venture Tax Credit (QBV) is a tool for entrepreneurs designed to stimulate capital investment in companies like yours.
The QBV is part of the Qualified Business Investment program administered by the NC Secretary of State.  Technology-based start-up companies are generally eligible for the program.  The QBV provides qualified investors with a tax credit of up to 25% of the investment (limited to $50,000).

The QBV is available to individuals and “pass-through” entities (S corporations, partnerships, and limited liability companies) that purchase equity securities or subordinated debt of a “qualified business.”  A pass-through entity is allowed a tax credit of up to $750,000.  The credit is not allowed to a pass-through entity that has committed capital under management in excess of $5,000,000.

Each individual owner of a pass-through entity is allowed a credit equal to his allocated share of the credits (not to exceed $50,000) for which the pass-through entity is eligible.  If the owner’s share of the pass-through entity’s credit is limited due to maximum allowable credit for a taxable year, the pass-through entity and its owners cannot reallocate the unused credit among other owners.

The total amount of tax credits allowed for qualified business investments in a calendar year cannot exceed $7,500,000.  If the total year exceeds $7,500,000, the $7,500,000 is allocated in proportion to all credits claimed by the approved applications.

The details of the QVB program are technical and can be complicated. If you have questions about this or similar topics, contact Max Koss, CPA, FROST PLLC.

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