I 
113TH CONGRESS 
2D SESSION 
H. R. 4931 
To amend the Internal Revenue Code of 1986 to allow a credit against 
income tax for equity investments by angel investors. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 20, 2014 
Mr. CHABOT (for himself and Mr. MURPHY of Florida) introduced the 
following bill; which was referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to allow a 
credit against income tax for equity investments by angel 
investors. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Angel Tax Credit Act’’. 
SEC. 2. ANGEL INVESTMENT TAX CREDIT. 
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
section: 
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‘‘SEC. 30E. ANGEL INVESTMENT TAX CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 25 percent of the 
qualified equity investments made by a qualified investor 
during the taxable year. 
‘‘(b) LIMITATION.—The amount of the credit allowed 
under subsection (a) for any taxpayer for any taxable year 
shall not exceed $250,000. 
‘‘(c) QUALIFIED EQUITY INVESTMENT.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified equity 
investment’ means any equity investment in a quali-
fying business entity if— 
‘‘(A) the aggregate amount of such invest-
ments made by the taxpayer during the taxable 
year is $25,000 or more, 
‘‘(B) such investment is acquired by the 
taxpayer at its original issue (directly or 
through an underwriter) solely in exchange for 
cash, and 
‘‘(C) such investment is designated for 
purposes of this section by the qualifying busi-
ness entity. 
‘‘(2) EQUITY INVESTMENT.—The term ‘equity 
investment’ means— 
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‘‘(A) any form of equity, including a gen-
eral or limited partnership interest, common 
stock, preferred stock (other than nonqualified 
preferred stock as defined in section 351(g)(2)), 
with or without voting rights, without regard to 
seniority position and whether or not convert-
ible into common stock or any form of subordi-
nate or convertible debt, or both, with warrants 
or other means of equity conversion, and 
‘‘(B) any capital interest in an entity 
which is a partnership. 
‘‘(3) REDEMPTIONS.—A rule similar to the rule 
of section 1202(c)(3) shall apply for purposes of this 
subsection. 
‘‘(d) QUALIFYING BUSINESS ENTITY.—For purposes 
of this section— 
‘‘(1) IN GENERAL.—The term ‘qualifying busi-
ness entity’ means any domestic corporation or part-
nership if such corporation or partnership— 
‘‘(A) has its headquarters in the United 
States, 
‘‘(B) has gross revenues for the taxable 
year preceding the date of the qualified equity 
investment of less than $1,000,000, 
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‘‘(C) employs less than 25 full-time equiva-
lent employees as of the date of such invest-
ment, 
‘‘(D) has been in existence for less than 7 
years as of the date of the qualified equity in-
vestment, 
‘‘(E) has more than 50 percent of the em-
ployees performing substantially all of their 
services in the United States as of the date of 
such investment, 
‘‘(F) is engaged in a high technology trade 
or business related to— 
‘‘(i) advanced materials, nanotechnolo-
gy, or precision manufacturing, 
‘‘(ii) aerospace, aeronautics, or de-
fense, 
‘‘(iii) biotechnology or pharmaceuti-
cals, 
‘‘(iv) electronics, semiconductors, soft-
ware, or computer technology, 
‘‘(v) energy, environment, or clean 
technologies, 
‘‘(vi) forest products or agriculture, 
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‘‘(vii) information technology, commu-
nication technology, digital media, or 
photonics, 
‘‘(viii) life sciences or medical sci-
ences, 
‘‘(ix) marine technology or aquacul-
ture, 
‘‘(x) transportation, or 
‘‘(xi) any other high technology trade 
or business, as determined by the Sec-
retary of the Treasury, and 
‘‘(G) has equity investments designated for 
purposes of this paragraph. 
‘‘(2) 
DESIGNATION
OF
EQUITY
INVEST-
MENTS.—For purposes of paragraph (1)(G), an eq-
uity investment shall not be treated as designated if 
such designation would result in the aggregate 
amount which may be taken into account under this 
section with respect to equity investments in such 
corporation or partnership exceeds $2,000,000, tak-
ing into account the total amount of all qualified eq-
uity investments made by all taxpayers for the tax-
able year and all preceding taxable years. 
‘‘(e) QUALIFIED INVESTOR.—For purposes of this 
section— 
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‘‘(1) IN GENERAL.—The term ‘qualified inves-
tor’ means an accredited investor, as defined by the 
Securities and Exchange Commission. 
‘‘(2) EXCLUSION.—The term ‘qualified investor’ 
does not include— 
‘‘(A) a person controlling at least 50 per-
cent of the qualifying business entity, 
‘‘(B) any venture capital fund (within the 
meaning of section 203(l) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b–3(l))), or 
‘‘(C) any bank, savings association, loan 
association, trust company, insurance company, 
or similar entity whose business activities in-
clude making similar investments to invest-
ments of a venture capital fund (as so defined). 
‘‘(f) NATIONAL LIMITATION ON AMOUNT OF INVEST-
MENTS DESIGNATED.— 
‘‘(1) IN GENERAL.—There is an angel invest-
ment tax credit limitation of $500,000,000 for each 
of calendar years 2013 through 2017. 
‘‘(2) ALLOCATION OF LIMITATION.—The limita-
tion under paragraph (1) shall be allocated by the 
Secretary among qualified small business entities se-
lected by the Secretary. 
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‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If 
the angel investment tax credit limitation for any 
calendar year exceeds the aggregate amount allo-
cated under paragraph (2) for such year, such limi-
tation for the succeeding calendar year shall be in-
creased by the amount of such excess. No amount 
may be carried under the preceding sentence to any 
calendar year after 2022. 
‘‘(g) APPLICATION WITH OTHER CREDITS.— 
‘‘(1) BUSINESS CREDIT TREATED AS PART OF 
GENERAL BUSINESS CREDIT.—Except as provided in 
paragraph (2), the credit which would be allowed 
under subsection (a) for any taxable year (deter-
mined without regard to this subsection) shall be 
treated as a credit listed in section 38(b) for such 
taxable year (and not allowed under subsection (a)). 
‘‘(2) PERSONAL CREDIT.— 
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who elects the application of this para-
graph, for purposes of this title, the credit al-
lowed under subsection (a) for any taxable year 
(determined after application of paragraph (1)) 
shall be treated as a credit allowable under sub-
part A for such taxable year. 
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‘‘(B) CARRYFORWARD OF UNUSED CRED-
IT.—If the credit allowable under subsection (a) 
by reason of subparagraph (A) exceeds the limi-
tation imposed by section 26(a) for such taxable 
year, reduced by the sum of the credits allow-
able under subpart A (other than this section) 
for such taxable year, such excess shall be car-
ried to each of the succeeding 20 taxable years 
to the extent that such unused credit may not 
be taken into account under subsection (a) by 
reason of subparagraph (A) for a prior taxable 
year because of such limitation. 
‘‘(h) SPECIAL RULES.— 
‘‘(1) RELATED PARTIES.—For purposes of this 
section— 
‘‘(A) IN
GENERAL.—All related persons 
shall be treated as 1 person. 
‘‘(B) RELATED PERSONS.—A person shall 
be treated as related to another person if— 
‘‘(i) the relationship between such per-
sons would result in the disallowance of 
losses under section 267 or 707(b), or 
‘‘(ii) for purposes of subsection (e), 
the person is an individual who is the 
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spouse of a lineal descendant of an indi-
vidual described in subsection (e)(2)(A). 
‘‘(2) BASIS.—For purposes of this subtitle, the 
basis of any investment with respect to which a cred-
it is allowable under this section shall be reduced by 
the amount of such credit so allowed. This sub-
section shall not apply for purposes of sections 1202, 
1397B, and 1400B. 
‘‘(3) RECAPTURE.—The Secretary shall, by reg-
ulations, provide for recapturing the benefit of any 
credit allowable under subsection (a) with respect to 
any qualified equity investment which is held by the 
taxpayer less than 3 years, except that no benefit 
shall be recaptured in the case of— 
‘‘(A) transfer of such investment by reason 
of the death of the taxpayer, 
‘‘(B) transfer between spouses, 
‘‘(C) transfer incident to the divorce (as 
defined in section 1041) of such taxpayer, or 
‘‘(D) a transaction to which section 381(a) 
applies (relating to certain acquisitions of the 
assets of one corporation by another corpora-
tion). 
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‘‘(i) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be appropriate to carry out this 
section, including regulations— 
‘‘(1) which prevent the abuse of the purposes of 
this section, 
‘‘(2) which impose appropriate reporting re-
quirements, and 
‘‘(3) which apply the provisions of this section 
to newly formed entities.’’. 
(b) CREDIT MADE PART OF GENERAL BUSINESS 
CREDIT.—Subsection (b) of section 38 of the Internal 
Revenue Code of 1986 is amended— 
(1) in paragraph (35), by striking ‘‘plus’’; 
(2) in paragraph (36), by striking the period at 
the end and inserting ‘‘, plus’’; and 
(3) by adding at the end the following new 
paragraph: 
‘‘(37) the portion of the angel investment tax 
credit to which section 30E(g)(1) applies.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 1016(a) of the Internal Revenue 
Code of 1986 is amended by striking ‘‘and’’ at the 
end of paragraph (36), by striking the period at the 
end of paragraph (37) and inserting ‘‘, and’’, and by 
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inserting after paragraph (37) the following new 
paragraph: 
‘‘(38) to the extent provided in section 
30E(h)(2).’’. 
(2) The table of sections for subpart B of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by adding at the end 
the following new item: 
‘‘Sec. 30E. Angel investment tax credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to investments made after Decem-
ber 31, 2013, in taxable years ending after such date. 
Æ 
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