To amend the Small Business Investment Act of 1958 to establish the Angel Investment Program.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Angels Nurture Growing Entrepreneurs 
into Long-term Successes (ANGELS) Act''.

SEC. 2. ESTABLISHMENT OF ANGEL INVESTMENT PROGRAM.

    (a) Establishment.--Title III of the Small Business Investment Act 
of 1958 (15 U.S.C. 681 et seq.) is amended by adding at the end the 
following new part:

                   ``PART C--ANGEL INVESTMENT PROGRAM

``SEC. 380. OFFICE OF ANGEL INVESTMENT.

    ``(a) Establishment.--There is established, in the Investment 
Division of the Small Business Administration, the Office of Angel 
Investment.
    ``(b) Director.--The head of the Office of Angel Investment is the 
Director of Angel Investment.
    ``(c) Duties.--Subject to the direction of the Secretary, the 
Director shall perform the following functions:
            ``(1) Provide support for the development of angel 
        investment opportunities for small business concerns.
            ``(2) Administer the Angel Finance Program under section 
        381 of this Act.
            ``(3) Administer the Federal Angel Network under section 
        382 of this Act.
            ``(4) Administer the grant program for the development of 
        angel groups under section 383 of this Act.
            ``(5) Perform such other duties consistent with this 
        section as the Administrator shall prescribe.

``SEC. 381. ANGEL FINANCE PROGRAM.

    ``(a) In General.--The Director of Angel Investment shall establish 
and carry out a program, to be known as the Angel Finance Program, to 
provide financing to approved angel groups.
    ``(b) Eligibility.--To be eligible to receive financing under this 
section, an angel group shall--
            ``(1) have demonstrated experience making investments in 
        local or regional small business concerns;
            ``(2) have established protocols and a due diligence 
        process for determining its investment strategy;
            ``(3) have an established code of ethics; and
            ``(4) submit an application to the Director of Angel 
        Investment at such time and containing such information and 
        assurances as the Director may require.
    ``(c) Use of Funds.--An angel group that receives financing under 
this section shall use the amounts received to make investments in 
small business concerns--
            ``(1) that have been in existence for less than 5 years as 
        of the date on which the investment is made;
            ``(2) that have fewer than 75 employees as of the date on 
        which the investment is made; and
            ``(3) more than 50 percent of the employees of which 
        perform substantially all of their services in the United 
        States as of the date on which the investment is made.
    ``(d) Limitation on Amount.--No angel group receiving financing 
under this section shall receive more than $2,000,000.
    ``(e) Priority in Providing Financing.--In providing financing 
under this section, the Director shall give priority to angel groups 
that invest in small business concerns owned and controlled by 
veterans, small business concerns owned and controlled by women, and 
socially and economically disadvantaged small business concerns.
    ``(f) Geographic Distribution of Financing.--In providing financing 
under this section, the Director shall, to the extent practicable, 
provide financing to angel groups that are located in a variety of 
geographic areas.
    ``(g) Matching Requirement.--As a condition of receiving financing 
under this section, the Director shall require that for each small 
business concern in which the angel group receiving such financing 
invests, the angel group shall invest an amount that is equal to or 
greater than the amount of financing received under this section from a 
source other than the Federal Government that is equal to the amount of 
the financing provided under this section that the angel group invests 
in that small business concern.
    ``(h) Repayment of Financing.--As a condition of receiving 
financing under this section, the Director shall require an angel group 
to repay the Director for any investment on which the angel group makes 
a profit an amount equal to the percentage of the profit that is equal 
to the percentage of the total amount invested by the angel group that 
consisted of financing received under this section.
    ``(i) Angel Investment Fund.--
            ``(1) Establishment.--There is in the Treasury a fund to be 
        known as the Angel Investment Fund.
            ``(2) Deposit of certain amounts.--Amounts collected under 
        subsection (h) shall be deposited in the fund.
            ``(3) Use of deposits.--Deposits in the fund shall be 
        available for the purpose of providing financing under this 
        section in the amounts specified in annual appropriation laws 
        without regard to fiscal year limitations.
    ``(j) Definitions.--In this section:
            ``(1) The term `small business concern owned and controlled 
        by veterans' has the meaning given that term under section 
        3(q)(3) of the Small Business Act (15 U.S.C. 632(q)(3)).
            ``(2) The term `small business concern owned and controlled 
        by women' has the meaning given that term under section 
        8(d)(3)(D) of such Act (15 U.S.C. 637(d)(3)(D)).
            ``(3) The term `socially and economically disadvantaged 
        small business concern' has the meaning given that term under 
        section 8(a)(4)(A) of such Act (15 U.S.C. 637(a)(4)(A)).
    ``(k) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section--
            ``(1) $25,000,000 for fiscal year 2007;
            ``(2) $50,000,000 for fiscal year 2008; and
            ``(3) $75,000,000 for fiscal year 2009.

``SEC. 382. FEDERAL ANGEL NETWORK.

    ``(a) In General.--Subject to the succeeding provisions of this 
subsection, the Director of the Office of Angel Investment shall 
establish and maintain a searchable database, to be known as the 
Federal Angel Network, to assist small business concerns in identifying 
angel investors.
    ``(b) Network Contents.--The Federal Angel Network shall include--
            ``(1) a list of the names and addresses of angel groups and 
        angel investors;
            ``(2) information about the types of investments each angel 
        group or angel investor has made; and
            ``(3) information about other public and private resources 
        and registries that provide information about angel groups or 
        angel investors.
    ``(c) Collection of Information.--
            ``(1) In general.--The Director shall collect the 
        information to be contained in the Federal Angel Network and 
        shall ensure that such information is updated regularly.
            ``(2) Request for exclusion of information.--The Director 
        shall not include such information concerning an angel investor 
        if that investor contacts the Director to request that such 
        information be excluded from the Network.
    ``(d) Availability.--The Director shall make the Federal Angel 
Network available on the Internet website of the Administration.
    ``(e) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section $1,000,000, to remain available 
until expended.

``SEC. 383. GRANT PROGRAM FOR DEVELOPMENT OF ANGEL GROUPS.

    ``(a) In General.--The Director of the Office of Angel Investment 
shall establish and carry out a grant program to make grants to 
eligible entities for the development of new or existing angel groups 
and to increase awareness and education about angel investing.
    ``(b) Eligible Entities.--In this section, the term `eligible 
entity' means--
            ``(1) a State or unit of local government;
            ``(2) a nonprofit organization;
            ``(3) a state mutual benefit corporation;
            ``(4) a Small Business Development Center established 
        pursuant to section 21 of the Small Business Act (15 U.S.C. 
        648); or
            ``(5) a women's business center established pursuant to 
        section 29 of the Small Business Act (15 U.S.C. 656).
    ``(c) Application.--To receive a grant under this section, an 
eligible entity shall submit an application that contains--
            ``(1) a proposal describing how the grant would be used; 
        and
            ``(2) any other information or assurances as the Director 
        may require.
    ``(d) Report.--Not later than 3 years after the date on which an 
eligible entity receives a grant under this section, such eligible 
entity shall submit a report to the Administrator describing the use of 
grant funds and evaluating the success of the angel group developed 
using the grant funds.
    ``(e) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section $1,500,000, for each of fiscal 
years 2007 through 2009.

``SEC. 384. DEFINITIONS.

    ``In this part:
    ``(a) The term `angel group' means two or more angel investors 
organized for the purpose of making investments in local or regional 
small business concerns that--
            ``(1) consists primarily of angel investors;
            ``(2) requires angel investors to be accredited investors; 
        and
            ``(3) actively involves the angel investors in evaluating 
        and making decisions about making investments.
    ``(b) The term `angel investor' means an individual who--
            ``(1) on the basis of such factors as financial 
        sophistication, income, net worth, knowledge, and experience in 
        financial matters, or amount of assets under management, 
        qualifies as an accredited investor under rules and regulations 
        prescribed by the Commissioner of the Securities and Exchange 
        Commission; and
            ``(2) provides capital to or makes investments in a small 
        business concern.''.

SEC. 3. TAX CREDIT FOR SMALL BUSINESS INVESTMENT.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25D the 
following new section:

``SEC. 25E. SMALL BUSINESS INVESTMENT.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter an amount 
equal to 20 percent of the amount paid or incurred for qualified small 
business investments during the taxable year.
    ``(b) Limitation.--With respect to any qualified small business 
investment in any corporation or partnership, the amount paid or 
incurred by any taxpayer which is taken into account under subsection 
(a) shall not exceed $250,000 ($500,000 in the case of a joint return), 
reduced by the amount taken into account under such subsection with 
respect to investments by the taxpayer in such corporation or 
partnership for all prior taxable years.
    ``(c) Qualified Small Business Investment.--For purposes of this 
section--
            ``(1) In general.--The term `qualified small business 
        investment' means any small business stock and any small 
        business partnership interest.
            ``(2) Small business stock.--The term `small business 
        stock' means any stock in a domestic corporation acquired by 
        the taxpayer at its original issue (directly or through an 
        underwriter) solely in exchange for cash, if--
                    ``(A) such corporation is an eligible small 
                business (as defined in section 41(b)(3)(D)(ii)),
                    ``(B) such corporation is engaged primarily in the 
                trade or business of manufacturing, processing, 
                assembling, or researching and developing products or 
                in the trade or business of agriculture, technology, or 
                life science,
                    ``(C) such corporation has been in existence for 
                less than 5 years as of such acquisition,
                    ``(D) such corporation has fewer than 75 employees 
                as of such acquisition,
                    ``(E) more than 50 percent of the corporation's 
                employees perform substantially all of their services 
                in the United States as of such acquisition, and
                    ``(F) such stock is designated by the corporation 
                for purposes of this paragraph.
        For purposes of subparagraph (E), stock 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 stock issued by such corporation to exceed $750,000, 
        taking into account all taxpayers for all taxable years.
            ``(3) Small business partnership interest.--The term `small 
        business partnership interest' means any capital or profits 
        interest in a domestic partnership acquired by the taxpayer 
        from the partnership solely in exchange for cash, if--
                    ``(A) such partnership is an eligible small 
                business (as defined in section 41(b)(3)(D)(ii)),
                    ``(B) such partnership is engaged primarily in the 
                trade or business of manufacturing, processing, 
                assembling, or researching and developing products or 
                in the trade or business of agriculture, technology, or 
                life science,
                    ``(C) such partnership has been in existence for 
                less than 5 years as of such acquisition,
                    ``(D) such partnership has fewer than 75 employees 
                as of such acquisition,
                    ``(E) more than 50 percent of the partnership's 
                employees perform substantially all of their services 
                in the United States as of such acquisition, and
                    ``(F) such capital or profits interest is 
                designated by partnership for purposes of this 
                paragraph.
        For purposes of subparagraph (E), a capital or profits interest 
        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 interests in such 
        partnership to exceed $750,000, taking into account all 
        taxpayers for all taxable years.
    ``(d) Carryforward of Unused Credit.--If the credit allowable under 
subsection (a) exceeds the limitation imposed by section 26(a) for such 
taxable year reduced by the sum of the credits allowable under this 
subpart (other than this section), such excess shall be carried to the 
succeeding taxable year and added to the credit allowable under this 
section. Such excess shall not be taken into account under this 
subsection for such succeeding taxable year or any taxable year 
succeeding such year.''.
    (b) Clerical Amendment.--The table of sections of such subpart is 
amended by inserting after the item relating to section 25D the 
following new item:

``Sec. 25E. Small business investment.''.
    (c) Report to Congress.--The Secretary of the Treasury shall 
conduct a study and report to Congress on the effectiveness of the 
credit allowed under section 25E of the Internal Revenue Code of 1986 
(as added by this section), and similar State tax credits, in providing 
incentives for investment in qualified small businesses. There are 
authorized to be appropriated $500,000 to carry out the purposes of 
this subsection.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

Summary: Angels Nurture Growing Entrepreneurs into Long-Term Successes (ANGELS) Act - Amends the Small Business Investment Act of 1958 to establish within the Investment Division of the Small Business Administration (SBA) the Office of Angel Investment, headed by a Director, to provide support for the development of angel investment opportunities for small businesses.

Requires the Director to: (1) establish and carry out a program, to be known as the Angel Finance Program, to provide financing to approved angel groups; (2) establish and maintain a searchable database, to be known as the Federal Angel Network, to assist small businesses in identifying angel investors; and (3) establish and carry out a program to make grants for the development of new or existing angel groups and to increase awareness and education about angel investing.

Amends the Internal Revenue Code to provide a small business investment tax credit of 20 percent of the amount paid or incurred for qualified small business investment.