Minutes for SB66 - Committee on Commerce

Short Title

Amending the angel investor tax credit with respect to the definition of qualified securities, tax credit limitations and amounts, investor requirements and extending the date that credits may be allowed.

Minutes Content for Mon, Feb 1, 2021

Chairman Olson opened the hearing on the bill and called for Charles Reimer for a Revisor of Statutes overview of the bill.

Chairman Olson called upon Kristen Rottingham for a neutral report summary concerning a recent Legislative Post Audit of the Angel Investor program. Ms. Rottingham explained that Legislative Post Audit (LPA) recently conducted an evaluation of the Angel Investor Tax Credit program. She made two recommendations to the committee:

1.) Decrease the ten year requirement to five years that participating business must remain in Kansas after receiving the tax credit.

2.) Clarify the program's goals, including specific benchmarks to measure program success.

(Attachment 1)

Chairman Olson called upon Rep. Stephen Owens for primary proponent testimony in support of the bill. Rep. Owens supported the proposed changes in the bill explaining that the State of Kansas provides almost no incentives for "start-up" business opportunities compared to surrounding states. He briefly summarized the 2019 Small Business Profile from the U.S. Small Business Administration - Office of Advocacy.

(Attachment 2)

Chairman Olson called upon David Soffer for supporting proponent testimony on the bill. Mr. Soffer explained the purpose and history of the Angel Investor Tax Credit program and called for the following legislative modifications:

1.) 5-year extension of the program.

2.) Grow appropriations to $8 Million by phasing in $500,000 increments starting in FY 23.

3.) Amend standard for convertible notes.

4.) Change Equal to 50% to Up to 50%.

5.) Increase credits received from $50,000 to $100,000.

6.) Allow up to $350,000 credits per investor per year.

7.) Eliminate reference to the defunct Kansas Venture Capital Inc.

8.) Changing standards for credits for those who currently owe no Kansas taxes.

9.) Decrease claw back for tech companies down to five years.

Mr. Toland responded to a committee member's question by expressing his opinion favoring Annual Reports as a measurement device versus the use of benchmarks.

(Attachment 3)

Chairman Olson called upon Jeff Shackelford for proponent testimony on the bill. Mr. Shackelford shared his personal experience with the Angel Investor program and other business endeavors. He asserted that Kansas needed more "early stage" companies and emphasized that the first resource they require is more people. He claimed that every dollar he has seen invested in Angel Investor Tax Credit program has resulted in a seven times return. He called for more tools that work, work quickly and can happen quickly.

(Attachment 4)

Chairman Olson called upon Sonia Hall for further proponent testimony. Ms. Hall shared that the Angel Investor Tax Credit program has provided entrepreneurs in Kansas a competitive advantage to attract investment from outside of the state. Ms. Hall cautioned that bioscience companies like the type she deals with can take a significant amount of time to become revenue positive compared to other industries. Ms. Hall asserted that this bill would result in a greater competitive advantage in attracting and retaining innovative companies and people.

(Attachment 5)

Seeing no more oral testimony Chairman Olson referenced the following Written-Only Proponent testimony.

Niki Cheng, Fennick Life Sciences

(Attachment 6)

Eric Stafford, Kansas Chamber

(Attachment 7)

Kevin Walker, Overland Park Chamber of Commerce

(Attachment 8)

Dennis Ridenour, Bio Nexes-KC

(Attachment 9)

Jim West, Clara Biotech

(Attachment 10)