To the average business owner, it may often times appear that pro-business initiatives and/or legislation drop to the back burner at the S.C. State House, while issues that seemingly do not improve business conditions, help create jobs, or improve our state’s infrastructure take much higher precedence. However, at the halfway point of the two-year legislative session, we can actually applaud a few important bills that passed during the 2013 legislative year. One, in particular, deserves special attention, because of the thoughtful process by which it passed, the work put into it by the Greenville Chamber of Commerce, the Upstate Chamber Coalition, the City of Greenville, SCBIO, UCAN, the Charleston Chamber, the S.C. Chamber, and other business-minded allies, and, perhaps most importantly,the impact it will have on South Carolina’s economic future.
If you pick up a newspaper or watch your local news telecast on any given day, you know that South Carolina is enjoying great results from recent industrial recruitment efforts, which is a critical piece of the pie for growing our economy. There’s also another fundamental, equally important aspect of economic development that is vital to the long-term prosperity of our state, and it has sorely needed some attention – that is, growing our own globally impactful headquarter companies.
As confirmed by recent research from the Kauffman Foundation, all net new job growth in the United States over the last 30 years has come from high-growth startup companies. A July 2011 study by the USC Moore School of Business also found that high-impact, fast-growth firms account for two-thirds of all new job growth in South Carolina. With such firm data, the business community found it hard to ignore this fact, and, therefore, decided it was time that we and the Legislature join hands to make high-impact entrepreneurship an economic development priority, just as we have done with industrial recruiting.
The first step to doing so involved improving our efforts as a state to help high-growth small businesses find access to early-stage capital. Over twenty-five other states have accomplished this goal through passage of what’s known as “angel incentive” legislation. South Carolina got on board, and thus, the High-Growth Small Business Job Creation Act was introduced in January by Senate Finance Committee Chairman Hugh Leatherman (Florence) and, in the House, by Rep. Dwight Loftis (Greenville).
Understanding that we now exist in an era of transparency where any such incentives or tax credits are put under a microscope, and where taxpayers want assurance that government is spending their money wisely and not picking winners and losers, Chairman Leatherman put forth a provision that would allow South Carolina to “recapture” the value of the credit upon liquidation of an investment. Unique to our state and not found in angel legislation other states have adopted, this provision ensured that there would be a significant return on investment.
Additionally, the legislation, under the angel investor tax credit approach, helped to create a marketplace of private investors that invest their own money into startups, simply incentivizing accredited investors in our state to get off the sidelines and invest in Palmetto State-born companies.
Since tax incentive bills always draw attention from the most conservative members of the Legislature, certain metrics must be in place to measure the success of the credit. During the committee process, Senators Shane Martin (Spartanburg) and Tom Davis (Beaufort) ensured that would be the case, working with Chairman Leatherman and his staff to create annual reporting metrics. In addition, a sunset provision was put in place, so if the tax credits do not produce in the promise of creating jobs and helping our high impact startups flourish, the program will not continue.
Passage of this bill was truly a bipartisan effort, and credit goes to legislators from both parties for pushing through an initiative that, at the end of the day, will create jobs. In addition to those Senators mentioned above, there were others, such as Democratic Minority Leader Nikki Setzler (Lexington) and Vincent Sheheen (Kershaw), who were helpful in garnering support from their side of the aisle, as was Senator Billy O’Dell (Greenwood) on the Republican side. That both parties came together as one body in our often-divided Senate to approve these angel tax incentives spoke to all Senators’ commitment toward building business and our economy through support for our home-grown start-ups.
On the House side, the concept of an angel bill in South Carolina first gained momentum three years ago when Rep. Bill Wylie (Greenville) helped draft legislation just before his sudden death prior to the 2011 legislative year. Credit goes to House leadership in working to fulfill Wylie’s goal, with the House passing angel legislation for three straight years. Speaker Bobby Harrell (Charleston), Majority Leader Bruce Bannister (Greenville), House Ways and Means Chairman Brian White (Anderson), and Rep. Rita Allison (Spartanburg) all played instrumental roles in supporting Rep. Loftis’ bill this year.
Too many times in our recent past, our Legislature has gotten bogged down in partisan politics between political parties, personalities, and the Governor’s Office. It has become somewhat unfortunate that today’s political climate lends itself toward a legislative body that does not work together to solve a problem. That is not the case with the High-Growth Small Business Job Creation Act. In fact, passage of this critical legislation to help our state’s small business start-up companies find early stage capital and grow headquarters in the Palmetto State is one of those rare occasions where we have witnessed true collaboration for the common good. We should acknowledge and celebrate it, give credit to those elected officials who made it happen, and tell them that we’d like to see much more of it.