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Proposed small business investment bill draws look

Idaho State Capitol Building

Idaho State Capitol Building

An Idaho House committee agreed to take a closer look at a bill that would try to trigger job growth by offering a 50 percent tax credit to investors who purchase equity in small businesses and later sell their stakes.

The House Revenue and Taxation Committee voted Feb. 4 to schedule a full hearing on the Idaho Small Business Venture Capital Investment Act Rep. Lenore Hardy Barrett, R-Challis, voted no.

It’s one of a package of bills that minority Democrats are seeking to pass this session to spur business activity.

The bill would provide a 50 percent tax credit on Idaho income – other than interest – from the sale of equity investments in businesses with less than 20 workers. It would not be refundable (meaning it could not be greater than the taxes owed by investors).

The law would take effect immediately and sunset in five years.

House Minority Leader John Rusche, D-Lewiston, told the committee that the bill is designed to help small businesses that are having trouble lining up loans in the face of tighter bank lending standards and the depressed value of collateral.

“It’s focused on the very smallest of businesses, the ones that can’t get capital, or from our information, are having great difficulty getting capital,” he said.

Republicans on the committee seemed receptive to the proposal, though some asked if it might open up loopholes.

Rep. Dell Raybould, R-Rexburg, worried that somebody might form a new corporation solely to take over an existing company and use the tax credit to dodge taxes on the profits from normal business operations.

Supporters said that might not be a bad thing, perhaps saving some struggling businesses that would otherwise have to shut down.

“I suppose one person’s loophole is to some viewed as an economic advantage,” said Rep. Grant Burgoyne, D-Boise. “I hope that we can use this in creative ways to not only create new jobs through new business activity but maybe save some jobs.”

Rusche also pulled another bill that the committee was scheduled to consider, the Idaho Small Business Jobs Development Act, which would provide tax credits to small businesses that add permanent, new employees. He said he could probably come back with a better proposal.

“I’ve had a significant amount of positive input,” Rusche said. “People like (House Majority Leader Mike) Moyle who have labored long in the vineyard on this.”

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