Congress is considering giving angel investors a 25% credit for backing small businesses that already qualify for a federal research and development grant program.

Five members of Congress – including Jared Polis, the founder of Proflowers.com and Bluemountain.com and a first-term Democrat from Colorado – are proposing a new tax break that would provide a 25 percent credit for an equity investment in a company that has already qualified for a federal research and development grant program for small businesses.

Under the legislation, introduced July 15 by Rep. Chris Van Hollen, a Maryland Democrat, the credit’s value would be limited to half the size of the Small Business Innovation Research award. (The nearly 30-year-old SBIR spreads federal research largess to small businesses, requiring federal departments and agencies that spend more than $100 million in grants for outside research to set aside 2.5 percent of that for small businesses. Initial grants usually equal about $100,000 to assess the feasibility of an idea and then, at the next stage, grants of $750,000 are provided for research and development.)

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Congress Considers Federal Tax Credit for Angels