Short title

This Act may be cited as the

Angels Nurture Growing Entrepreneurs into Long-term Successes (ANGELS) Act

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:

Angel Investment Program

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.

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 2008; (2)$50,000,000 for fiscal year 2009; and (3)$75,000,000 for fiscal year 2010.

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.

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 2008 through 2010.

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.

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:

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.