To establish the Angel Investor Tax Credit Act

HB350 INTRODUCED
Page 0
HB350
PS4ZYRR-1
By Representatives Shaw, DuBose, Brown, Marques, Moore (P),
Chestnut, Rafferty, Rigsby, Faulkner
RFD: Ways and Means Education
First Read: 29-Jan-26
1
2
3
4
5
6
PS4ZYRR-1 12/18/2025 RA (F)RA 2025-3623
Page 1
First Read: 29-Jan-26
SYNOPSIS:
This bill would establish the Angel Investor Tax
Credit Act which would allow certain qualified
investors to claim income tax credits for investments
in certain qualified businesses.
A BILL
TO BE ENTITLED
AN ACT
Relating to income tax; to create the Angel Investor
Tax Credit Act; to provide for income tax credits to qualified
investors who make qualified investments.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. This act shall be known as the Angel
Investor Tax Credit Act.
Section 2. The Legislature finds and declares that
early stage capital is critical to the growth of innovative
startup companies in the state, and that angel investors play
a key role in financing high-growth businesses. Therefore,
having a credit in place for those angel investors will help
promote entrepreneurship, job creation, capital investment,
and long-term economic growth in the state.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
HB350 INTRODUCED
Page 2
and long-term economic growth in the state.
Section 3. For the purposes of this act, the following
terms have the following meanings:
(1) DEPARTMENT. The Alabama Department of Commerce.
(2) PRIORITY IMPACT BUSINESS. A qualified business that
the department determines is primarily engaged in, or whose
products or services materially support, one or more of the
following:
a. Rural health care access or delivery.
b. Agriculture production, agribusiness, or
agricultural technology.
c. Educational supports or services for high-need
student populations, including students in poverty, English
learners, students with disabilities, gifted students, or
public charter school students.
d. Home-based education, including homeschooling.
e. Workforce development or workforce participation.
f. Housing affordability.
(3) QUALIFIED ANGEL INVESTOR. A person who either:
a. Makes a qualified investment and is not a
controlling shareholder, owner, or employee of the qualified
business at the time of the investment; or
b. Is a pass-through entity, including a limited
liability corporation, an S-corporation, or a partnership that
makes a qualified investment, provided that the credit is
claimed by the owners, not the pass-through entity.
(4) QUALIFIED BUSINESS. A business entity that at the
time of the first qualified investment it receives meets all
of the following criteria:
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
HB350 INTRODUCED
Page 3
of the following criteria:
a. Headquartered in this state and intends to remain in
this state after receipt of the investment.
b. Has 100 or fewer employees.
c. Employs at least 51 percent of its employees in this
state or pays at least 51 percent of its payroll to employees
in this state.
d. Has been in operation for 10 years or less.
e. Is primarily engaged in manufacturing, processing,
or assembling products; developing, producing,
commercializing, or licensing technology products, software,
or technology-enabled services; conducting research and
development including in biotechnology, life sciences, or
medical devices; or developing or proving agribusiness or
agricultural technology products and services.
f. Is not primarily engaged in retail sales; real
estate development; the business of insurance, banking, or
lending; or the provision of professional services provided by
accountants, attorneys, or physicians.
(5) QUALIFIED INVESTMENT. A cash investment made in
exchange for equity, debt, or other ownership interest in a
qualified business as approved by the department.
Section 4. (a)(1) For tax years beginning on or after
January 1, 2027, and ending December 31, 2031, a qualified
angel investor may claim an income tax credit in an amount
equal to 25 percent of the amount contributed to a qualified
business during the tax year as provided in this section.
(2) Any credit provided by this act may not decrease a
taxpayer's liability to less than zero. If the tax liability
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
HB350 INTRODUCED
Page 4
taxpayer's liability to less than zero. If the tax liability
of the taxpayer is less than the credit offered, then the
unused portion may be carried forward for up to five years.
(3) A qualified angel investor may not claim more than
two hundred fifty thousand dollars ($250,000) in credits
pursuant to this act in any single tax year.
(4) The total amount of credits granted shall not
exceed five million dollars ($5,000,000) for the tax year
ending December 31, 2027, ten million dollars ($10,000,000)
for the tax year ending December 31, 2028, and twelve million
dollars ($12,000,000) for each subsequent tax year.
(b) The department shall reserve not less than 50
percent of the total tax credits available each tax year for
qualified investments in a priority impact business. Reserved
credits shall be granted on a first-come, first-served basis
within the reserve category. Any reserved credits not awarded
by October 1 of each year shall be made available for other
qualified investments. The unreserved tax credits authorized
by this section shall be on a first-come, first-served basis.
(c)(1) The department shall submit an annual
informational report to the Department of Revenue containing a
list of priority impact businesses, qualified businesses, and
qualified angel investors.
(2) The department may require qualified businesses to
report on job creation, revenue growth, and other economic
impacts.
(3) The department shall coordinate with the Department
of Revenue to monitor compliance with this act.
(d)(1) To claim a credit under this section, a
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
HB350 INTRODUCED
Page 5
(d)(1) To claim a credit under this section, a
qualified angel investor shall submit documentation of their
qualified investment in a qualified business to the Department
of Revenue. The Department of Revenue shall certify qualified
investments in a qualified business made in accordance with
this act.
(2) The Department of Revenue may recapture all of, or
a portion of, the credit if any of the following occur:
a. The qualified investment is sold, transferred, or
otherwise disposed of within three years of the investment
date.
b. The qualified business relocates its principal
operation outside of Alabama within three years of the
investment.
c. The credit was obtained through material
misrepresentation or fraud.
(e) The department shall conduct workshops and outreach
campaigns to educate investors and startups about the tax
credit and it may also partner with universities, incubators,
and tech accelerators to identify qualifying businesses and
attract angel investors.
(f) The Department of Revenue and the Department of
Commerce shall adopt any rules necessary to implement and
administer this act.
Section 5. This act shall become effective on June 1,
2026.
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137