Hacker News Reader

Comment by shawndrost | Hacker News Reader

AFAICT, private investments in software (or other tech) startups up to $2 million are basically repaid by the state. (Over 5 years, front-loaded, through refundable state income tax credits. Credits against taxes owed, not deductions from taxable income. And refundable, meaning if credits exceed debts, the state will cut a check to the taxpayer.)

So it works likes this: Investors give you money. The state gives it back to them. Any amount you do not piss away is profit for them. Am I missing something? Why haven't I heard of this before?

Side note: Any other n.ycers in Hawaii? If so, anyone going to the Hawaii Venture Capital Association lunch this Thursday?

View on HN

I've been speaking with many people that have taken advantage of 221, and I've learned that it's not refundable -- sorry for spreading bad information. However, I can say that there is no catch -- it's just as great an incentive as it looks. In fact, one company I spoke with is working on solar power development, and due to other, stacking credits, their investors are guaranteed a significant profit even on a complete loss of capital. Fascinating and scary.

I'm in HI. I'm not going to HVCA lunch, though.

Did you try Act221 benefits? A few years back it seemed that everybody in this business trying to get that. At that time my business was pretty small and I didn't bother.

No, I haven't; I just moved back a week ago. I'm interested in creating a startup, but if I can't get some angel money to live on in the next several weeks, I'll need to get a day job.

Do you know of any non-obvious downsides to Act 221?

Also, can a business owner receive 221 benefits for investing in their own company? That seems ripe for abuse: you could invest $x in your company, raise your salary by $x for one year, and receive the tax credit from the state.

I didn't dig deep enough, but some of my friends did. If you're curious, I can ask them or introduce you to them. Drop me a line at shiro at acm dot org. I'm mostly in the video game / CG imaging industry. There are some interesting startup in this field here.

I move back in a week and have been telling the same story. drop me an email kzo@kzo.net, always looking to hear what other people are up to.

Reply on news.ycombinator.com