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Investor says Gianforte’s business-startup tax incentive needs more

Tax holiday meant to attract startups to MT
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HELENA — A Gianforte administration proposal to attract startup companies to Montana through an income-tax holiday for its founders should be expanded to include outside investors, the leader of a Montana investment group says.

“Every single state in the country is doing something to try to attract better business startups,” Pat LaPointe of Frontier Angels told MTN News in a recent interview. “We need to stimulate the (startup) ecosystem, and stimulating the ecosystem means we need to make sure there are investors who are properly incented to want to put money into Montana companies.”

The Gianforte administration is behind Senate Bill 184, which aims to attract business startups by exempting from state taxation any profit from sale of the company stock by its founders – after it’s been here five years.

SB184, which has passed the Senate, has its first hearing in the House Taxation Committee on Wednesday.

“Not only are we going to attract new talent, but I think we’re going to attract talent that has left the state, and wants to come back,” the bill’s sponsor, Sen. Mark Blasdel of Kalispell, said at its Senate hearing last month.

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Senate President Mark Blasdel, R-Kalispell.

The bill says any profit from company stock sold by its directors or employees, after the company has been in Montana for five years, would be exempt from state income taxes.

At least half of the company’s corporate officers, and 25 percent of its employees, must have lived in Montana for at least three years, before the tax holiday can take effect.

LaPointe says that incentive may encourage a company founder to consider Montana, but does nothing for outside investors – and those investors, he says, are vital for growing new companies.

“There has to be actively engaged investors in the community that are willing to put money into these early-stage businesses to make them go,” he says.

LaPointe is managing director for Frontier Angels, a group of about 90 Montana investors that put money into startups, primarily in high-tech fields. About 20 percent of their money goes into Montana firms.

Investors already get a federal income-tax holiday on returns from money put into companies and held for five years or more, LaPointe said.

An additional capital-gains holiday from Montana on state taxes probably won’t be a big incentive for investors, who can put their money anywhere, he said. But a state tax credit on that investment, such as 15 percent of 25 percent, could make investors more likely to take a risk on Montana companies, he added.

“There should be a targeted incentive to investors who are, first and foremost, putting their own money to work,” LaPointe said.

Tax credits also could be offered to the companies, creating an additional incentive to locate here and allowing them to raise more money for investment, LaPointe said.

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Montana Gov. Greg Gianforte.

When asked by MTN News whether he’d support changes or additions to the proposal, Gov. Greg Gianforte said he certainly wouldn’t rule it out.

“I think better is always possible,” he said last week. “If there’s ways to make it better, that’s what the legislative process is about, and we’ll incorporate it.”