Rep. Donald O’Reilly Jr., who introduced legislation to spur job creation and generate venture capital funding for small businesses in Rhode Island, said the bill will likely get lost in the House budget debate.
Introduced by the Cumberland Democrat late in May, the legislation calls for the creation of a “Rhode Island Certified Capital Companies Act” or CAPCO, which O’Reilly said would become a mechanism for generating venture capital funding that in turn, would be invested directly into the state’s small business community.
The program, currently used in nine other states, is designed to increase venture capital for small business by allowing a premium tax liability credit to an insurance company making a qualified investment through CAPCO.
“The ultimate purpose of this legislation is to create jobs, which in turn expands the tax base,” he said. “It creates an opportunity for insurance companies to invest in these funds and then the CAPCO to grow and invest in Rhode Island business.”
The goal is to raise $100 million over the first two years of the program and then invest that money into the state’s business community. According to O’Neill, under the proposed legislation no tax credits can be given until at least 30 percent of the funding has been invested.
Citing the state’s current rank of 36th in the nation when it comes to venture funding, O’Reilly said, the CAPCO is viable solution to a growing problem.
“What we are trying to do is create this opportunity in Rhode Island,” he said.
O’Reilly said states like Florida, that have already enacted this program, are seeing huge financial rewards. In addition, he said, the average salary for a CAPCO job in Florida is almost $50,000.
“Florida enacted this in 1998 and already it has created over 2,800 jobs and increased tax revenues to $262 million,” he said. “If you look at what we went through (during the budget debate) looking for money everywhere worried about taking money from some places, this makes sense.”
Jack Sommer, executive director of the Rhode Island Technology Council, said CAPCO is vital to stimulating investments in the state’s start-ups.
“We haven’t put ourselves on the map as a venture capital center, but we can do that with CAPCO,” said Sommer.
