Some South Carolina accountants have learned the hard way that the early bird does indeed get the worm.
The wriggly morsel in this case is a relatively new, obscure tax credit that’s become quite the hot financial-planning ticket for certain wage-earners.
It’s also become an intriguing way for the state to inject seed money into some of its promising new business enterprises.
At issue is the state’s Industry Partnership Fund, which was created by lawmakers in 2006 and is administered by the S.C. Research Authority.
The first-come, first-served program offers a dollar-for-dollar tax credit in exchange for cash payments from individuals and businesses looking to cut their tax bills. Their contributions, in turn, are funneled into SC Launch, a nonprofit SCRA-run venture capital fund.
The money is used to support entrepreneurs, new companies and the commercialization of research at Clemson, the Medical University of South Carolina and USC.
The hope and the goal are that those homegrown upstarts will appreciate that the state believed in them and put some equity in them when or if the time comes to expand and create jobs.
The fund is hardly a threat to the likes of Silicon Valley giant Kleiner Perkins and other big-venture capital firms. Under state law, the research authority’s credits are capped at $6 million a year.
The problem — if it can be called a problem at all — is that the word is out. The fund and the accompanying tax benefit have become too popular.
“It seems more and more people are cluing into it, and it’s to the point that it’s almost impossible to get,” said DeAnna R. Moss, a certified public accountant and founder of Mount Pleasant-based Moss & Lewis CPAs.
Moss has learned to get in line earlier and earlier each year to secure the credits, mostly on behalf of mid- to higher-earning clients trapped in the onerous “alternative minimum tax” prison. It’s one of the only tools she can use to offset that liability, she said.
This year, Moss emailed her requests at 6:17 a.m. Jan. 2, the day the SCRA started taking names for 2014. It wasn’t quite early enough. By that time, the entire bucket of credits had been swallowed up. A wave of applications had flooded the agency’s in-box right after midnight.
“Thanks to the generosity of our contributors, we have reached the limit for donations eligible for 2014 state tax credits ahead of schedule,” is the message now posted on the authority’s website.
Moss said her clients are on a waiting list.
“There has to be either a better way to allocate the money or maybe increase the limit if it’s such a popular thing,” she said.
Neither of those options is being considered at the moment, said SCRA spokeswoman Micki McNaughton. “For now, we’re just using our returns and our revenue and reinvesting that back into the program to grow it from the inside,” she said.
The state-chartered research authority is looking at making some software upgrades for the Industry Partnership Fund, but the basic ground rules will continue to favor the early bird.
“It will still be first-come, first-served,” McNaughton said.
Contact John McDermott at 937-5572.