Audit finds Angel Investor Tax Credit influenced investments but raises questions about job and survival outcomes

The Kansas Senate Commerce Committee on Friday heard two Post Audit presentations examining the Angel Investor Tax Credit (AITC) program and received testimony from the Kansas Chamber as lawmakers weigh whether to extend the program.

Post Audit lead presenter Josh summarized the AITC mechanics and usage, saying, “The Angel Investor Tax Credit or AITC program allows participating startup businesses to give investors a state income tax credit in exchange for their investments.” He noted Commerce is statutorily allowed $8,000,000 in credits for tax year 2026, the credit is scheduled to sunset at the end of 2026, and a house bill would extend the program to tax year 2031.

The auditors described program rules and limits: credits typically equal 50% of an investor’s investment; investors may transfer credits; investors face per-business and annual caps ($100,000 per business, $350,000 per year); qualifying startups generally must be under five years old (ten years for bioscience firms) with under $5,000,000 in revenue, and certain industries (banking, construction) do not qualify.

On program use, Post Audit reported that between 2015 and 2022 roughly $100,000,000 was invested in participating startups and about $44,000,000 in credits were issued. Kansas investors accounted for approximately $73,000,000 of that invested capital, with Johnson County representing the single largest source of participating investment. Auditors said investment flows concentrated in about eight counties and in software and bioscience industries.

To assess whether the AITC changed behavior, Post Audit surveyed program participants and examined historical comparisons. Josh said Post Audit surveyed about 1,100 investors (355 complete responses, about 33%) and 158 business representatives (52 complete responses, about 33%). He summarized investor responses: “the program was very or extremely important about two‑thirds of the time,” and roughly 60% of responding investors said they would have invested less or later without the program while about 30% said they would not have invested at all.

Business respondents similarly reported the credit mattered: about half said they would have hired fewer employees without the program and some said the credit influenced their decision to locate in Kansas. Josh cautioned about survey limits, noting roughly two‑thirds of participants did not respond and the audit could not generalize findings to all program participants.

Andy Greenzel, presenting a separate 2020 analysis, reported a matched comparison of 181 participating startups to 65 nonparticipants for 2009–2019. He told the committee that participating firms were not statistically more likely to survive three to five years and, in the examined period, created fewer jobs than nonparticipating firms. “Each of the businesses that we reviewed that participated in the program created about 1 job every 2 years, which is about half as many as the businesses that didn’t participate,” Greenzel said, and noted the job‑creation finding was presented at a 95% confidence level. He offered two interpretations: the program may allow lower‑quality firms to survive when otherwise they would not, or there may be systematic differences between participants and nonparticipants making causal claims uncertain.

Greenzel recommended the legislature consider clarifying statutory program goals so future evaluations can measure success against explicit objectives. He said clearer goals would make it easier for auditors and policymakers to determine whether the program is meeting legislative intent.

Eric Stafford, vice president for government affairs at the Kansas Chamber, told the committee the Chamber supports renewing incentives that target startups, saying AITC is “one of the few things that we do specifically try to target small businesses with.” He argued the state lags national averages in new business formation and that access to capital—particularly outside major tech hubs—remains a challenge for Kansas entrepreneurs. Stafford urged careful review of metrics before eliminating incentives and raised the issue of university technology transfer and keeping commercialization activity in state.

Committee members asked for more granular data, including how many credits were transferred or sold, whether the state can calculate a fiscal return on investment for the credits, and whether comparisons truly matched like businesses. Auditors said the Post Audit reports did not calculate return‑on‑investment to the state and that some data gaps at Commerce limited deeper fiscal analysis; Commerce agreed to implement audit recommendations to improve data completeness and its verification process.

The committee scheduled a hearing on Senate Bill 429, a bill to extend the AITC sunset, for Thursday, and discussed potential future audit requests to estimate fiscal offsets (sales tax, property tax) and to gather more detailed patent/commercialization metrics from universities.

The hearing ended with no committee votes on policy; members requested followup data and additional analysis before considering statutory changes or renewal.