From the unique Innovation Evergreen Fund, nearly a dozen Strategic Innovation Centers, numerous programs to support small businesses to a perpetual retelling of his desire to create an innovation economy, Gov. Phil Murphy has done plenty to help build a next-generation economy.
The budget for fiscal year 2026 proposes one final act that many feel will have tremendous benefit.
Murphy’s budget aims to encourage the Legislature to bring New Jersey in line with almost every state in the nation by recognizing the federal tax benefit called QSBS, which stands for Qualified Small Business Stock exemption.
In the simplest terms, it allows early investors — upon sale of the company — to get tax relief on the capital gains from the first $10 million (or 10x the basis of the company) of the sale.
If that seems like a lot, consider this: A typical angel-invested startup can sell for two to three times that amount — if not more.
Aaron Price, the head of TechUnited: NJ and an ardent supporter of QSBS, was ecstatic when he heard the news.
“We are thrilled to see the governor’s leadership in his budget address with a focus on increasing the Angel Investor Tax Credit and for New Jersey to recognize Qualified Small Business Stock,” he told ROI-NJ.
“These issues are critical to the startup and investor community and are eagerly welcomed to drive more investment into New Jersey startups and to retain business leaders in our innovation economy.
“These two policies will complement and build upon the efforts already led by the governor in supporting New Jersey’s innovation economy.”
Administration officials said the potential change is not so much a change in policy as a recognition that a changed policy now is needed – since the state is developing so many more startups.
The policy, officials said, will keep the state in line with its nearest and closest competitors: New York, Pennsylvania and Massachusetts.
Murphy also proposed changes to the Angel Investor tax credit program, taking it from a base of 20% as a refundable tax credit to 30%, with a 5% bonus for investing in minority owned companies or companies located in opportunity zones.
Tim Sullivan, the CEO of the N.J. Economic Development Authority, said the increase would be incredibly impactful – noting the increase from 10% or 20% in 2021 certainly was.
“Our Angel Investor tax credit is a really potent tool when we’re around the world, but particularly around the country,” he said. “When we’re in California, and we tell people about the Angel tax credit, their ears perked up. This only makes it stronger.
“We’d have probably the most attractive Angel tax credit in America.”
There appears to be support to take the action.
Earlier Tuesday, the Senate passed legislation sponsored by Sens. Andrew Zwicker (D-Hillsborough) and Paul Sarlo (D-Wood-Ridge), which would increase the tax credits provided under the “New Jersey Angel Investor Tax Credit Act” for qualified investments made in New Jersey’s emerging technology business ventures from 20% to 35% – and then an additional 5% kicker.
Zwicker stated his case.
“The Angel Investor tax credit is an outstanding investment that has strengthened our innovation economy by providing much-needed capital to fledgling start-ups,” he said. “Between 2013 and 2023, $958 million was invested into new technology companies in New Jersey, resulting in over 4,000 additional jobs and more than 470 new patents. By passing this bill, we can significantly increase those numbers in the next decade.”
Sarlo, the Senate Budget chair, agreed.
“We aspire to make New Jersey the best state for people to start a business, especially in emerging technology industries,” he said. “This legislation is the next step in making that aspiration a reality.
“Raising the Angel Investor tax credit will exponentially increase the investment that we see in start-ups across our State, helping small businesses to grow and create the breakthrough technologies of tomorrow.”
