Florida Is Close to Getting an Intrastate Crowdfunding Investment Exemption Law
Nagel Photography / Shutterstock.com
The Sunshine State’s legislative attempts to pass a similar law last session were stymied.
State crowdfunding investment exemption laws have already helped small businesses like those in Michigan and other states get the financing they desperately need. Florida is now next in line to get its own law on the books.
In Tallahassee, lawmakers in the state House and Senate have already passed investment crowdfunding legislation, which is expected to be signed into law by Gov. Rick Scott soon.
Unlike rewards-based crowdfunding, which offers immediate gratification, investment crowdfunding allows accredited investors to finance companies in return for partial ownership or future returns.
Crowdfunding investment exemption laws allow small, state-based investors to avoid certain tax code provisions while getting a financial stake in community-driven and other locally-rooted projects.
"I'm encouraged to see the legislature embrace new forms of finance to ignite entrepreneurial innovation in our state,” Sally Outlaw, the Florida Crowdfinance Association’s president, said in a statement. “This bill not only creates more capital opportunities for small businesses but also provides Florida residents a chance to invest in emerging companies in their own communities."
Florida’s legislature had been slated to approve a bipartisan crowdfunding bill during its spring 2014 session, Crowdfund Insider reported, but met resistance from the Florida Office of Financial Regulation, which wanted to wait for the U.S. Securities and Exchange Commission rules on Title III of the 2012 JOBS Act, opening crowdfunding to low-net-worth investors.
Rulings stalled, and the SEC ultimately accomplished the goal under Title IV.
The current legislation in Florida mandates that crowdfunding platforms register in the state, where both the businesses and investors must also reside.
As GovExec State & Local detailed last summer, business partners Kyle DeWitt and Tim Schmidt couldn’t secure a $200,000 bank loan for their brewery in Tecumseh, Michigan. But they able to crowdfund the $175,000 in seed money—the first project in the state to reach its goal through the Michigan Invests Locally Exemption (MILE) law.
As of this month, 17 states have authorized intrastate crowdfunding exemptions and 20 more are considering them, according to Crowdfunding Legal Hub. Michigan’s law is considered a model that’s both generous and light on the paperwork.
In-state, non-accredited investors can fund $10,000 per project per year and businesses raise up to $1 million without audited financial statements and $2 million with them.
Investments are held in an escrow account until the target amount is reached. If that target isn’t reached, the money is returned to investors.
In Florida, Miami-based Funding Wonder Inc., a social lending community, helped push the initial crowdfunding bill.
“I am gratified that the work we did last year to educate Florida lawmakers has finally paid off,” CEO Michael Mildenberger said in a statement. “There is tremendous momentum behind Crowdfunding as a tool for business finance and it makes sense for Florida, with the country’s fourth largest economy, to be an active participant.”
(Photo by Nagel Photography / Shutterstock.com)
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