1. Short title This Act may be cited as the Invest in Innovative Small Businesses Act . 2. Angel investment tax credit (a) In general Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 30E. Angel investment tax credit (a) Allowance of credit There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 25 percent of the qualified equity investments made by a qualified investor during the taxable year. (b) Qualified equity investment For purposes of this section— (1) In general The term qualified equity investment means any equity investment in a qualified small business entity if— (A) such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash, and (B) such investment is designated for purposes of this section by the qualified small business entity. (2) Equity investment The term equity investment means— (A) any form of equity, including a general or limited partnership interest, common stock, preferred stock (other than nonqualified preferred stock as defined in section 351(g)(2)), with or without voting rights, without regard to seniority position and whether or not convertible into common stock or any form of subordinate or convertible debt, or both, with warrants or other means of equity conversion, and (B) any capital interest in an entity which is a partnership. (3) Redemptions A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this subsection. (c) Qualified small business entity For purposes of this section— (1) In general The term qualified small business entity means any domestic corporation or partnership if such corporation or partnership— (A) is a small business (as defined in section 41(b)(3)(D)(iii)), (B) has its headquarters in the United States, (C) is engaged in a high technology trade or business related to— (i) advanced materials, nan­o­tech­nol­o­gy,