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Minnesota Passes Angel Tax Credit
In late March, the Minnesota legislature passed a jobs bill, containing an angel tax credit provision. The vote passed by an easy margin, with the House supporting it 112-20 and the Senate supporting it 58-3. The legislation is predicted to provide up to $17 million in tax credits next year to investors, and about $12 million a year after that.
The legislation will give qualified investors—both individuals and pooled funds—a 25% tax credit, up to $125,000 per individual or $250,000 for a married couple, filing jointly.
Michelle Landsverk, Chair of Pine to Prairie Angel fund, says the tax credit is a “win-win—it provides capital to businesses so they can grow their companies, it lowers the risk for investors, and it kick-starts emerging businesses, creating jobs in the state.”
Both investors and businesses need to be “qualifying” in order for an investor to earn the tax credit.
The bill also included an R&D tax credit provision, increasing the tax credit to 10 percent of R&D expenses up to $2.5 million, up from 5 percent. The R&D tax credit is also being expanded to include startup companies, individuals, limited liability companies and S corporations. Previously, only C corporations received the benefit of the tax credit.
Taken together, the angel tax credit and the increased R&D tax credit will provide Minnesota some much-needed economic development tools.
Angel investors can claim the credit if they invest in early-stage companies statewide. The program will be administered by the Department of Employment and Economic Development (DEED) which will maintain a website of qualified small businesses and certified investors.
- Not in operation more than 10 years
- Fewer than 25 employees
- Raised no more than $2 million in private capital
- Headquarters in Minnesota
- Application fee of $150
- Individual investors must invest at least $10,000 in a qualified small business; pooled funds, a minimum of $30,000.
- Individual investors pay a $350 application fee.
- Pooled investors pay a $1,000 application fee.
- Investors cannot claim credit if they receive more than 50 percent of their annual gross income from the small business in which they want to make an investment.
For more information on the program, go to: www.PositivelyMinnesota.com, where you’ll find details program information, updates on implementation, certification application forms (investors, funds, businesses), credit allocation request forms, and report forms (investors, funds, businesses)
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