Governor Tim Pawlenty signed into law the Small Business Investment Tax Credit, also known as the “Angel Tax Credit,” on April 1, 2010. The Angel Tax Credit is expected to stimulate investment in Minnesota businesses utilizing or developing new technologies, including those related to renewable energy and energy efficiency and conservation. Qualified investors are eligible for a 25 percent individual tax credit (maximum of $125,000 per year per individual or $250,000 per year for those married and filing jointly) for an investment made in a qualified small business. A total of $11 million in credits is currently allocated for 2010. The Minnesota Department of Employment and Economic Development (DEED), which will administer the program, recently made available the application requirements and certification forms on its website.
The following is a general list of criteria for investors to consider in whether they may qualify for certification under the Angel Tax Credit program:
- Be a natural person.
- Meet the requirements of an accredited investor under Regulation D.
- If not an accredited investor, be a non-accredited investor investing in exempt filings per Minn. Stat. 80A.46 (13) or (14) or Minn. Stat. 80A.50 (b).
- Not receive more than 50 percent of their annual gross income from the business.
- Be certified by DEED before investment is made. Non-accredited investors making exempt transactions may file for certification within 30 days of making investment. There is a certification filing fee of $350.
- Make a minimum qualifying investment of $10,000. Three or more investors may join to create a fund. Funds have a minimum investment of $30,000, which may be divided among investors as the fund wishes.
A qualified business must be engaged in technological innovation in Minnesota through the use or research and development of proprietary technology in specified “qualified high technology fields” which include aerospace, agricultural processing, renewable energy, energy efficiency and conservation, environmental engineering, food technology, cellulosic ethanol, information technology, materials science technology, nanotechnology, telecommunications, biotechnology, medical devices, pharmaceuticals, diagnostics, biologicals, chemistry, or veterinary science. The following is a general list of criteria for businesses to consider in whether they may qualify for certification under the Angel Tax Credit program:
- Be headquartered in Minnesota.
- Have a minimum of 51 percent of employees and 51 percent of payroll in Minnesota.
- Have fewer than 25 employees.
- Pay employees annual wages of at least 175 percent of poverty level, currently $18.55 per hour. Does not apply to business’ executives, officers, board members, 20 percent-plus owners.
- Not have been in operation for more than 10 years.
- Not previously have received private equity investments of more than $2 million.
- Not have been disqualified from investment under Minn. Stat. 80 A.50 (b)(3) Small corporation offering registration disqualifications.
- Not have generated more than $4 million in investments that have received an Angel Tax Credit. The Angel Tax Credit is capped at $1 million per business.
- Be certified by DEED before investment is made. The certification filing fee is $150.
For more information on the Minnesota Angel Investment Tax Credit, please visit the Angel Tax Credit section of the DEED website.