New Tax Credit for 'Angel Investors' Makes Investing in Minnesota Technology Start-Ups More Attractive A generous new tax credit is available for investing in start-up and early stage businesses located in Minnesota that are focused on high technology or new proprietary technology. Investments meeting the requirements of the "Angel Tax Credit Program" can receive as much as a 25% tax credit for an investment of up to $1,000,000. Administered by the Minnesota Department of Employment and Economic Development (DEED), the program comes at a good time for many businesses since it provides an attractive incentive for investors to make crucial early stage investments amidst a challenging fund-raising environment.
Investors may invest as little as $10,000 and receive credits of up to 25% of each dollar invested. The maximum credit each year is $125,000 for single filers or $250,000 for joint filers. Investors may receive the credit for investments made individually or through a fund of investors. The credit is fully refundable, meaning that any credits in excess of the investor's Minnesota income tax will be returned as a tax refund, even if the investor is not a Minnesota resident.
Generally, the businesses, the investors and the transaction must be approved in advance by DEED to receive an allocation of the tax credit. Once the business, the investor and the transaction are approved, the transaction must close within 60 days or the tax credit is forfeited.
To view further details on the Angel Tax Credit qualification criteria, go to:
Financial Reform Bill Changes the Definition of Accredited Investor, Effective Immediately
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010, contains some provisions that directly affect individual investors, entrepreneurs and early stage businesses. Effective immediately, Section 413 of the Act changes the standard for how individuals may qualify as an "accredited investor" under Regulation D. An individual investor will now be accredited only if he or she has a net worth greater than $1 million, individually or jointly with his or her spouse, excluding the value of the individual's primary residence. Previously, the estimated fair market value of the principal residence could be included to determine net worth. The Act does not change the other categories of accredited investors, such as individuals who meet the income test (more than $200,000 in individual income or $300,000 in joint income for the past two years and reasonably anticipated for the current year).
This change has a major impact on the category of individuals who can be considered accredited investors, including investors seeking the Angel Tax Credit. Companies conducting private placements of securities under Regulation D should ensure their offering materials incorporate the new definition of accredited investor.
Experience You Can Trust
Individual investors and early stage businesses should contact a Maslon attorney for more information on the Angel Tax Credit Program. Attorneys in the Business & Securities Group can assist in the application process, including negotiating and documenting an investment, organizing an investment fund, or preparing a business to qualify for the Angel Investor Tax Credit.
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