Minnesota Angel Tax Credit Program FAQs: Updates & Reminders

What is the Minnesota Angel Tax Credit Program?

It is a 25% refundable tax credit for investors who invest in small emerging businesses in a high tech field, or that are using new proprietary technology. The maximum credit per year is $125,000/$250,000 for single/married filing jointly

Have there been any recent changes to the program?

Businesses utilizing service contracts must meet the requirement that 51% of  the value of such contracts are performed in Minnesota.

Will the program continue in the future?

It was extended through 2017 and there have been discussions about removing the sunset provision from the authorizing statute.

How much money will be available going forward?

The fund was cut drastically for 2017. Only $10 million will be available, down from $15 million a year prior.

Are portions of the fund reserved for specific types of businesses?

Yes. Half of the fund, $5 million, is reserved for:

  • Minority-owned & managed businesses (Asian, Black, Hispanic, Pacific Islander, or Native Americans)
  • Women-owned & managed businesses
  • Greater Minnesota businesses (outside 7-county metro area)

After September 30th any unused funds become available for investments in all businesses.

I have been hearing a lot about this program but still don’t know how to get involved, what are the steps?

There are four simple steps:

1) Apply for Certification

  • Investors & Funds—usually 2 week turnaround (30 days max)
  • Businesses—usually 2-3 week turnaround (30 days max)

2) Apply for Tax Credit Allocation

  • Joint application by business and investor/fund to reserve credits for a planned investment transaction—usually 1-3 day turnaround (15 days max)
  • Upon approval, investment can be made (investment must be done within 60 days or by 12/31; investment cannot be made prior to approval)

3) Submit Proof of Investment

  • Business provides copy of investor’s check, bank deposit receipt, and underlying transaction document

4) Annual Report

  • Investors & Funds: three-year reporting period (Generally must hold investment for three years)
  • Businesses: five-year reporting period (Must maintain headquarters and 51% employees and payroll in Minnesota for five years)

Are there any other similar or related programs?

Yes. There are three related programs:

1) Angel Loan Program

  • Business must be Angel Tax Credit certified (any year)
  • Business must receive at least one investment, after approval for participation in the loan program, from an Angel Tax Credit certified investor who is an accredited investor
  • Loan terms:
    • Loan of 10% of equity raised within 12 month funding round after approval for participation in the loan program
    • $20,000 minimum loan amount, $250,000 maximum
    • 7 year term, non-recourse, no payments due during the term, with a 7 year balloon
    • 0% interest

2) Greater Minnesota Internship Tax Credit Program

  • Tax credits for hiring interns enrolled at eligible schools for businesses located outside the 7-county metro area (40% of student intern’s wages up to $2,000)

3) STEM Intern Grants

  • SciTechsperience provides grants of 50% of intern’s wages up to $2,500 when working in STEM disciplines (science, technology, engineering, math)

This article was written by attorney Todd Taylor.