Angel Investment Tax Credit Program is Expensive but With Perks

The angel investment tax credit program has come up as a big break for start up business investors and had also created 579 jobs between 2010 and 2014. In 2015, the cost to Minnesota taxpayers has also increased and has become more than $100,000 per job.

Not only the wealthy taxpayer is profiting from this money but the money is also going out of the state as a reward for startup investors. It is expected that the money will soon become a major titan as a job creator in Minnesota.

Here is What the Proponents Believe

The supporters of Angel Investment Tax Credit Program never fail to mention a number of perks of the program. According to the supporters, the program is attracting investors towards high-risk deals of information technology companies as well as widening economic benefits to help Minnesota bear more fruit after some time.

Software engineers, consultants, and accountants will not only get permanent jobs but will also get highly paid jobs with this program. The program will also help in establishing $1 billion IT and software enterprises and establish Medtronic or unicorn jobs.

For 2017, an amount of $10.7 million in credits is available, of which $5 million is for businesses owned by women and minorities and business located in Greater Minnesota, until September 30th 2017.

Plans to Work Around the Edges

The chairperson of House Taxes Committee, Rep. Greg Davis claims that the aims are far higher than leaving the business feeble or restricting it to Minnesota only. While referring to taxes that have become higher than average, he claimed that we have to work around the edges to make things turn around and Angel Investment Tax Credit Program is one of the examples of HTC efforts.

What Does the Program Offer?

According to the program, the Minnesota Angel Investment Tax Credit Program will fund investors or investment funds with 25% investments. The program is available for investors who are willing to pour money into high technology firms including those focused on new technology, new proprietary products, and services or products in specific fields.

The amount of this refundable credit is $125,000 per person in one year. If it is a joint investment by two people, the amount of credit would be $250,000 per year.

Currently, the applications are opened for 2017 where credit allocation applications are processed for investment in targeted businesses. The credit allocations applications are also held and accepted for investments in general businesses. They were processed starting with January 10th 2017.

The investors and business can extract information about funding and program deadlines from the official website

Unbelievable Perks Offered by the Program

  • Any person from any country can apply for the program and receive funds. The investor does not need to be a domiciled citizen of Minnesota or even America.
  • The investors can also use IRA for investing and receiving funds on their investments.
  • The fund does not need to be qualified in Minnesota.
  • The invested business may be located anywhere in the world but only its headquarter needs to be located in Minnesota.

Democrats Are Suspicious About the Program!

While there is a lot of support available for the program including bipartisan support, the Democrats are suspicious about Angel Investment Tax Credit Program.

To deal with the doubts of Democrats, the Securities and Exchange Commission has set forth some conditions for the investors. According to the conditions, the taxpayer investors need to be accredited investors. The term accredited investors is defined as an investor with the net worth of $300,000 or above for at least 3 years. This condition is set to reduce the risks involved for novice investors.

The operating strategy of this program is quite simple to understand. When the investors in Minnesota or out of Minnesota make investment in businesses that are using hi-tech and proprietary technology in any field like mining, tourism, timber and agriculture, the government of Minnesota gives 25% tax credit per family to the investor. The business you are investing in needs to have headquarters in Minnesota but franchises or other offices may be located anywhere in the world. Simply put, the investors receive $250,000 deduction in Minnesota taxes on investment of $1 million.

There are only a few refundable tax programs operating in the country and this program is one of them. If the tax bill of investor is less than $250,000, the investor will receive the differential amount from the state of Minnesota.

The Department of Employment and Economic Development also runs the angel credit program which is managed by Jeff Nelson. According to Jeff, the Angel Investment Tax Credit Program will bring capital to Minnesota and lead to business growth in the state.

Minnesota currently has one-third of non-Minnesota investors. In 2014, 110 companies, including more than 50% of biotech software and medical-tech firms received investments.

To get their tax breaks, the angel investor beneficiaries have made investments of around $250 million in different sectors of Minnesota enterprises.

While there are many investors who turned out as Angel Investment Tax Credit Program beneficiaries, there are people like Jeffrey Sohl as well. Jeffrey, who works as the Director of Center of venture Research at the University of New Hampshire believes that anyone would have invested in these enterprises if they had to. Such programs cost huge amounts of money to the state which could have been spent on other issues like prekindergarten.

On the other hand, Minnesota program published it in 2014 that more than 50% of the investors claim that they would not have invested in these firms had there been no program like this.