Monday, August 8, 2011

Minnesota Angel Tax Credit Update: Going…Going…Not Quite Gone

As of press time, the Minnesota Department of Economic Development (DEED) Web site reported that, of the $15.9 million in angel tax credits available for 2011, $9.02 million have been allocated to date. Funding for the years 2012 to 2014 is set at $12 million per year. Considering that the program was formally launched at the end of July 2010, the program has yielded approximately $16.02 million in tax credits in the last 12 months.

Last year, investors collected $7 million in credits, less than the $11 million available. The enacting legislation allowed excess credit to roll into the following year, so the $4 million of unallocated 2010 credits rolled into 2011, boosting the total available in 2011 to nearly $15.9 million. Without the rollover, there would have been less than $3 million available for the balance of 2011.

If the current trend continues, the remaining angel credits will be gone well before the end of the year. Moreover, there may be a number of companies that would otherwise qualify for credits but won’t qualify while 2011 credits are still available, which will create additional demand for 2012 credits. Such unsatisfied demand could be for as much as $3 million of credits.

If your company is planning to raise capital in the first or second quarter of 2012, and you intend to rely on the availability of the credit for qualifying investors, consider this…

  • If the 2012 allocation is $12 million, and

  • If 2012 demand is consistent with 2011 demand, and

  • If unsatisfied demand from 2011 is approximately $3 million,

…then it isn’t a stretch to see that the entire credit allocation for 2012 could be exhausted by July 2012 or even earlier. Time will tell if there will be unsatisfied demand that will roll into 2012, especially with continuing signs of strain on the economy. There’s no question, though, that Minnesota companies have been successfully using the credit as a tool to attract investment.

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