In case you haven’t already heard, Minnesota’s allotment of $12 million in angel tax credits for 2012 has been officially exhausted. If this seems early, you’re not imagining things—last year, credits didn’t run out until mid-November (and if I’m having deja vu writing this article, it’s probably because I posted about the tapping out of the 2011 credits just 8 months ago).
To be fair, the state’s angel tax credit program, which offers qualifying investors up to a 25% tax credit on eligible investments in Minnesota start-up businesses, was allocated $16 million in 2011, $4 million more than this year (and, I should add, $4 million more than the next two years, which are both slated to be allocated $12 million again). However, the relatively quick exhaustion reflects the increasing popularity of the program.
As of early May, only 27% of the allocated credits was spoken for. By mid-June, this number had increased to 63%. Early in July, articles were published predicting that the tax credits would be gone by the end of the summer, and according to the Star Tribune this caused a last-minute rush that depleted the credits officially as of July 24th.
Despite the program’s “success” as reflected by its popularity, there are of course its critics. Some commentators feel that the program influences the timing of investments more than the actual investment decision itself, and worry that Minnesota start-ups will now face a drought in angel funding for the rest of 2012. A notification from the Minnesota Angel Network sent out regarding the exhaustion of the funding appeared to recognize this concern, encouraging its recipients to continue to consider investments for the remaining five months of this year.
Despite these concerns, DEED continues to tout the positive impact of the program, which it says has garnered over $140 million in investments for Minnesota start-ups since its inception and helped raise money for over 100 businesses in 2012.
Applications for 2013 will be become available in November. And, if the trend continues (and the legislature doesn’t act to increase the allocations), look for another “tax credits” post from yours truly in about 7 months.