Wednesday, December 3, 2014

Update on Minnesota Angel Tax Credit for 2015

As you are emerging from your Thanksgiving comas and getting ready for the busy holiday season, now is a good time for a reminder that the Minnesota Department of Employment and Economic Development (DEED) is already accepting certification applications for the 2015 Angel Tax Credit. If you follow this blog, you probably are already aware of the popularity of the Minnesota Angel Tax Credit and some of its limitations. If you aren’t a frequent reader or are new to the entrepreneurial scene in Minnesota, below are some highlights of the 2015 Angel Tax Credit program.

  • For 2015, the Minnesota legislature allocated $15 million of tax credits for eligible investments. Until Oct. 1, $7.5 million of that $15 million is reserved for businesses owned by women or minorities, or for businesses located outside of the seven county metro area. Beginning on Oct. 1, any portion of that $7.5 million that has not been allocated will be made available for all other eligible investments.
  • Before Oct. 1, only $7.5 million will be available for qualified investments made in companies that are either located in the seven county metro area or are not woman- or minority-owned. For reference, all of the $15 million that was made available in 2014 was fully allocated by early May (with most of those allocations going to businesses in the metro area). It seems likely that the $7.5 million made available for metro area companies will go well before the beginning of May. Indeed, DEED is expecting the $7.5 million of credits to be allocated by Feb. 1.
  • New for this year, “insiders” (defined to include officers, principals, 20% owners, and their family members) are not eligible to receive an angel tax credit.

If you are planning to use the Minnesota Angel Tax Credit for an investment in 2015, you should plan on becoming qualified now. Many companies are submitting applications now, and some have even delayed financings that would have been completed by now, but are being put on hold until a tax credit allocation has been received for 2015.

As a reminder, the process requires that the company be certified as a qualified business and that the investor also be certified as a qualified angel. Both of these steps require filings with DEED.  Once the company and investor are both certified, they must jointly submit a credit allocation application. Once you have received word from DEED that a tax credit has been approved for the investment, the investment can be made. The investment must be made within 60 days of receiving approval. Within 15 days of completing the investment, the company needs to file a proof of investment form together with evidence of the investment.

All of the requirements for becoming a qualified business or angel investor are listed on DEED’s website, together with links to all of the forms.

So, unless your business is located outside of the seven county metro area or is woman- or minority-owned, in addition to shopping and merriment, you should also set aside time during the holiday season for Angel Tax Credit preparations. Otherwise, you may have to wait until October.

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