Temporarily Grounded: No More Angel Tax Credits for 2011

With December right around the corner, Minnesota small businesses may not be too concerned with the recent news that the state’s angel tax credit program has no funds left for 2011. The program, which has been in operation since July of 2010, offers qualifying investors up to a 25% tax credit on eligible investments in Minnesota start-up businesses. It was allocated $16 million in tax credits for 2011, and as reported, ran out of this allotment in mid-November. The year’s $16 million is just a part of the total $23 million in credits that have been given out since the program’s inception, which has generated $92 million in investments in Minnesota companies. 

Fortunately, the popularity of the program (hence the empty bucket) is seen as a sign of success for the state, and will continue in 2012. More fortunate, still, the state’s Department of Employment and Economic Development (DEED) has already begun accepting applications for the $12 million in credits it has available for next year. 

It is still important to be aware of the ramifications for 2011. Businesses looking for—or planning on—capital from angel investors who desire the credit in the near term will now have to wait at least until January, if not later. And remember that money from investors looking for the credit cannot be received until after both the investor and the business have been qualified by the state AND allocated a portion of the funding. The 2012 credits will be doled out on a first-come, first-served basis. In the past, DEED has been quick to turn applications, but there could end up being a line (you thought that was over after Black Friday!) because of the exhaustion of the credits for 2011. 

Despite these hurdles, we are happy to see that, come New Year’s Day, the Minnesota angel program will be back.

A Post by Karen Wenzel, Guest Blogger