Get In Line for 2013 Minnesota Angel Tax Credits

Among all of the other holiday tasks and resolutions likely still on your to-do list, if you are an entrepreneur looking to raise capital in 2013 and hope to take advantage of the Minnesota Angel Tax Credit, you should think about starting the process now. The state’s annual allotment of credits, which gives qualifying investors up to a 25% tax credit on eligible investments in Minnesota start-up businesses, has seen a trend of depletion earlier and earlier in each year of its existence. The first full year’s allotment of $16 million in 2011 was fully subscribed for by November of that year. 2012’s allotment of $12 million was exhausted by the end of July, in part due to a last-minute rush on the credits precipitated by articles reporting on the scarcity of credits. So, if word on the street is any indicator, the additional $12 million allotment for 2013 will be gone even earlier this year.

The credits have proven to be deserving of their status as a “hot commodity.” Between July of 2010 (when the program started) and the end of 2011, the credits helped generate $92 million in investments in Minnesota companies, and that number reached $140 million after the 2012 allotment. Over 100 companies were issued the credits in 2012 (a few of which, we are proud to say, are Gray Plant Mooty clients.) The program is currently only set to last through 2014, with the same amount of funding in its final year as in 2012 and 2013. 

So what should you do to make sure you get your share of the tax credits this year? Minnesota’s Department of Employment and Economic Development (DEED) is already accepting applications for business certification, which solidifies a business’s qualification to receive applicable investors in the coming year. Investors may also currently submit their certification applications to obtain qualified investor status. These forms and other directions can be found on the DEED website. You will still have to wait until 2013 to officially begin a joint filing between the business and the investors of the specific credit allocation application (and, of course, the making of the actual investment). With businesses and investors already poised to file for allocations and transfer money, I can only imagine that the DEED office is gearing up for a busy start to the new year next week!

A Post by Karen Wenzel, Guest Blogger