Frequently Asked Questions

Here you'll find answers to some of the most frequently asked questions about the Angel Tax Credit program. Scroll down the page to view all the questions, or select from the links below to view specific sets of questions.

Questions about Qualified Investors

  • Do Qualified Investors need to be residents of or domiciled in Minnesota?

    No. Qualified investors may be the residents of any state or any country, because the tax credit is refundable. No Minnesota tax liability is needed to receive the tax credit, though a Minnesota tax return must be filed.

  • Can a pass-through entity be a Qualified Investor?

    No. A qualified investor must be a natural person. A LLC, even a single owner LLC, is not a natural person and does not qualify for the credit. A qualified fund needs to be a pass-through entity, but only the fund’s natural person members are eligible for the credit.

  • Does a Qualified Investor need to be an accredited investor (as defined by SEC Rule 501)?

    Not if the investor only invests in Qualified Small Businesses that exempt under Minn. Stat. 80A.46 clauses (13) or (14) or only invests in a security registered under Minn. Stat. 80A.50 (b).

  • May an investor use IRA funds to make a qualified investment?

    Yes. Investors may use IRAs to fund their qualified investments, but are strongly urged to seek advice of tax counsel to determine the possible serious negative tax consequences of tapping the funds. Tax credits will be issued to investors in their capacities as natural persons.

  • Is a trust considered a natural person that may seek certification as a Qualified Investor?

    An irrevocable trust is a separate legal entity, which is not a natural person. A revocable trust, on the other hand, is not a separate entity from the grantor. Grantors may use revocable trust assets to fund their qualified investments. Tax credits will be issued to investors in their capacities as natural persons.

  • What “insiders” are not eligible for the credit?

    Investors who, of the business in which the investment is made, are an officer (a person elected or appointed by the board to manage the business); or a principal (a person having authority to act on behalf of the business); or a 20% or more owner, individually or combined with family members, of the voting securities of the business, or a family member (siblings, spouse, ancestors and lineal descendants) of any of these persons.

  • Is a trust considered a natural person that may seek certification as a Qualified Investor?
    An irrevocable trust is a separate legal entity, which is not a natural person. A revocable trust, on the other hand, is not a separate entity from the grantor. Grantors may use revocable trust assets to fund their qualified investments. Tax credits will be issued to grantor investors in their capacities as natural persons.

    A Qualified Investor seeking a credit allocation may not receive more than 50 percent of his or her gross income from the qualified small business in which the investment is being made (or be a family member of an individual who receives more than 50 percent of his or her gross income from the qualified small business in which the investment is being made).

  • How is gross income measured?
    Gross income is considered total income as determined by line 22 of IRS Form 1040.

Questions about Qualified Funds

Questions about Qualified Small Businesses

Questions about Investments

Questions About The Tax Credits & Procedures