Businesses need to meet these criteria to participate in the Angel Tax Credit program:
Be headquartered in Minnesota
Have a minimum of 51 percent of employees and 51 percent of payroll in Minnesota
Have fewer than 25 employees. No minimum number of employees is required
Pay employees annual wages of at least 175 percent of poverty level, which for 2016 is $42,525 per year or $20.44 per hour. Does not apply to business' executives, officers, board members, 20 percent-plus owners
Pay interns 175 percent of federal minimum wage ($12.69 per hour)
Not have been in operation for more than 10 years (20 years if related to medical devices or pharmaceuticals requiring FDA approval)
Not have been disqualified from investment under Minn. Stat. 80 A.50 (b)(3), the Small Corporation Offering Registration disqualifications
Not have issued securities that are traded on a public exchanges, or begin trading (or have a liquidation event) within 180 days after a qualified investment
Not previously have received private equity investments of more than $4 million
Not have generated more than $4 million in investments that have received an Angel Tax Credit. The Angel Tax Credit is capped at $1 million per business
Be certified by DEED before investment is made. The non-refundable certification filing fee is $150
Technological Innovation Qualification
In addition, qualifying businesses need to be engaged in -- or be committed to engage in -- technological innovation in Minnesota. The primary business activity must include one or more of the following:
Using proprietary technology to add value to a product, process or service in a qualified high-technology field
Researching or developing a proprietary product, process, or service in a qualified high-technology field
Researching, developing, or producing a new proprietary technology for use in the fields of: agriculture, tourism, forestry, mining, manufacturing, or transportation
Researching or developing a proprietary product, process or service in the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation (no technology component required)
Definitions of Proprietary Technology and Qualified High-Tech Fields
Proprietary Technology refers to technical innovations that are unique and legally owned or licensed by a business, including innovations that are patented, patent pending, a subject of trade secrets, or copyrighted.
Qualified high-technology fields include, aerospace, agricultural processing, renewable energy, energy efficiency and conservation, environmental engineering, food technology, cellulosic ethanol, information technology, materials science technology, nanotechnology, telecommunications, biotechnology, medical devices, pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, or similar.
Excluded Businesses and Professional Services
These types of businesses that may not participate in the Angel Tax Credit program:
Real estate development
Banking and lending
Lobbying and political consulting
Information technology consulting
Wholesale and retail trade
Leisure and hospitality
Ethanol from corn
Certain professional services firms are also excluded from participating, including:
Applying for the Angel Tax Credit is a four-step process. Steps 1-2 must be approved before a qualifying investment is made.
Step One: CERTIFICATION
The 2016 certification can be submitted online.
Before you start, read the Business Application Guide to ensure that you have the information and uploadable files needed. Warning: the system will time out after 20 minutes and you will lose everything you have entered if you have not completed the entire application.
We will send the investor or fund and business a credit allocation approval email within 15 days (often in about one week).
Only investments made after the date of the credit allocation approval email qualify for the credit.
Upon approval, the proposed investment transaction needs to be completed within 60 days, or by December 31, whichever is sooner.
Step Three: PROOF OF INVESTMENT
Within 15 days of the investment transaction, the business submits a Proof of Investment Form along with the following documentation:
A copy of the underlying transaction document (e.g., an executed subscription agreement).
A copy of the investor's or fund's check made out to the business, or a copy of the wire transfer:
A copy of the check serves as evidence that the certified investor or fund made the investment. If it does not, you must provide documentation showing a clear audit trail from the certified investor or fund to the business.
A wire transfer needs to show the certified investor or fund as the originator and the certified business as the beneficiary.
A copy of the business' bank deposit receipt (not a deposit slip) with the business' name and account number showing the deposit(s) being made:
A bank deposit receipt needs to show the certified business as the depositor, with business name and account number. If it does not, include a bank statement with the business' name and account number.
If an escrow account is used, submit documentation showing both the deposit into escrow and the transfer from escrow into the business' account (note: the latter is considered the date of investment).
We will send the investor or fund and the business a proof of investment approval email after processing the submission.
Step Four: ANNUAL REPORT
Review the Business Annual Report Guide to ensure that you have all the information you will need because the system will time out after 20 minutes and you will lose everything you have entered if you have not completed the entire report.
The Innovation Voucher Program (IVP) provides vouchers up to $25,000 to pay for technical assistance/services from public higher education institutions and nonprofit entities.
The federal government's Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs help fund technological innovations with commercial potential. MNSBIR supports Minnesota businesses seeking funding through these programs.
The Minnesota Angel Tax Credit Program does not provide match-making services between entrepreneurs and investors, but you may wish to engage these resources: