Angel Tax Credit For Businesses

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Qualifications

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
  • Insurance
  • Banking and lending
  • Lobbying and political consulting
  • Information technology consulting
  • Wholesale and retail trade
  • Leisure and hospitality
  • Transportation
  • Construction
  • Ethanol from corn

Certain professional services firms are also excluded from participating, including:

  • Attorneys
  • Accountants
  • Business consultants
  • Physicians
  • Health care consultants

Before submitting an application, complete the Business Certification Checklist to self-determine your eligibility for the Angel Tax Credit Program.


Apply

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.
  • Complete the online 2016 Business Certification Application and pay the $150 nonrefundable filing fee.

Here's what happens next:

  • If we need additional information, we will contact you; otherwise we will send you a certification approval or denial email within 30 days (often in about two weeks).
  • Upon certification, your business name, business type, and contact information will be posted on our website. All other information you submit is non-public data.
  • Authorized persons acting on behalf of a business who wish to discuss a business certification application with us should submit a Power of Attorney Form.

Step Two: CREDIT ALLOCATION

After certification, a business and investor or fund jointly complete a Credit Allocation Application:

Here's what happens next:

  • 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.
  • Businesses need to file a Business Annual Report and pay a $100 filing fee by February 1st.
    • Reports filed after February 1st must also pay a $500 late filing penalty.
    • Business annual reports need to be filed for five years from the date of the latest investment.

We will send you an annual report approval email after processing the report.

Insolvency Report

Businesses that cease operations or become insolvent need to file a Business Insolvency Report. Thereafter, the business is exempt from further annual reporting requirements.


More Information

Contact Us

The program is staffed by:

Other Program Information

Download the "Minnesota’s Angel Tax – Small Corporate Offering Registration (SCOR)" guidebook, or order a free copy.

Download the Angel Tax Credit fact sheet.

Watch a video about the Angel Tax Credit program.

Read the statute establishing and governing the program.


More Loans and Grants

These loans and grants may be available to Angel Tax Credit Program participants:

Angel Loan Fund

The Angel Loan Fund (ALF) provides interest-free loans to businesses participating in the Angel Tax Credit Program. 

Greater Minnesota Internship Tax Credit Program

The Greater Minnesota Internship Tax Credit Program provides tax credits for businesses, located outside the 7-county metro area, of 40 percent of student intern’s wages up to $2,000.

STEM Intern Grants

SciTechsperience provides grants—in science, technology, engineering and math (STEM) disciplines—of 50 percent of intern’s wages up to $2,500.

Innovation Voucher Program

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. 

SBIR/STTR Programs

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.

Minnesota Technical Assistance Program

The Minnesota Technical Assistance Program helps Minnesota businesses develop and implement industry-tailored solutions that reduce waste, increase energy efficiency and prevent pollution, all with an eye toward improving public health and the environment.


Finding Investors

The Minnesota Angel Tax Credit Program does not provide match-making services between entrepreneurs and investors, but you may wish to engage these resources:

Use this website’s Lists and Reports page

  • The Certification Lists tab provides lists of certified investors (by law, names only)
  • The Certification Lists tab provides lists of certified funds (by law, names only)

Contact local angel and entrepreneur associations

Connect with supporting organizations

Use Minnesota’s Equity Crowdfunding Legislation