Funds need to meet these criteria to participate in the Angel Tax Credit program:
Have a minimum of three qualifying investors who are natural persons
Of the business in which the investment is made, fund investors do not qualify for the credit if they 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 the above
Be organized as a pass-through entity (S-Corp, LLC, partnership)
Ensure that the investor's investment in fund is equity or interest-bearing notes
We will send the 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 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 fund made the investment. If it does not, you must provide documentation showing a clear audit trail from the certified fund to the business.
A wire transfer needs to show the certified 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 fund and business a proof of investment approval email after processing the submission.
Reports filed after February 1st must also pay a $500 late filing penalty.
Fund annual reports need to be filed for three years from the date of the latest investment.
We will send you an annual report approval email after processing the report.
HOW TO CLAIM THE ANGEL TAX CREDIT
We email Angel Tax Credit Certificates for qualifying investments directly to the fund's investors (NOT to the fund) by January or February of the year following the investment. Investors need to file a Minnesota Individual Income Tax Return (Form M1) and claim the credit on Schedule M1B, Business and Investment Credits. Investors who do not live in Minnesota may also need to file Schedule M1NR, Nonresidents/Part-Year Residents. Forms are available on the Minnesota Department of Revenue's website.