Angel Tax Credit For Funds

Qualifications

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
  • 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
  • Be certified by DEED before investment is made
  • Make a minimum qualifying investment of $30,000

Before submitting an application, complete the Fund Certification Checklist to determine your eligibility for the Angel Tax Credit Program


To 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

Complete and submit this online Fund Certification Application. We will email you a confirmation with a remittance receipt. Sign the receipt in the presence of a notary and mail it to us with the $1,000 filing fee. Here's what happens next:

  • We will send you a certification approval email within 30 days (usually in about two weeks), or contact you regarding additional information we may need.
  • 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.
  • Consultants acting on behalf of a fund who wish to discuss the fund certification application with us should submit a Power of Attorney Form.

Step Two: CREDIT ALLOCATION

After certification, the business and investor jointly complete a 2014 Credit Allocation Application. Here's what happens next:

  • We will send the fund and business a Credit Allocation approval email within 15 days (usually 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:

    1. A copy of the underlying transaction document (e.g., a signed investor/subscription agreement)

    2. A copy of the investor’s or fund’s wire transfer or check made out to the business

            a. A wire transfer receipt needs show the certified investor as the originator and the certified
                business as the beneficiary

            b. check copy needs show the certified investor as the maker

    3. A copy of the business’ bank deposit receipt (not a deposit slip) or bank statement showing the
        deposit(s) being made

            a. A deposit receipt needs to show the certified business as the depositor

            b. 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.

Step Four: ANNUAL REPORT

Funds need to file a Fund Annual Report by February 1st along with a $100 filing fee.

  • Reports filed after February 1st must also include a $500 late filing penalty.
  • Investor annual reports need to be filed for three years from the date of latest investment

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

Funds need to hold a qualifying investment for three years or the Angel Tax Credit will be revoked and will have to be repaid by the investor, unless one of these exceptions is met:

  • The investment becomes worthless
  • At least 80 percent of the business’ assets are sold
  • The business is sold
  • The business goes public

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 .


For More Information

Contact Us

Call Jeff Nelson, program coordinator, at 651-259-7523 or Angel.Credit@state.mn.us

Call Kim Ann, program administrator, at 651-259-7434 or Kimberly.Ann@state.mn.us

Other Program Information

Download the "Minnesota’s Angel Tax – Small Corporate Offering Registration" 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.