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.
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. Residents of other countries, who do not have a Social Security Number and who wish to use our online system for investor certification or annual reporting, need to contact us to obtain an Angel Identification Number before attempting to create an online account.
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.
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.
Generally, yes. The wage minimums do not apply to business’ executives, officers, board members, or any employees who own, control, or hold power to vote 20 percent or more of the business’ outstanding securities. Nor do they apply to employees of other businesses that make up the unitary group. Interns have a different wage minimum. They need to be paid at least 175 percent of the federal minimum wage, which is $12.69 per hour.
"Intern" means a student of an accredited institution of higher education, or a former student who has graduated in the past six months from an accredited institution of higher education, who is employed by a qualified small business in a nonpermanent position for a duration of nine months or less that provides training and experience in the primary business activity of the business.
A minority-owned business is one which is (a) at least 51 percent owned by one or more minority group members, or, in the case of any publicly-owned business, at least 51 percent of the stock of which is owned by one or more minority group members, and (b) whose management and daily business operations are controlled by one or more minority group members. Minority group members are United States citizens who are Asian, Black, Hispanic, Pacific Islander, or Native American.
A women-owned business is one which is (a) at least 51 percent owned by one or more women, or, in the case of any publicly-owned business, at least 51 percent of the stock of which is owned by one or more women, and (b) whose management and daily business operations are controlled by one or more women.
If convertible loans have a non-conditional, mandatory conversion requirement, they are considered equity. It is mandatory that such debt must convert, without condition, to equity within the three-year annual reporting requirement period for investors. In addition, due to a 2013 law change restricting liquidity events, convertible notes cannot convert to equity within 180 days of the investment in order for the investment to be eligible for the Angel Tax Credit. Businesses are encouraged to submit a proposed convertible note to DEED for review before the investment is made to ensure the note’s clauses regarding these two provisions falls within the program’s requirements.
A business’ qualifications for certification are measured as of the date of application for certification. Certification is good for the calendar year in which it is granted. Investments made subsequent to certification have no bearing on the certification status already obtained for the calendar year. Such subsequent investments, however, do count toward the maximum if certification is sought in later calendar years.
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.
Foreign investors follow the same procedure outlined above. Those without a Social Security number or an individual taxpayer identification number may submit their return without such a number, or they may obtain a Minnesota identification number from the Minnesota Department of Revenue’s Taxpayer Registration Office at (651) 282-5225. Foreign investors who have obtained a Minnesota identification number can, after filing, check on the status of their refund online.
Only the Minnesota Department of Revenue can provide this information. Check online or via their automated tax service line at 651-296-4444 or 1-800-657-3676.