Angel Tax Credit For Businesses

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 2014 is $41,738 per year or $20.07 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.


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

Submit a 2014 Business Certification Application along with the required $150 nonrefundable filing fee to MN DEED. 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 business who wish to discuss a business 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 investor 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 investor and business a Proof of Investment approval email after processing the submission.

Step Four: ANNUAL REPORT

Businesses receiving investments need to file a Business Annual Report by February 1st along with a $100 filing fee.

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


For More Information

Contact Us

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


Additional 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. 

See an informational ALF flyer

STEM Intern Grants

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

See an informational SciTechsperience flyer.

Job Training Incentive Pilot Grants

The Job Training Incentive Pilot (JTIP) provides grants up to $50,000 for training new employees. 

See an informational JTIP flyer.

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.