Angel Tax Credit

On 5/30/2019 Governor Walz signed the Omnibus Tax Bill which reinstates the Angel Tax Program and provides $10 million in credits for 2019 and $10 million for 2021 ($0 for 2020). We are working to reopen the program by mid-summer; watch this space for updates. The Angel Tax Credit Program provides a 25-percent credit to investors or investment funds that put money into startup companies focused on high technology, new proprietary technology, or a new proprietary product, process or service in specified fields.

Businesses
Investors
Funds
FAQs
Certification Lists
Forms and Reports
More Information

Businesses

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.
Investors

Annual Report

Investors need to file an Investor Annual Report and pay a $100 filing fee by February 1st.
- Reports filed after February 1st must also pay a $500 late filing penalty.
- Investor 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 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.
Funds

Annual Report

Funds need to file a Fund Annual Report and pay a $100 filing fee by February 1st.
- 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.
FAQs
- What are the program's minimum compensation requirements for 2019?
  - Employees (those who will receive a W-2) need to be paid wages and non-mandatory benefits of at least $45,063 on an annualized basis, which is equivalent to $21.66 per hour. Non-mandatory benefits include health, dental, life and disability insurance and the like, whereas mandatory benefits include worker's compensation premiums, unemployment insurance, the employer's share of Social Security and FICA taxes, and the like. The compensation minimum does not apply to the business's executives, officers, board members, or employees that are 20% or more owners of the business. Student interns need to be paid at least $12.69 per hour.
- How do Qualified Investors claim the credit?
  - 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.
- Do foreign Qualified Investors follow a different procedure to claim the credit?
  - 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.
- Does the tax credit certificate evidencing the tax credit come from (flow through) the fund to its investing members?
  - No. The tax credit certificates are issued directly from DEED to the Qualified Fund's investor members.
- With whom should I inquire about the status of my tax certificate?
  - The Angel Tax Credit Program emails Angel Tax Credit Certificates in mid-February for investments made the previous year. If you don't receive yours, first check your Junk mailbox and then contact us at angel.credit@state.mn.us.
- With whom should I inquire about the status of my state tax refund?
  - 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.
- What is the tax effect of receiving the Minnesota Angel Tax Credit?
  - The IRS has determined that the credit is taxable income. The Minnesota Department of Revenue will issue you a 1099-MISC in the amount of the credit and it needs to be reported on your federal 1040 as income. It is also income for Minnesota state income tax purposes and is considered Minnesota-sourced income.
- How long does a qualified investor need to hold the investment and are there any exceptions?
  - Investors are required to hold the investment for three years, with the year the investment is made counting as the first year no matter what date the actual investment occurred. Exceptions to this requirement include 1) the investment becomes worthless before the end of the three-year period, 2) 80 percent or more of the assets of the qualified small business are sold before the end of the three-year period, 3) the qualified small business is sold before the end of the three-year period, 4) the qualified small business's common stock begins trading on a public exchange before the end of the three-year period, or 5) the investor is deceased.
- What does a qualified investor need to do if there is a sale or transfer of the investment before the end of the three year holding period?
  - Unless an exception to the three year holding period applies, investors are required to file an amended return with the Minnesota Department of Revenue for the year in which the credit was taken. This must be done within 30 days of the sale or transfer. The investor needs to repay the credit plus any interest owed when filing the amended return; failure to pay both the credit amount and the interest at that time will result in the imposition of a penalty by the Department of Revenue.
Certification Lists

Here are lists of all businesses, investors and funds that have been certified to receive Angel Tax Credits, along with a list of all credits issued. If you need additional information, please contact us at angel.credit@state.mn.us.

2017 Certification Lists
2016 Certification Lists
2015 Certification Lists
Forms and Reports

Reports
- Angel Tax Credit Program Summary Report 2017
- Angel Tax Credit Program 2017 Annual Report to the Legislature
- Angel Tax Credit Program Summary Report 2016
- Angel Tax Credit Program 2016 Annual Report to the Legislature
- Angel Tax Credit Program Summary Report 2015
- Angel Tax Credit Program 2015 Annual Report to the Legislature
Proof of Investment

Businesses need to provide a proof of the investment within 15 days of the investment transaction.
- Proof of Investment Form
Annual Report

Program participants need to report annually (investors/funds for three years, businesses for five years).
- Business Annual Report (Online)
- Business Annual Report (Paper)
- Investor Annual Report (Online)
- Investor Annual Report (Paper)
- Fund Annual Report (Online)
- Fund Annual Report (Paper)
More Information

Contact Us
- Call us on the Angel Hotline at 651-259-7599
- Email us at Angel.Credit@state.mn.us
The program is staffed by:
- Program Lead, Sarah Miller, 651-259-7434
- Program Administrator, Stephen Wolff, 651-259-7415
- Program Manager, Jeff Nelson, 651-259-7523
Other Program Information

Read the statute that established and governed the program.