Angel Tax Credit
To qualify for the Angel Tax Credit, businesses must meet these general criteria. At minimum they must:
- Be headquartered in Minnesota
- Have a minimum of 51 percent of employees and 51 percent of payroll in Minnesota
- Have fewer than 25 employees
- Pay employees annual wages of at least 175 percent of poverty level, which for 2012 is $40,338 per year or $19.39 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
- Not previously have received private equity investments of more than $4 million
- Not have been disqualified from investment under Minn. Stat. 80 A.50 (b)(3) Small corporation offering registration disqualifications
- 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
In addition, qualifying businesses must also be engaged in -- or committed to engage in -- technological innovation in Minnesota. Their primary business activities 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
Definitions of Proprietary Technology and Qualified High-Tech Fields
For the purposes of this program, 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
There are several types of businesses that may not participate in the Angel Tax Credit program. They include:
- Real estate development
- Banking and lending
- Lobbying and political consulting
- Information technology consulting
- Wholesale and retail trade
- Leisure and hospitality
- Ethanol from corn
Certain professional services are also excluded from participating, including professional services from:
- Business consultants
- Health care consultants
Application Procedures for Businesses
Applying for the Angel Tax Credit is a four-step process; step 5 is an annual reporting requirement. Please note that steps 1-3 must be approved before the investment is made.
Step One - Before submitting an application, complete the certification checklist to self-determine whether the business might qualify for the Angel Tax Credit Program. Do not submit this checklist with the certification application.
Step Two - Complete and submit a certification application along with the $150 filing fee. The fee is nonrefundable. Please review the Frequently Asked Questions for before completing the application.
Certification approval notification is done by e-mail within 30 days, though our usual turnaround time is about two weeks. Consultants who are acting on behalf of a business and who wish to discuss the application with DEED must first submit a Power of Attorney form. Current year certifications expire on December 31.
Step Three - After certification, the business and investors jointly complete the Credit Allocation Application form and submit to DEED. Allocation approval is done by e-mail within 15 days, though our usual turnaround time is about 4-5 days. Once approved, the investment transaction must be completed within 60 days or by December 31, whichever is sooner.
Step Four - Within 15 days of completion of the investment transaction, the business must provide DEED with proof the investment was made. Proof approval is done by email within 15 days.
The following documentation must be submitted with the attached form:
- A copy of the investor’s or fund’s wire transfer or check made out to the business
- A copy of the business’ deposit receipt or bank statement showing the deposit(s) made
- A copy of the underlying transaction document (e.g., a signed investor/subscription agreement)
Step Five - By February 1 of each year, businesses that have received investments pursuant to the program must file an annual report with DEED. Business annual reports must be filed for five years from the year the investment is received.
The annual report filing fee is $100. There is a $500 fine for failure to file an annual report by the February 1st deadline. In the annual reports, the company must certify that:
- The company's headquarters remains in Minnesota
- A minimum 51 percent of employees and 51 percent of payroll is in Minnesota
- The business pays employees wages of at least 175 percent of poverty level
- The company is engaged in qualified business activity type
A business that fails to meet the 51 percent of employees and 51percent of payroll in Minnesota required during the five-year reporting period must repay all or a portion of the tax credits granted. The amount declines 20 percent per year until 0 percent in year six.
Reporting Requirements for Insolvent Businesses
Qualified small businesses that cease operations or become insolvent are must file a Business Insolvency Report Form. Upon filing the report, the company is thereafter exempt from annual reporting requirements, filing fees, and fines for failure to report.
Lists of Certified Businesses, Investors, Funds and Credits Issued
Select from the links below to view, download and print lists of businesses, investors and funds that have been certified to receive Angel Tax credits and the list of credits issued. The documents are updated regularly.
For More Information
Email Angel.Credit@state.mn.us or contact:
Jeff Nelson, Program Coordinator, at firstname.lastname@example.org or 651-259-7523
Kim Ann, Program Administrator, at email@example.com or 651-259-7434