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Tax Credits Encourage Angel Investment

Mark Marich

A recent story from the Angel Capital Education Foundation shows that more than twenty states currently have tax credits for early stage investment—ranging from 10 to more than 50 percent. As venture capital dollars continue to be elusive, groups of angel investors have stepped forward to begin pooling resources and working to make their states more attractive to startups and to other angels.

In at least three of those states—Georgia, Minnesota, and Connecticut—angel investors played significant roles in getting tax credit legislation passed and signed into law. Thanks largely to the Atlanta Technology Angels and the Technology Association of Georgia, the state of Georgia will now provide a 35 percent income tax credit up to $50,000 per individual per year. The credit just went into effect on January 1, 2011 and is in place for three years—capped at $10 million per year. Connecticut also launched a new tax credit program, allowing angel investors to take a 25 percent credit against Connecticut state income tax for investments from $100,000 to $1,000,000 in qualifying companies. And while most of these types of programs focus on investors within the state, Minnesota recently approved a 25 percent individual income tax credit that is available to “accredited investors who invest at least $10,000 in a qualifying Minnesota company”—regardless of the investor’s location (even if it is outside of the United States).

For more details on those programs, read ACEF’s December newsletter.

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