Minn. Angel Tax Credit program expands reach

DEED targets minority-owned businesses in Greater Minnesota for future funding

BY MONTE HANSON

The Minnesota Angel Tax Credit Program is reaching out to a broader audience. The popular state program that has attracted more than $260 million for high-tech startups in Minnesota since 2010 will focus much of its efforts in the next two years on helping businesses located in Greater Minnesota and those owned by women or members of minority groups.

Half of the $120 million in investments that the program hopes to attract over the next two years will be targeted at emerging businesses in at least one of those three categories.

The Angel Tax Program was launched four years ago to get money into the hands of high-tech startups that need cash because they are considered too risky for conventional bank loans. Software firms, medical device companies, biotechnology businesses and clean technology firms were among the 128 high-tech businesses in Minnesota that received funding under the program last year.

Starting in 2015, though, even more types of emerging companies will be eligible to participate in the program. Officials have expanded the list to include businesses in agriculture, tourism, forestry, mining, manufacturing and transportation.

The program works by giving 25 percent tax credits to individuals or investment firms that put money into emerging companies. For example, an investor would receive a $100,000 state tax credit for investing $400,000 in a startup business certified to participate in the Angel Tax Credit Program. With $30 million in angel tax credits available over the next two years, that translates into $120 million in investments going to promising Minnesota startups.

Minnesota companies that received investments last year include Mill Creek Life Sciences in Rochester and Living Greens Farm Inc. in Faribault. The vast majority of the businesses that attracted investments, though, were headquartered in the sevencounty Twin Cities metro, including 85 businesses based in Hennepin County.

Of the 248 Minnesota startups that have received funding since the Angel Tax Credit Program was launched in 2010, just 18 were headquartered in Greater Minnesota. Eight startups participating in the program were minority-owned and 14 were owned by women.

Officials hope that targeting investments at those three groups in the next two years will broaden the impact of the program. Leftover tax credits not tapped for investments in those businesses by Sept. 30 of each year will be made available for investments in businesses that don’t fall into those categories.

Qualified startups must be headquartered in Minnesota and certified to participate in the program. They must have fewer than 25 employees, with at least 51 percent of the workers and total payroll based in the state. They also must have been operating for no more than 10 years and cannot have received previous equity investments exceeding $4 million.

Although all tax credits have been exhausted for this year, the Minnesota Department of Employment and Economic Development will begin accepting applications for participation in the 2015 Angel Tax Credit program in November.

More details about the program are available at www.mn.gov/deed/angelcredit. PB

Monte Hanson Media Relations Manager Minnesota Department of Employment and Economic Development monte.hanson@state.mn.us