The Minnesota Department of Employment and Economic Development recently announced that it successfully distributed all $10 million from the angel tax credit fund, a program that gives tax breaks to investors backing Minnesota startups.
Reinstated in 2019, the angel tax credit provides a 25% 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 specific fields.
Minnesota Gov. Tim Walz and other state lawmakers voted to revive the program with a $10 million budget for 2019. No funding was given for 2020. The legislature authorized $10 million in credits for 2021, with $5 million reserved until Oct. 1, 2021 for targeted businesses.
Half of the angel tax credit funding each year is targeted toward minority women and veteran-owned companies, as well as businesses located in greater Minnesota.
The angel tax credit was originally introduced in 2010. It was, in general, popular among local startups, and when you look at the numbers it's easy to see why.
Between 2010 and 2017, more than $420 million was invested in 855 Minnesota businesses through the state’s angel tax credit program, according to DEED. In 2017, about 48% of investors were non-Minnesotans whose investments made up about 53% of all investments that year.
The program drew investors from both inside and outside of Minnesota. DEED reports that in 2017, 388 Minnesotans invested $21,053,866 through the program, accounting for around 47% of that year’s total investment. The same year, 364 non-Minnesotans invested $23,420,900 in local businesses, which is 52.7 percent of the total investors.
The program lapsed in 2018 after state lawmakers decided not to fund it.
Certification applications for the 2021 angel tax credit program will reopen again in November 2020.
