Wall Street Journal has a blog entry from last week about a recently passed law in North Dakota that extends a 45% tax credit to angel investors who back homegrown businesses (North Dakota: More Than A Flyover State). Two new angel funds, the Grow Dakota fund (estimated $2 million) and Aurora Angel Fund ($5 million) are being created as vehicles for the program, where investors can invest in these funds, and receive the tax credits, and the funds would invest in target companies in the state. This is a great example of states doing their part to help solve the Need for Seed problem that exists throughout the country. Some other states have similar tax credit incentives for local venture investment:
- Maine Seed Capital Tax Credit Program offers state income tax credits to investors for up to 60% of the cash equity provided to eligible Maine businesses, which may be used for fixed assets, research or working capital.
- Iowa Venture Capital Credit is allowed for investments made into the Iowa fund of funds. The Iowa fund of funds makes investments in venture capital funds who make a commitment to consider investments in Iowa businesses (capped at $100 million in the aggregate, and $20 million of credits in one year).
- Wisconsin has two tax credit programs: Angel Investment and Venture Capital. Under the Angel Investor Tax Credit Program, angel investors and angel investor networks that invest in qualified new business in Wisconsin can claim an income tax credit on that investment, equal to 12.5% in each of two years. Under the Venture Capital Tax Credit Program, venture capital funds that are certified by the WI Department of Commerce and that invest in qualified new businesses may be eligible to claim a 25% income tax credit on that investment.
These are great ways for states to help incentive intrastate venture/angel investments, and a direction that Connecticut and other states hopefully will soon follow.
- Gregg J. Lallier
