Venture Capital Tax Credits By State

Transcription

1 Venture Capital Tax Credits By State Alabama States Credit Amount Eligibility Notes Alaska Arizona Angel Investment Bill (Direct Tax Credit available for investments made after June 30, 2006, for tax years 2007 to 2014, with an annual cap of $20 million in total credits. Program offers tax credits of 10% annually over three years, or 30% total, for investments of at least $25,000 in qualified Arizona small businesses. Investments must be made in qualified businesses that are not involved in retail, restaurants, real estate, professional services or health care. Total of all qualified investments for any individual investor in any calendar year shall not exceed $250,000. Maximum amount of qualified investments in a single qualified small business shall not exceed an aggregate of $2 million in investments for all taxable years. Arkansas Strategic Value Income Tax Credit (Direct Tax Program provides for a 33% income tax credit. Income tax credit can offset lesser of (i) 50% of an investor's annual tax liability or (ii) $50,000. Strategic value means research in fields having long-term economic or commercial value to the state, and that have been identified by the Arkansas Science and Technology Authority. Tax credit is transferable. Dividends, distributions and income allocable to investment are exempt from state, county, and municipal income tax. Venture Capital Investment Act California $70 million fund for investment in privately managed venture capital funds. Commitments by the fund made only to funds that meet the objectives of ADFA in aiding Arkansas companies that range from $3 million-$10 million in size.

2 Colorado Venture Capital Program 25% - 50%, depending upon nature of investment. Colorado Venture Capital Authority selects the venture capital fund manager. Investments must be made in: (i) qualified rural businesses; (ii) qualified state-wide businesses; or (iii) qualified distressed urban communities. Connecticut Delaware Florida Georgia Hawaii Hawaii Act 221, as amended by Act 215 (Direct Tax Investment tax credit equal to 100%, taken over a period of five years after investment is made (35% in year of investment and 25%, 20%, 10% and 10%, respectively, in subsequent years). Cannot claim more than $2 million per year, per qualified high-tech business. $36 million aggregate cap on credits issued by state with $12 million cap on credits per year. Investment can be made by any person, corporation, limited liability company, partnership, or other lawfully organized entity. Investment must be in a "qualified high technology business". Credits are transferable. Currently, one-third of all claims for credits over the past two years are being audited by the State. Idaho Illinois Indiana IC (Direct Tax 20% of investment made in the taxable year. Investment must be made in a qualified business. Applications for qualified business and investors must be filed with the Indiana Economic Development Corporation. Investors and businesses must apply prior to making the investment.

3 Iowa Venture Capital Fund (Seed Tax Fund must be capitalized with a minimum of $500,000. Credit can be used for individual income, corporation income, franchise, insurance premium and moneys and credits tax. $10 million cap on aggregate credits. Investment in fund having some physical presence in the state of Iowa, with commitment to consider making equity investments in Iowa. The determination of an eligible fund is made by the Iowa Capital Investment Board based of information submitted by the fund in the application process. Funds have until 120 days after the investment to file for eligibility in either program. Tax credits can be claimed up to 3 years after investment. Community Based Fund Credit ) Up to 20% of investment. Investment in a fund located in Iowa, having at least one-third of its investments dedicated to qualified Iowa businesses. Kansas Kansas Angel Investor Tax Credit Act (Direct Tax Credit equal to 50% of cash investment. Investor can invest annually in up to five companies with a maximum tax credit of $250,000. Tax credit available to investors investing in qualified Kansas businesses. Aggregate amount of tax credits available for any given tax year is $2M. A qualified Kansas business must apply to the Kansas Technology Enterprise Corporation. Application must be made and approved prior to the date on which the cash investment is made. Kentucky Kentucky Investment Fund Act (Seed Capital 50% of total qualified investments made by a single investment fund, but not to exceed 30% of the cash contributions to the investment fund. Minimum fund size of $500,000, with no less than four unaffiliated investors and no single investor accounting for more than 40% of the fund's total capitalization. Qualified investments must be made in Kentucky-based small businesses engaged in a qualified activity. Fund may apply for tax credits either before or after it raises capital. Fund must have physical office in the state of Kentucky. Louisiana Maine The Maine Seed Capital Tax Credit Program (Direct Tax Generally, 40% of investment, and up to 60% of investment made in businesses located in high unemployment areas. Investor may invest up to $500,000 per business with an Qualified business located in Maine. Investors must own less than an aggregate of 50% of the qualified business. Businesses receiving credits must file annual reports disclosing the total number of employees and jobs created/retained, annual payroll and total sales revenue. Fees apply ($250 fee per eligible business; $100 fee per investor, per investment; and $250 fee per venture capital fund).

4 aggregate investment limit per business of $5M. Credits taken in increments of 25% per year for the 4 years following the investment. Credit cannot exceed 50% of investor's total tax liability. Investors may invest up to $500K in any qualified business in any consecutive 3 year period. Investors cannot receive more than $5M in tax credits for an investment in any given business. Credits may be revoked if not redeemed within 3 years following the initial investment. Credits can be carried forward for 15 years. Maryland Massachusetts Michigan: Early Stage Venture Capital Investment Act of 2003 Credit determined and certified under the Michigan Code and the Michigan Early Stage Venture Capital Investment Act of The Michigan early stage venture capital investment corporation determines which investors are eligible for tax credits and the amount of tax credit allowed. Investors must apply to Michigan early stage venture capital investment corporation for certification of allowable tax credits. Eligible investors receive a certificate to be attached to the investor's annual return. Total amount of all credits authorized for any one calendar year cannot exceed $30 million. A credit may only be claimed in a tax year that begins after December 31, 2008 and before January 1, Minnesota Mississippi Missouri: New Enterprise Creation Act (Direct Tax Tax credit equal to 100% of qualified contribution. Qualified contribution must be made to a qualified fund which invests in a qualified business. An investor must submit an application for the tax credit, which may be claimed for the tax year in which the qualified contribution is made or in any of the following ten years and may be assigned, transferred or sold. Tax imposed on each qualified fund's uninvested capital at close of tax year. Each tax year, every qualified fund must remit the tax imposed to the director of the department of revenue for deposit in the state treasury to the credit of the general revenue fund. Small Business Incubators Act 50% of contributions to Missouri Small Business Incubator Fund, Local sponsor determines where investment will be made consistent with Investment cannot exceed 50% of total eligible project costs.

5 subject to an annual cap of $500,000. intent and purpose of program. Tax credit can be carried forward for 5 years and is transferable. Montana Nebraska Nevada New Jersey New Hampshire New Mexico Venture Capital Investment Act (Direct Tax Credit applied against state income tax and available to any taxpayer who pays federal income tax on the net capital gain of a qualified diversifying business which is allocated to New Mexico. Credit available anytime after June 30, 1993 for a taxpayer holding stock of a corporation domiciled in New Mexico (meeting the requirements of the Investment Act). Credit available anytime after June 30, 1994 for taxpayers holding stock of a corporation domiciled in New Mexico in which such stock was issued on or before June 30, 1994 by a corporation that was not domiciled in New Mexico. New York New York Enterprise Zones Act (Direct Tax 25% of qualified investment certified by commissioner of economic development with a maximum investment of $300,000. Credit available to taxpayers subject to (i) franchise tax on (1) business corporations, (2) banking corporations and (3) insurance corporations and (ii) personal income tax. Investment must be made in a qualified business located in the Empire Zone ("EZ"). Credit is allowed for each of the three taxable years immediately following the taxable year in which the investment was made. To claim the EZ investment tax credit, Form DTF-603, Claim for EZ Investment Tax Credit and EZ Employment Incentive Tax Credit must be completed and attached to the appropriate tax return. EZ tax credit is subject to recapture in the event taxpayer sells, transfers or otherwise disposes of an interest arising from a qualified investment.

6 North Carolina North Carolina Corporations Act (Direct Tax 25% of qualified investments. Direct tax credit program applies only to investments in qualified business ventures, qualified grantee business, and qualified license business. Tax credit can be carried forward for 5 years. North Dakota North Dakota Century Code (Direct Tax 45% of qualified investments. Minimum investment is $5,000 with a maximum of $250,000. Investor can claim credit against 33% of tax liability. Must be made in qualified investments. Total cap on available tax credits is $2.5 million per year. Investor can claim the credit by attaching the appropriate form to investor's tax return. Ohio Technology Investment Tax Credit (Direct Tax Generally, 25% tax credit, but 30% for qualified minority businesses in economically distressed areas. Maximum investment of $150,000 Credit is available for investments in private, for-profit venture capital funds that invest in the seed or early stage companies or established business enterprises developing new methods or technologies. Tax credit authorized by written contract with the investor. Tax credit certificates issued by Ohio Venture Capital Authority. Credit shall be claimed for the taxable year specified in the certificate. If the taxpayer elected a refundable credit and the amount of the credit shown on the certificate exceeds the tax otherwise due, the taxpayer shall receive a refund equal to 75% of that excess. If the taxpayer elected a nonrefundable credit, the amount of the credit, claimed in that order, shall not exceed the tax otherwise due after all the taxpayer's credits are deducted. Freely transferable for a period of three (3) years from the date of investment. Ohio Venture Capital Program Ohio Venture Capital Authority has authority to allocate $100 million in aggregate tax credits. Fund invests in enterprises in the seed and early stage of business development or established business enterprises. Tax credit are authorized by a written contract with the investor. Tax credit certificates issued by Ohio Venture Capital Authority. The credit shall be claimed for the taxable year specified in the certificate. Oklahoma Small Business Capital Formation Incentive Act (Direct Tax 20% of investment. Tax credit available after December 31, 1997 but before January 1, Investment must be made in qualified small businesses. Tax credit may only be claimed in tax year in which investment was made. No tax credit is available if the qualified small business used the investment for the acquisition of another legal entity. Tax credit can be carried forward for a period of ten years.

7 20% of qualified investment. For taxable years beginning after December 31, 1986, and before January 1, 2009, a tax credit is allowed for investments in qualified venture capital companies. Investments must be made in qualified venture capital companies having a capitalization not less than $5 million. The Oklahoma Capital Investment Board shall have the authority to certify an entity as a qualified venture capital company. A reasonable certification fee may be charged by the Oklahoma Capital Investment Board for this service. The tax credit may be carried forward as a credit against subsequent tax liability for a period not to exceed three (3) years and to the extent not previously utilized, the credit shall be freely transferable for a period of three (3) years from the date of investment No investor in a venture capital company organized after July 1, 1992, may claim tax credits under the provisions of this section. Oklahoma Capital Formation Act Oklahoma Capital Investment Board authorized to invest $100 million between July 1, 1990 and July 1, Investments are made to qualified venture capital companies. Annual tax credit amount capped at $20 million. Tax credits are freely transferable. Credit claimed by attaching certificate issued by the Oklahoma Capital Investment Board to taxpayer's tax return. Oregon Pennsylvania Rhode Island Tax Incentive for Capital Investments in Small Business (Direct Tax Tax credits are in form of deductions or modifications in the computation of business corporation tax, public service corporation tax, bank exercise tax, gross premiums tax, and personal income. Investments must be made in certified venture capital partnerships or qualifying business entities. The Department of Economic Development must certify a qualified business or venture capital partnership prior to any deduction, modification, capital gain exclusion or wage credit being allowed. The certification number must be shown where required on all tax incentive claims. Deductions or modifications shall not, generally, reduce taxes owed to less than $100 and, in certain cases, shall not reduce the taxes owed to less than zero. Amounts of credits, modifications, or deductions not used may not be carried forward to subsequent years. South Carolina Credit is lesser of (i) 30% of all Investment must be made in a qualified Credit is claimed on tax return in a manner prescribed by

8 South Carolina Income Tax Act qualified investments during tax year or (ii) 50% of all qualified investments during all tax years multiplied by 30%. Credit can be applied towards income, bank or insurance premium taxes. investment. appropriate agency. If qualified investment is redeemed within five (5) years, credit is no longer applicable and any credit previously allowed must be repaid. Total amount of credits allowed for all taxpayers for all taxable years shall not exceed $5 million. Life Sciences Act $50 million in tax credits may be available at any given time with an annual redemption limitation of $20 million for any given tax year. Investments are made to qualified investors. Investment preference is given to investors headquartered in South Carolina. For investors not headquartered in South Carolina, such investors must have other venture capital investments within the state. Tax credits are issued in form of a certificate. Tax credits are freely transferable. South Dakota Tennessee Texas. Utah Utah Venture Capital Enhancement Act $100 million in tax credits available with an annual redemption limitation of $20 million. Investments to be made in private seed and venture capital partnerships, with commitments to invest in state of Utah and having a physical presence within the state. Investments in any one venture capital partnership are not to exceed 20% of the fund total. Tax credit can only be redeemed by the designated investor. Tax credit cannot be claimed until investor has fully paid the fund of funds for the certificate. Once monies are invested, certificate cannot be modified, terminated or rescinded. Tax credit is available only where the actual return on the investment was less than the initial investment plus the stated return (as set forth n the certificate). Vermont. Virginia Tax Credit for Individuals 50% of investment made in the taxable year. Credit may not exceed the lesser of Investment must be made in cash, in a qualified business and in the form of either equity or subordinated debt. Businesses must be pre-certified and must file by Dec. 31 of the year for which they seek certification. Individual investors must file form by April 1 of the year

9 (Direct Tax Washington the individual's tax liability or $50K. If taxpayer, or any of taxpayer's family members or any entity affiliated with taxpayer, has received compensation from the qualified business within one year before or after the investment, taxpayer is not eligible for the credit. following the investment to apply for their credit. Total amount of tax credits available for a calendar year is $5M. Any credit not used can be rolled over for up to 15 years. West Virginia West Virginia Capital Company Act Wisconsin Angel Investment Tax Credit (Direct Tax 50% of investment in a "West Virginia Capital Company". 12.5% of investment with a maximum of $500,000 per year. Total tax credit available is $30 million for all tax years. A company may become a West Virginia Capital Company by applying to the West Virginia Economic Development Authority. Investments made directly by investors into qualified new business. West Virginia Capital Company must apply to be qualified and must hold a valid business certificate Limit for all credits allocated after July 2004 is $1M. Total credits for one business are limited to $2M. Any individual who receives a credit will have his/her name and address published in the state register by category (dollar amount of credit). Must claim tax credit in each taxable year for two years, beginning with the taxable year in which the taxpayer's investment was made. Early Stage Seed Investment (Seed Capital 25% of initial investment paid in the taxable year to a fund manager that is invested in a certified business. The maximum amount that may be claimed for all taxable years is $35M. A carryover for up to 15 years is permitted if the eligible credit exceeds the tax liability of the claimant. Equity investment must be made in a qualified new business which has been certified. Investment must be held for more than one year. If held for less than one year, must pay amount of credit back. Must make a timely filing (within 4 years of investment). Business must be certified with the state before the investment is made. Each business is limited to receive up to $4M in tax crediteligible equity investment, of which no more than $1M in tax credit-eligible can come from angel investors. Beginning Jan 1, 2006, funds will only be able to earn tax credits for investment in businesses with whom they had no previous investment activity. Wyoming