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AZ, NJ, WI Increase Capital for Entrepreneurship, MN's Angel Tax Credit Closed for 2013

June 19, 2013

Over the last week, several states have announced/passed new programs focused on increasing the capital available to spur small business growth and innovation. Officials from New Jersey announced the state's new angel tax credit will take effect July 1. In Arizona and Wisconsin two bills await gubernatorial approval that would rework the Arizona R&D tax credit program and establish a $75 million venture capital fund in Wisconsin. Meanwhile, the Minnesota state legislature did not approve an additional $5 million for its popular Small Business Investment Tax Credit.

Arizona
In Arizona, a bill (House Bill 2342) seeking to expand the state's research and development (R&D) tax credit awaits the signature of Gov. Jan Brewer. Administered by the Arizona Commerce Authority, the reform is intended to help small, innovative companies with little to no cash flow by providing a refund for R&D activities. To be eligible for the R&D credit, the company would have 150 or less employees and perform research and development in one of several target industries.

In exchange for the refund, the state gets to discount its research and tax obligation by 25 percent, according to the Phoenix Business Journal. For example, if a company has $100 of research and development expenditures that qualify for the tax credit, the company can receive $75 from the state and the remaining $25 is erased from the state's research and development tax credit obligation. The annual cap for the refundable portion of the tax credit is intended to increase from $5 million in 2014 to $10 million in 2014; it will reach $15 million in 2015.

New Jersey
New Jersey Gov. Chris Christie's administration announced the Angel Tax Credit Program will launch on July 1, according to a press release from the New Jersey Economic Development Authority (EDA). Signed into law in January, the program (S 581) provides tax credits for up to 10 percent of a qualified investment in businesses that conduct research, manufacturing or technology commercialization and have fewer than 225 employees (75 percent of those employees must live in New Jersey). Administered by the New Jersey EDA, in consultation with the New Jersey Department of the Treasury, the fund will have an annual cap of $25 million with each qualified investment being capped at $500,000 per tax year.

The New Jersey EDA also announced the Stronger NJ Business Loan Program at its monthly board meeting. Beginning in July, the program will offer direct, low-cost loans of up to $5 million to businesses and nonprofits that suffered physical damage, as well as to businesses looking to expand within storm-impacted communities. The $100 million will be available to support working capital needs and/or renovations or new construction of the place of business. Read the release...

Wisconsin
Wisconsin lawmakers passed a new venture capital bill (Assembly Bill 181) that would invest up to $75 million in state and private funds in early stage companies from target industries, according to a press release from the Wisconsin Technology Council. The bill received almost unanimous support in both the state Senate (29-3) and the Assembly (91-2). After the Assembly concurred with minor Senate amendments, the bill awaits Gov. Scott Walker's approval.

If signed into law, the state would contribute $25 million to a fund-of-funds that would include up to $50 million in investments from private-sector partners. Target industries include agriculture, advanced manufacturing, engineered products, information technology, medical devices and medical imaging sectors.

Minnesota
In the last hours of its legislative session, the Minnesota legislature decided not to allocate an additional $5 million in funds to the state's Small Business Investment Tax Credit for 2013 according to an article from the Pioneer Press. The additional funds were necessitated by the exhaustion of a previously allocated $12.7 million earlier this year. This decision left the popular angel tax credit program closed to applications in 2013. However, the legislature did approve a $12 million appropriation for 2014.

According to the Pioneer Press, the state has commissioned a study to evaluate the cost-effectiveness of the angel tax credit program, which would be completed before the 2014 legislative session. With the program set to expire after the 2014 calendar year, the findings should significantly influence the vote for renewal of the program in 2014.

Arizona, Minnesota, New Jersey, Wisconsinstate budget, tax credits, capital, entrepreneurship