Minnesota Gov Wants Tax Credits for Angels and Research

Gov. Tim Pawlenty recently unveiled his 2010 supplemental budget recommendations, which includes new tax incentives to boost job creation and spending cuts across state agencies to help eliminate a projected $1.2 billion deficit. Announced during his State of the State Address earlier this month, the proposed Jobs Creation Bill is a six-part plan with components aimed at stimulating formation of early-stage capital in new emerging businesses and encouraging businesses to invest in R&D.

Under the proposal, a 25 percent tax credit for angel investments in qualified businesses would be established. The tax credits would be capped at $5 million a year in 2010 and $10 million in 2011, according to budget documents. Angel tax incentives are likely to be a topic of debate during the upcoming legislative session with competing bills introduced in both the House and Senate (Read the article).

Gov. Pawlenty's jobs bill also aims to encourage businesses to undertake R&D by eliminating the current cap for corporations — which currently is 5 percent for R&D investments up to $2.5 million — and to expand the credit to all businesses that invest in R&D.

Another part of the jobs plan would create a program modeled after the certified capital company programs (CAPCO), but the general fund impact would not begin until 2014. Under the proposal, a $100 million capital pool would be created for investing in small, emerging green businesses with the program providing an 80 percent tax credit for companies investing in small businesses. Lawmakers rejected a similar proposal by the governor last year that would provide $50 million in investment tax credits for CAPCOs (see the July 15, 2009 issue of the Digest).

State agencies and other programs would be reduced by $181 million within the supplemental budget proposal, with additional cuts to higher education institutions. Lawmakers passed the 2009-11 spending plan in May; however, Gov. Pawlenty used executive authority to reduce the approved budget in order to fill what was then a projected $2.7 billion deficit.

The governor's $815 million capital budget includes $80 million for a new physics and nanotechnology building at the University of Minnesota to house research laboratories.

The governor's 2010 supplemental budget is available at: http://www.mmb.state.mn.us/doc/budget/bud-op/op10/supp10.pdf