Minnesota would offer so-called angel investors in small technology companies more money in tax credits under a pair of bills approved Tuesday by the House Greater Minnesota Economic and Workforce Development Policy Committee.
[MORE: Listen to full audio of Tuesday's hearing]
Heading to the House Job Growth and Energy Affordability Policy and Finance Committee, HF65 and HF66 would also make the program permanent by lifting a 2016 sunset on the Minnesota Small Business Investment Credit, also called the angel investment credit.
The bills’ sponsor, Rep. Sarah Anderson (R-Plymouth), said she hasn’t decided how much to propose raising the program’s budget, but was considering a $3 million increase to $18 million per year.
Investors taking the credit drain the program’s funding well before year’s end — in its first four years, the program ran out of money in August, July, May and March. “The trend line is that it’s getting exhausted at an earlier and earlier rate,” Anderson said.
Qualified investors get a refundable income tax credit equal to 25 percent of their investments, up to a maximum of $125,000 (or $250,000 for married couples filing taxes jointly).
Michael Lacey, president and CEO at Digineer and vice chair at the Minnesota High Tech Association, told the committee he received the credit for investing in entrepreneur Chad Olsen’s company. As a University of Minnesota student, Olsen developed a Groupon-type app for students called By Me that he said would not be where it is today — preparing for national expansion — without the tax-credit program.
But several legislators said the program shortchanges Greater Minnesota — despite a change last year reserving $7.5 million for investments outside of the metro area. (Any of those funds not used by Sept. 30 are open to investments statewide.)
Rep. Tim Mahoney (DFL-St. Paul) co-sponsored the original investment tax credit legislation in 2010, but said beneficiaries’ geographic concentration lead him to oppose Anderson’s bills. “Almost 66 percent of the companies that benefit from the program are in Western Hennepin County,” Mahoney said.
The companion bills, SF185 and SF186, sponsored by Sen. Paul Gazelka (R-Nisswa), both await action by the Senate Taxes Committee.
-Chris Steller