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State Representative Jim Davnie
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-0173
For more information contact: Matt Swenson 651-297-8406
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HOUSE COMMITTEES GET TO WORK ON ANGEL INVESTOR CREDIT
ST. PAUL, MN – After unveiling a comprehensive Job Creation Bill last week, the Minnesota House is getting to work immediately on one of the package’s signature provisions – an Angel Investor Tax Credit aimed at funneling start-up capital to high-tech entrepreneurs. The House Taxes Committee and the House Bioscience and Workforce Development Division will take up the proposal at a joint hearing Tuesday, February 9 at 10:30am in Room 200 of the State Office Building.
“This legislation is a crucial tool for jump-starting Minnesota’s economic recovery," said the bill’s author, state Rep. Jim Davnie (DFL – Minneapolis). “For decades Minnesota has been a leader in science and technology innovation. But Minnesota’s ability to generate new business ventures has fallen off dramatically in recent years because our commitment to encouraging entrepreneurship has waned. This bill builds on Minnesota’s historic strengths and readies our state to create new, innovative business partnerships that will grow jobs for our future.”
The need to pass Davnie’s bill is clear. The medical technology industry – one of the state’s signature strengths – is growing at a rate of 15 percent per year nationally, but Minnesota is barely participating in that growth. While Minnesota ranks 2nd nationally in the number of medical device companies, a 2006 statewide assessment of Minnesota’s biobusiness industry found that Minnesota is lagging behind other states in the number of biotechnology startup companies. Minnesota is now 48th in new company formation and 15th in venture capital investments.
“While we’ve been talking about putting Angel Investor incentives in place to encourage high-tech business development that will create good-paying jobs, other states have actually been doing it,” said state Rep. Tim Mahoney (DFL – St. Paul), chair of the Bioscience and Workforce Development Committee. “With the economy in deep recession, states that take forward-thinking, responsible action now will be the ones that get to compete in a 21st Century economy – everyone else will just be stuck in the back seat. It’s time to pass this bill and get Minnesota back in the driver’s seat.”
In the last decade, Wisconsin and Ohio enacted Angel Investor Tax Credits. Both states combined had half the number of venture deals in 2003 than Minnesota. But by 2008, venture capital deals in those states had increased 50 percent over Minnesota. Since then their venture deals have grown more than 210 percent, while similar venture capital activity decreased 5 percent in Minnesota.
Rep. Davnie says this is an initiative both parties and Governor Pawlenty can support. A new bipartisan Small Business Caucus made up of House Democrats and Republicans have already endorsed the bill and will push for its passage this session.
“Lawmakers on both sides of the aisle recognize this is a priority,” said Davnie. “The Angel Investor Credit is exactly the kind of intelligent tax incentive Minnesota needs to attract new investors and create new jobs. State government can’t single-handedly reverse this recession – but this is one significant tool we have at our finger-tips that we know will make a significant difference for Minnesotans.”
Specifically, Davnie’s bill would:
• Provide a credit equal to 25 percent of the taxpayer’s investment made in a qualified new business with a maximum credit of $125,000
• Focus the credit on the industries and companies most in need by ensuring qualifying companies:
o Are high-tech with proprietary technology based in Minnesota
o Have been in operation for fewer than 10 years
o Have fewer than 25 employees
o Have not received equity investments of more than $2 million
The credit would be received in the next taxable year. But in order to prevent tax sheltering, investments must be held for three years unless certain conditions are met.
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