Recombinetics, a St. Paul-based biotech company, uses gene editing to support medicinal and agricultural advances, including work to test gene-therapy treatments that could cure sickle-cell anemia.
In the company’s early days, a now-dormant tax credit incentivized $4 million in investments that allowed Recombinetics to reequip and reconfigure its space for the venture. The company doubled in size that year and has continued to grow and attract investment, Communications Manager Kris Huson told the House Jobs and Economic Development Finance Division Tuesday.
“The (Angel Investor Tax Credit) is super important to businesses,” Huson said. “We were able to leverage that, get more investors … and now we’re on the forefront of what we do.”
HF1268, sponsored by Rep. Carlie Kotyza-Witthuhn (DFL-Eden Prairie), would reinstate the Angel Investor Tax Credit and make it permanent, with a cap of $20 million in credits to qualified investors or funds per taxable year.
As amended, the bill was laid over by the division, which awaits a fiscal note that includes any costs associated with restarting the program.
“If we want to see our start-ups mature … we need to support them at the earliest of stages,” said John Dukich, director of public policy and research for the Minnesota High Tech Association.
The tax credit program, which ended in 2017, provided 25 percent credits to investors and investment funds that supported startup and early-stage companies focused on high-technology fields and proprietary technology, products, processes or services.
Reviving this would incentivize the “inherently risky” investments needed to support new companies and allow them to grow, Dukich said.
To qualify for the tax credit, cash investments would need to meet a minimum of $10,000 by a qualified investor or $30,000 by a qualified fund, both within a calendar year.
The bill would also allow $5,000 cash investments, made within a calendar year, to qualify for the tax credit if supporting Greater Minnesota businesses or business owned by women and minorities.
The fine charged to small business, investors, and funds impacted by the tax credit for failing to file annual reports by Feb. 1 would drop from $500 to $100. The bill would also authorize additional penalties if qualified investors, funds, and business fail to file annual reports by April 1.
Division discussion touched on the difficulty of getting investors to invest in businesses outside the Twin Cities metro area. Language remains in the bill that would require half of the tax credits be allocated to qualifying investments made in businesses owned by women or minorities, or in Greater Minnesota.
But Rep. Tim Mahoney (DFL-St. Paul), the division chair, expressed concern that more work needs to be done to change the behavior of investors.
“It’s a great program. It does really good stuff. But it only does it in a really concentrated area,” he said.
Rep. Barb Haley (DFL-Red Wing) unsuccessfully offered an amendment to require the coordination of promotional efforts with nonprofits working in Greater Minnesota or with minority- and women-owned business.
Gov. Tim Walz’s budget proposal includes a $10 million investments in the tax credit during Fiscal Year 2020 and again in Fiscal Year 2021, but would not make it permanent.