7 Myths about the Best Angel Tax Credit in America — THE MN ANGEL TAX CREDIT

7 Common misconceptions about the MN Angel Tax Credit offered by the Minnesota Department of Employment & Economic Development.

11/29/16 –$1.4MM + remain for the #MN Angel Tax Credit. You don’t need to be from Minnesota to qualify — http://bit.ly/2fHQ3bm #tech #vc

MN Angel Tax Credit 101:

“Minnesota’s Angel Tax Credit provides a 25-percent credit to investors or investment funds that put money into startup companies focused on high technology, new proprietary technology, or a new proprietary product, process or service in specified fields. The maximum credit is $125,000 per person, per year ($250,000 if filing jointly). The credit is refundable. Residents of other states and foreign countries are eligible” — MN DEED

Myth #1: The Minnesota Angel Tax Credit is just for state residents — False, Its actually for everyone.

It’s for anyone from anywhere — worldwide. Seriously.

In fact the only hard requirement to invest and benefit from the MN Angel Tax Credit is to be a natural person (meaning you must be a human being, and not a corporation). The MN Angel Tax Credit is one of the few tax credit’s out there that treats resident Angel investors and non-resident Angel investors similarly. You don’t even have to be a resident of the United States to benefit from Minnesota’s Angel Tax Credit.

“…Qualified investors may be the residents of any state or any country, because the tax credit is refundable. No Minnesota tax liability is needed to receive the tax credit, though a Minnesota tax return must be filed. Residents of other countries, who do not have a Social Security Number and who wish to use our online system for investor certification or annual reporting, need to contact us to obtain an Angel Identification Number before attempting to create an online account”— MN Angel Tax Credit FAQs

Myth #2: It’s only for “accredited investors”.

There are 3 ways to invest via the MN Angel Tax Credit as a non-accredited investor today. Check them out below.

The Minnesota Angel Tax Credit allows non-accredited investors to invest in Minnesota startups that meet one of the following three conditions according to the Minnesota Department of Economic Development;

1. A small Corporate Registration Offering under Minn. Stat. 80A.50 (b)
2. A Limited Offering Exempt Transaction under Minn. Stat. 80A.46(14)
3. A MNvest Offering (crowdfunding) under Minn. Stat. 80A.461 (Pending MN Gov. Dayton’s approval of the Omnibus tax bill)
  • If you have questions on these alternative investment types, I recommend talking to attorney Zach Robins of @MNVest Fame @WinthropMpls.
  • It’s also important to note that some startups may only be seeking accredited investment, however it doesn’t hurt to ask.
P.S. You can complete this quick checklist to see if you can become qualified as an Angel Investor in the MN Angel Tax Credit: http://mn.gov/deed/assets/atc-investor-certification-checklist-2016_tcm1045-131765.pdf

Myth #3: It’s out of Money for 2016.

Although it’s true that The Minnesota Department of Employment and Economic Development states credits are exhausted for general businesses on their website…

“…credits for general businesses have been exhausted and we are no longer accepting credit allocation applications for investments in them”. — MN DEED

There is an exception to the rule. It also states that $7,500,000 dollars in angel tax credits are reserved for for minority- and women-owned businesses, as well as businesses located in Greater Minnesota. Those funds, a whopping, $5,500,000 at the time of this post, will become available on September 30th if they don’t find a qualified target business before then.

“We will begin accepting credit allocations for non-targeted businesses on September 15, in anticipation of reserved credits becoming available for all businesses on October 1. “— MN DEED

Be sure to get your application started if you want to make qualified investments into Minnesota Startups in 2016, visit http://mn.gov/deed/business/financing-business/tax-credits/angel-tax-credit/for-investors.jsp to start the process to become a qualified angel investor.

Myth #4: High minimum investment amounts

You can invest as little as $10,000 into a Minnesota Startup that has been qualified by MN DEED. This tax credit is designed for Angel investors, specifically those with small investment amounts who want to maximize the impact of their investment by funding quality, qualified startups.

Myth #5: There are no great startups in Minnesota

What? Have you heard of The Minnesota Cup?

“The largest statewide startup competition in the country.” — @MinnesotaCup

Over 1500 startups participated in the statewide competition. Not only are there many Minnesota Startups — there are serious resources at their disposal.

Since it’s inception the Minnesota Cup has awarded over $2,000,000 in seed money to MN Startups, helped support over 11,000 Minnesota-based Entrepreneurs, of whom MN Cup finalists have raised over $225,000,000 in funding.

This year the MN Cup selected 80 semi-finalists, 26 finalists, and only 8 winners over the summer. The 8 division winners are listed below;

Not only that, this year Gopher Angels hosted the Midwest Angel Capital Association meeting, some VCs are opening regional offices and came out for Twin Cities Startup Week #TCSW16

@MinnesotaCup Division Winners are in the top 1% of Startups

1. StemoniX, Winner — Life Science/Health IT *MN ANGEL TAX CREDIT QUALIFIED & selected as the Grand Prize Winner of the MN Cup.
2. Vugo, Winner — High Tech, *MN ANGEL TAX CREDIT QUALIFIED (Full Disclosure — Vugo is a my startup, contact us at Rob@GoVugo.com or James@GoVugo.com if you have questions.)
3. Activated Research Company, Winner — Energy/Clean Tech/Water
4. SelfEco Garden, Winner — Food/Ag/Beverage
5. Berd Spokes, Winner — General
6. Asiya, Winner — Social Entrepreneurship
7. Minnealloy Magnetics, Winner — Student
8. ExpressionMed, Winner — Youth

9/22 — Tonight all 8 winners will compete for the grand prize of $50,000 in no-strings attached cash at the MN CUP Final Awards Ceremony. It appears they are saving the best for last (Or it’s in alphabetical order…), as Rob Flessner, my co-founder and Vugo’s CEO will be presenting Vugo’s Mobility Media™ platform that influences people in motion via our TripIntent Technology. Allowing Vugo to capture the emerging passenger entertainment experience in ridesharing today, and self-driving cars tomorrow. Update 9/23: StemoniX was selected for the MNCup Grand Prize

Where else can I discover great Minnesota Startups?

You can learn about Minnesota’s strongest startup companies following these great publications and organizations;

Top 10 MN Angel Tax Credit Qualified Startups

Vugo has been active in the Minnesota startup ecosystem for over two years, during this time we have gotten to know a number of fanatical founders and fantastic startups, as such we have taken the liberty to create a list of the Top 1o MN Angel Tax Credit qualified startups that we like with a short description of what they do, obviously we are a little biased but we think we can recognize a great founder when we see one and we have been around a while to see a couple founders at multiple places.
1. StemoniX — Scaling Human Stem Cells .Winner of the Minnesota Cup Life Sciences division and Grand Prize winner of MN CUP also *MN ATC Qualified.

Contact Details: here

2. Vugo — Mobility Media™ Entertainment & Rideshare Advertising. Winner of the 2016 Minnesota Cup High-Tech Division and the 2016 Eureka! Innovation Awards. Recently selected to showcase at the North American International Auto Show “NAIAS” / The Detroit Auto Show in January 2017 by Techstars Mobility. ALSO an MN ATC Qualified Contact Details: here (full-disclosure/my company)
3. Sezzle — Efficient payment processing for merchants and a better checkout experience for consumers. Contact Details: here
4. 75F — Low-cost solutions solving comfort and energy issues in light commercial buildings — Contact Details: here
5. Apruve — Credit Management for B2B eCommerce. Contact Details: here
6. VEMOS (Previously known as BookBottles) — Event and Venue Management Software. Contact Details: here
7. DOSE Health — A Smarter Pill Box. Contact: Contact Details: here
8. Bizzy Coffee — The Coke Syrup of Coffee, Cold Brew Coffee. Contact Details: here
9. KIDIZEN — The Mom Powered platform to Shop, Share and Sell Kid-Style — Contact Details: here
10. HEMA Imaging — Thermal imaging software that helps experts detect equipment failure in production facilities. Contact Details: here
You can see the complete list of Minnesota Angel Tax Credit qualified startups and contact details for 2016 here

Myth #6: There must be a ton of paperwork.

It’s actually pretty painless, everyone involved benefits from a quick and easy investment process. Startup founders will work with you to make sure you are able to quickly and easily make a decision to invest. The MN DEED has FAQs, and uniform forms on their website and are very friendly when a phone call is needed. Most importantly many startups like Vugo & StemoniX have already gone through the process, of becoming qualified thus you just need to apply to become a qualified angel investor to certify an investment.

Start here: http://mn.gov/deed/business/financing-business/tax-credits/angel-tax-credit/for-investors.jsp

Myth #7: MN Angel Tax Credit is only for individuals.

Well, then who are these qualified angel funds? You can discover how to qualify your fund here: http://mn.gov/deed/business/financing-business/tax-credits/angel-tax-credit/for-funds.jsp

  • 701 Angel Fund LP
  • Asynch Media, LLC
  • BacTrac Technologies LLP
  • Circle Investments, LLLP
  • CRP Holdings, LLC
  • Cyclops Family Partnership LLC
  • Dalmore Investments
  • Erwin A Kelen Family LTD Partnership
  • Fountain Hills Investments, LLC
  • Harvest Fund I, LLLP
  • Healthy Ventures Fund 1 LP
  • Invenshure Fund II, LP
  • Key Venture Partners, LLC
  • MedPro Investors-Impleo, LLC
  • Omphalos Venture Partners, LLC
  • PC1, LLC
  • R&P Anderson Enterprises LP
  • Sofia Angel Fund II LLC
  • Solitude Capital I, LLC
  • Verbier S.P. Partnership, L.P.

Conclusion — Let’s Get Started.

Although the MN Angel Tax Credit isn’t out of funds today, it could be in a matter of weeks. If you want to take advantage of one of the best Angel Investment Tax Credits in the world- Get qualified by contacting the MN DEED or get to know some of the qualified companies and their founders.

James Bellefeuille is a co-founder of Vugo a MN Angel Tax Credit Qualified company. Vugo is A Cloud-Based, B2B Mobility Media™ Platform for the for-hire transportation Industry. Vugo won the Minnesota Cup high-tech division and the 2016 Eureka! Award for Media and Advertising from the Minneapolis-St.Paul Business Journal in 2016.
Contact: James@GoVugo.com / @JLBellefeuille / www.GoVugo.com

Thanks to Rob Eckardt (@RobEckardt), Rob Flessner (@RobFlessner), and John Roberts (@NewCounsel) for reviewing a draft of this article prior to publication.