Income Tax Incentives
Seed Capital Investment Credit
An individual, estate, trust, partnership, corporation, or limited liability company is allowed an income tax credit for investing in a business certified by the Department of Commerce Division of Economic Development and Finance. A real estate investment trust is not eligible for the credit.
In the case of a passthrough entity, such as a partnership or S corporation, or in the case of an angel fund, the credit is passed through to the entity’s owners, or the fund’s investors, in proportion to their respective interests. For purposes of this credit, an investment may consist of (1) a direct cash payment, or (2) a direct transfer of cash from a retirement plan in which the taxpayer is a participant and the taxpayer controls where the plan’s assets are invested. The credit is equal to 45% of the investment. No more than $112,500 of the credit may be used in any year. An unused credit may be carried forward up to four years.
For businesses first certified on or after January 1, 2005, or recertified on or after January 1, 2007, only the first $500,000 of eligible investments in a certified business are eligible for the tax credit. The total amount of tax credits allowed for investments made in all certified businesses in any calendar year is limited to $3.5 million.
