A new law doubling the tax credit available under the state’s Angel Investor Tax Credit program will make it easier for startups and emerging technology businesses to attract the private investment they need to succeed, and will also boost New Jersey’s growing innovation economy.
The legislation, A-5604 (Freiman, Pinkin, Milam, DePhillips, Zwicker, Land, Corrado, Singleton), was signed into law Sunday by Gov. Phil Murphy. The law raises the tax credit percentage from 10% to 20% for qualified investment in a New Jersey emerging technology business. The credit increases to 25% if the business is certified as women or minority owned, or if it is located in a designated Opportunity Zone or low-income community.
“A robust innovation economy requires substantial private sector investment, which is why NJBIA has been a vocal proponent of expanding the Angel Investor Tax Credit program,” said NJBIA Vice President Andrew Musick. “This law will make New Jersey a more attractive location for high-tech companies because investors can only qualify for the credit if the company is located in New Jersey.”
The Angel Investor program, which was created in 2013, provides refundable tax credits against the corporation business or gross income tax for a specified percentage of qualified investment in a technology business that conducts research, manufacturing, or technology commercialization.
Musick noted that in 2017, $11 million in Angel Investor tax credits spurred more than $111 million in investment in 39 New Jersey companies, according to the New Jersey Economic Development Authority. By doubling the percentage of the available tax credit, high-tech startup businesses in New Jersey will become even more financially attractive to investors, Musick said.
“Increasing venture capital is important because NJBIA’s Indicators of Innovation report found that New Jersey lags far behind other states in our region in total venture capital investment,” Musick said. “This change to the Angel Investor Tax Credit program will help boost our innovation economy.”
Under the law, the expanded credit applies to taxable years beginning or after Jan. 1, 2020. The program remains capped at $25 million annually, but the program has yet to utilize that maximum cap. The average cap utilization was only $10 million per year during 2016-2018.