“NJBIA has advocated for the Angel Investor program for years as part of our support for innovation, and we were happy to see its expansion in the Economic Recovery Act of 2020,” said NJBIA Vice President of Government Affairs Christopher Emigholz.
The Angel Investor Tax Credit Program was created in 2013 and expanded under the New Jersey Economic Recovery Act of 2020 (ERA). The draft rules align with changes to the law and include: an increase to the amount of tax credits available each year, an increase in the amount of tax credits available per qualified investment, bonus credits for qualified investments in targeted locations or in certified minority or women-owned businesses, and the ability to receive a tax credit for investments made in qualified venture funds.
As defined in the draft rules, a qualified venture fund is a partnership, corporation, trust, or limited liability company that invests cash in a business during the early or expansion stages of a business in exchange for an equity stake in the business. The fund must be administered by a professional manager and the investment must be non-refundable and non-transferrable.
In addition, the venture fund must commit to invest at least 50% of its committed funds in New Jersey-based businesses. A bonus of 5% is available if the fund invests 50% of its funds in New Jersey diverse entrepreneurs.
The state’s Angel Investor program incentivizes angel investment in emerging New Jersey technology businesses by authorizing the NJEDA to provide tax credits to investors based on percentage of a qualified investment made in a New Jersey business conducting research or engaged in pilot-scale manufacturing or technology commercialization in any of these fields:
- advanced computing
- advanced materials
- carbon footprint reduction technology
- electronic device technology
- information technology
- life sciences
- medical device technology
- mobile communications technology
- renewable energy technology
In addition, the business receiving the investment must employ fewer than 225 employees, with at least 75% of them working in New Jersey.
In addition to the expanded Angel Investor Tax Credit program, the ERA created a suite of programs that include tax credits to incentivize job creation, new construction, and revitalization of brownfields and historic properties; financial resources for small businesses; support for new supermarkets and healthy food retailers in food desert communities; new funding opportunities for early-stage companies in New Jersey; and support for the growing film and digital media industry. More info about the ERA can be found here.
Since inception of the Angel Investor Tax Credit Program, the NJEDA has approved more than 1,600 applications from investors representing more than $615 million in total qualified investment into emerging New Jersey technology companies.