On June 30, 2019, Gov. Phil Murphy signed legislation A-5604 (P.L.2019, c.145) authorizing an expansion of New Jersey’s Angel Investor Tax Credit Program. The expansion of the program provides for an increased tax credit on investments and bonuses for businesses located in low-income communities as well as minority or women-owned businesses. This Fast Facts will inform the business community of the changes to this program, which will help to attract early-stage and growth capital for innovative New Jersey companies.
The Angel Investor Tax Credit program was created by the “New Jersey Angel Investor Tax Credit Act” of 2013. It is administered by the NJ Economic Development Authority in conjunction with the NJ Department of Treasury’s Division of Taxation. The program was created to incentivize investment into emerging technology or life science businesses within the state.
In order to qualify for this program, companies must conduct pilot-scale manufacturing or technology commercialization in the fields of advanced computing, advanced materials, biotechnology, carbon footprint reduction technology, electronic device technology, information technology, life sciences, medical device technology, mobile communications technology, or renewable energy technology.
Eligible companies under this program are required to have fewer than 225 employees, at least 75% of whom work in New Jersey. The company must also own property or maintain an office within the state. The value of tax credit received under this program has a limit of $500,000 for the privilege period for each qualifying investment made.
When does the law take effect?
While the new law will take effect immediately, it will only apply to qualified investments made during taxable years beginning on and after January 1, 2020.
What are the changes to the program?
This bill increases the amount of the Corporation Business Tax and Gross Income Tax credits available for qualified investments under the “New Jersey Angel Investor Tax Credit Act,” from 10 percent to 20 percent of the qualified investment made by a taxpayer. The investment can be made either directly into a New Jersey emerging technology business, or into a New Jersey emerging technology business holding company that makes a verified transfer of funds to a New Jersey emerging technology business.
The new law also provides that a taxpayer may be allowed a tax credit of 25 percent of the qualified investment if the emerging technology business is located in a qualified “opportunity zone” or low-income community.
The changes are as follows:
- A taxpayer, upon approval of an NJEDA application, is eligible for credit against tax imposed amounting to 20% of the qualified investment. (An increase from 10% under the previous law).
- New Initiative: A taxpayer is eligible for tax credit equaling 25% of a qualified investment if the investment meets the following criteria:
- The business receiving the investment is located in a qualified “opportunity zone” or low income community as defined by federal law.
- The business receiving the investment is certified by the state as a minority or woman-owned company.
—For More Information—
For a copy of the new law, please click here.