New Jersey Expands Angel Investor Tax Credit – Potentially up to 25%
- Aug 8, 2019
On July 10, 2019, the New Jersey Economic Development Authority announced an expansion of the NJ Angel Investor Tax Credit Program. This program allows eligible angel investors a tax credit for a percentage of their investment in technology or life science businesses in the state of New Jersey.
Prior to 2020, the tax credit is 10% of the qualified investment made in an NJ emerging technology business, up to a maximum allowed credit of $500,000 for each qualified investment. The expanded program, effective in 2020, increases the credit from 10% to 20% of a qualified investment. An additional 5% is available for investments in a business located in a Qualified Opportunity Zone, low-income community, or a business that is certified by NJ as minority- or women-owned. Hence, an eligible taxpayer that invests $500,000 into an NJ emerging technology business can claim up to a maximum tax credit of $125,000 on their NJ tax return.
To be eligible for the credit, a NJ emerging technology business must meet these four criteria:
- Employ fewer than 225 full-time employees, at least 75% of whom work in New Jersey.
- Conduct business, employ or own capital or property, or maintain an office in New Jersey.
- Perform at least one of the following activities in New Jersey:
- Incur qualified research expenses.
- Conduct pilot scale manufacturing.
- Commercialize in the state one or more of the following: advanced computing, advanced materials, biotechnology, electronic devices, information technology, life sciences, medical devices, mobile communications, and renewable energy technology.
- Have as its primary business an eligible technology, as listed in number three above.
Qualified investments include non-refundable transfers of cash made directly to the NJ emerging technology business in exchange for any of the following: (a) stock, interests in partnerships or joint ventures, licenses, rights to use technology, marketing rights, warrants, options, or any similar items; or (b) purchase, production, or research agreement.
The program budget allocates up to $25 million of Angel Investor Tax Credits per calendar year
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Benjamin Aspir is a Partner and a member of the firm’s National Tax Group, with more than 10 years of public accounting experience. He has extensive experience with IRC Section 1202 - Qualified Small Business Stock and advising cannabis clients on IRC Section 280E, within the Manufacturing and Distribution practice.
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