New Jersey Expands Angel Investor Tax Credit – Potentially up to 25%

August 08, 2019

By Benjamin Aspir

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:

  1. Employ fewer than 225 full-time employees, at least 75% of whom work in New Jersey.
  2. Conduct business, employ or own capital or property, or maintain an office in New Jersey.
  3. 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.
  4. 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

About Ben Aspir

Benjamin Aspir is a Senior Tax Manager with expertise in tax, audit and accounting services. Member AICPA and New Jersey Society of Certified Public Accountants.

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