Gov. John Carney signed House Bill 170, the Angel Investor Job Creation and Innovation Act for Small Technology Companies into law on Thursday.
Sounds good, but what is it, and how can it help you as a startup or a potential startup investor?
Let’s break it down:
- The Angel Investor Job Creation and Innovation Act is an amendment to Titles 29 and 30 of the Delaware Code, which entitles qualified angel investors to a tax credit.
- The amendment gets rid of the section of Title 29 called the Delaware Investment Tax Credit Program entirely
- In section 1116 of Title 30, the Delaware Investment Credit is changed to the Angel Investor Job Creation and Innovation Act credit
- The credit amount has been changed from 15 percent to an amount (up to 25 percent) to be determined by the director of the Division of Small Business, Development, and Tourism.
- Before the amendment, this credit could not exceed the total amount of tax due; now it can, so it’s possible to receive credit as a tax refund.
For an individual investor, the minimum investment in a small tech company is $10,000 over a calendar year, or $30,000 for a fund.
This is an incentive to encourage more investment in a specific kind of Delaware tech startup that is committed to innovating the state.
If you have or plan to start a small tech company, here’s what you’ll need to be to qualify as a business that entitles investors to the credit:
- Based in Delaware, with innovation in Delaware its primary business activity
- At least 51 percent of employees are in Delaware
- Fewer that 25 employees
- A tech company with a proprietary product in a qualified high-technology field (including agriculture, manufacturing, wildlife preservation, environmental science, financial technology and transportation)
- Employees annual wages must be at least 175 percent of the federal poverty guideline for a family of 4 and intern wages must be at least 175 percent of the federal minimum wage
- The business has not been in business longer than 10 years, unless it’s a medical/pharmaceutical company where FDA approval is required
- No previously received private equity investments of more than $4,000,000
- Has not issued securities that are traded on a public exchange
Businesses have to get certified as a qualified business before the investment is made, and investors have to get certified as a qualified investor.
To find out more about the credit and how to apply to be a certified investor or business, visit the Division of Small Business, Development, and Tourism website.