Angel Investor program: EDA increases total tax credits available, amount each company can receive

The Board of the N.J. Economic Development Authority approved proposed amendments to the state’s Angel Investor Tax Credit program Wednesday that they feel will help fuel investments into early stage New Jersey technology companies.

The amendments were based on expansions and revisions made to the program by both the Economic Recovery Act of 2020, which was enacted in January 2021, and legislation signed into law by Governor Phil Murphy in 2019. The EDA Board also approved publishing the proposed amendments in the New Jersey Register for a 60-day public comment period.

Among the amendments:

  • Increasing the amount of tax credits available annually under the program from $25 million to $35 million;
  • Expanding the definition of a qualified investment to include investment commitments made into qualified venture funds.

The following additions were also made to the Angel Investor Tax Credit Program rules. These updates are associated to legislative actions from 2019 which have already been implemented into the current Program:

  • Increasing the amount of tax credits available per qualified investment in an emerging New Jersey technology business from 10% to 20%.
  • Adding a 5% bonus credit for qualified investments made in a New Jersey certified minority-or women-owned technology business or a technology business that is located in a qualified Opportunity Zone or New Markets Tax Credit Census Tract.

EDA officials offered more details involving the venture fund change.

“Venture fund” means 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 in which the investment is made. “Venture fund” may include a venture capital fund, a family office fund, or a corporate investor fund, provided that a professional manager administers the venture fund. 

For an investment commitment to a venture fund be eligible as a qualified investment, the venture fund must be a “qualified venture fund” investing a minimum of 50 percent of the venture fund’s committed capital in New Jersey based businesses. In addition, a five percent bonus is available if the fund invests 50 percent of its funds in New Jersey diverse entrepreneurs.

The New Jersey Angel Investor Tax Credit Program, which is open to both in-state and out-of-state investors, was created in 2013 to incentivize investment into emerging New Jersey technology businesses. 

An investor can receive a refundable tax credit equal to a percentage of their qualified investment made in a New Jersey early-stage company. This company’s primary business must be an eligible technology which are 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. 

In addition to commercializing one of these eligible technologies, the business receiving the investment must employ fewer than 225 employees, at least 75 percent of whom work in New Jersey. An investment in a New Jersey emerging technology business holding company may also meet the requirements for a qualified investment. 

Since the program’s inception, the NJEDA has approved 1,671 applications totaling more than $616 million invested in 102 eligible New Jersey businesses. In the first quarter of 2021 alone, 207 Angel Tax Credit Program applications were approved for a total of $5.2 million in tax credits, representing the injection of nearly $33 million into 17 emerging companies.