Download HF3143

CORPORATE FRANCHASE TAX
INDIVIDUAL INCOME TAX
Tax Credit for Qualified High
Technology Business
April 4, 2008
Yes
DOR Administrative
Costs/Savings
Department of Revenue
Analysis of H.F. 3143 (Winkler), 1st Engrossment
F.Y. 2008
General Fund
$0
Fund Impact
F.Y. 2009
F.Y. 2010
(000’s)
($3,000)
($3,000)
No
X
F.Y. 2011
($3,000)
Effective beginning with tax year 2008.
EXPLANATION OF THE BILL
The bill would allow a 25% investment tax credit for qualified taxpayers’ investments in a
qualified high technology business. The bill places a ceiling on the maximum of amount tax
credits that can be issued at $3 million per tax year.
The credit applies to both the individual income tax and the corporate franchise tax. The
maximum credit is $25,000 for an individual who is not part of a partnership, and the maximum
credit is $300,000 for a C corporation or a pass-through entity. Unused tax credits can be carried
forward tax years.
Qualified taxpayers are defined as accredited investors under SEC Regulation D who do not own
20% or more of the outstanding securities of the qualified business. Under Regulation D,
accredited investors generally are high income and net worth individuals or entities with
substantial assets
A qualified high technology business must conduct business in a qualifying high technology
field, including but no limited to: aerospace, agricultural processing, alternative energy,
biotechnology, defense, drug delivery, environmental engineering, food technology, cellulosic
ethanol, information technology, green manufacturing, materials science technology, medical
devices, nanotechnology, pharmaceutical technology, and telecommunications. The bill also
includes a list of activities such as real estate where the business must not be engaged.
A qualified business must have its headquarters in Minnesota, employ no more than 25
Minnesota full-time employees, have gross receipts less than $1 million, be in operation for less
than ten years, and have investments of capital received in previous years of less than $2 million.
Department of Revenue
Analysis of H.F. 3143, 1st Engrossment
Page 2
April 4, 2008
REVENUE ANALYSIS DETAIL
• Investments in a qualified high technology business are assumed to come from three sources:
friends and family of the owners of the business, the so-called angel investment groups, and
venture capital groups.
• Estimates are based on the published industry reports on the amount of venture capital
invested in Minnesota. The amount of the venture capital invested that qualifies for the tax
credit is assumed to exceed $12 million per year. Therefore, the impact is assumed to be the
limit of $3 million per year.
Number of Taxpayers: Unknown
Source: Minnesota Department of Revenue
Tax Research Division
http://www.taxes.state.mn.us/taxes/legal_policy
hf3143(sf3083)_1/dkd