Under the Act, an angel investor is entitled to a tax credit of up to 10 percent of a "qualified investment" into a "New Jersey emerging technology business" against such investor's New Jersey corporation business and gross income taxes.
On January 31, 2013, New Jersey Governor Chris Christie signed into law the New Jersey Angel Investor Tax Credit Act (Senate Bill 581) (the "Act"). The Act is intended to encourage investment and growth in New Jersey-based emerging technology companies by providing angel investors with tax credits in New Jersey.
Under the Act, an angel investor is entitled to a tax credit of up to 10 percent of a "qualified investment" into a "New Jersey emerging technology business" against such investor's New Jersey corporation business and gross income taxes.
In order for an investment to be a "qualified investment," the investment has to meet the following requirements:
- The investment must be a non-refundable transfer of cash to a "New Jersey emerging technology business."
- The investor must not control or be controlled by the "New Jersey emerging technology business."
- The transfer of cash must be in connection with either: (i) an exchange for either stock, partnership interests, licenses (exclusive or non-exclusive), rights to use technology, marketing rights, warrants or options; or (ii) a purchase, production or research agreement.
In order to qualify as a "New Jersey emerging technology business," the company has to meet the following requirements:
- The company must do business, employ or own capital or property, or maintain an office in New Jersey.
- The company must have certain qualified research expenses paid or incurred for research conducted in New Jersey or conduct pilot-scale manufacturing in New Jersey or technology commercialization in New Jersey.
- The company must operate in one of the following industries: advanced computing, advanced materials, biotechnology, electronic device technology, information technology, life sciences, medical device technology, mobile communications technology or renewable energy technology.
- The company must have fewer than 225 employees, of whom at least 75 percent work in New Jersey.
Under the Act, each angel investor's New Jersey tax credit is capped at $500,000 per year for each qualified investment.
The program, which is administered by the New Jersey Economic Development Authority (the "NJEDA") is capped at $25 million in tax credits per year for all taxpayers. If the cumulative amount of tax credits available exceeds the cap in any year, then the tax credits will be allocated by the NJEDA on a first-come, first-served basis.
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