Earmarked angel tax credits slow to move

The state is still struggling to disperse $7.5 million in tax credits earmarked for young companies owned by women and people of color, or based in Greater Minnesota.

Qualifying businesses have until Sept. 30 to tap into the $3.7 million still available from that pool, part of the popular Angel Tax Credit program, before it funnels into a general pot accessible to all Minnesota companies. The program allows early-stage investors to recapture a portion of their buy-in to a given startup.

For the first time this year, legislators set aside credits for underserved groups historically shut out of the program. But interest and access still lag compared with other companies, which cleaned out this year’s $8.5 million general allocation last month.

Since July 1, the Minnesota Department of Employment and Economic Development has doled out roughly $700,000 in angel tax credits to women- and minority-owned businesses, or those based in Greater Minnesota, according to agency figures.

In the three months before that, it only distributed about $500,000 from the specialized pool. The slow-going stretch has prompted redoubled outreach from DEED after an earlier campaign, including advertisements in publications targeting certain groups, failed to galvanize widespread interest.

Twenty women-owned businesses have been certified through the program, according to DEED. It was unclear how many outstate or minority-owned outfits had pounced.

Awareness of the program among select groups is generally lower, and it can be tough for businesses based in Greater Minnesota to link up with investors – generally clustered around innovation centers in the Twin Cities metro area.

In addition, new standards for who can cash in on the credits slowed credit dispersal across the board. Lawmakers this year prohibited company insiders – founders and owners, for example – from cashing in on the program.

Without the more rigid rules, DEED last year distributed its entire $12 million pool by early March, before businesses snapped up a bonus $3 million allocation in a single day.

Any funding remaining at the end of the year will be available for dispersal in 2016. Either way, DEED will get $15 million more for the program next year, including $7.5 million that will again be set aside for the same targeted groups.