Incentives Watch: Calling All ‘Angels’ -- Kentucky Seeks to Lure Investors

Many states offer income tax credits to investors in various small businesses – specifically, startup technology businesses.  This tax credit is an incentive to help struggling startups get seed money to grow their business.

One such state, Kentucky, recently passed its own angel investment tax credit.  Starting with the 2014 taxable year, a tax credit is available against income tax or limited liability entity tax for taxpayers rehabilitating certain historic structures in Kentucky.  The credit equals 40 percent of the small business investment.  If the small business is located in an enhanced incentive county, then the credit amount increases to 50 percent of the investment.

The nonrefundable, transferable income tax credit is available to investors making cash investments of at least $10,000 in small businesses.  The businesses must be in certain technology and research and development fields.

Once certified, the investor has 60 days after credit approval or by Dec. 31 of the calendar year of credit approval, whichever is earlier, to make the investment. If the investment is not implemented within the required time, then the credit approval is canceled.

Any unused credits may be carried forward for up to 15 years.  The credit is subject to recapture. 

Other states that offer a similar tax credit include Connecticut, Illinois, Louisiana, Minnesota, Nebraska, New Jersey, New Mexico, North Dakota and Wisconsin.

For more information about angel investment tax credits, check out Bloomberg BNA’s Credits and Incentives Portfolios by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.

In other developments . . .

Iowa recently amended its brownfield and grayfield redevelopment tax credit to make the credit available to taxpayers redeveloping abandoned public buildings such as old schoolhouses, according to a Bloomberg BNA Weekly State Tax Reportarticle.

By: Kathleen Caggiano

Follow Kathleen on Twitter at:  @katcaggiano .

Follow BBNA on Twitter at: @BBNATax .