NJ Investors – Take Advantage of the NJ Angel Tax Credit

In an effort to stimulate investments in emerging technology businesses based in New Jersey, a tax benefit program has been established allowing credits against corporation business or gross income taxes.

If you have invested in a qualifying emerging technology business in New Jersey in 2012 or after, you may have a beneficial tax credit available to you. A qualifying investor can be an entity of any kind or an individual. Also, if you are an out of state investor you can simply file a zero income tax return with New Jersey and submit your return to the New Jersey Economic Development Authority to obtain a refund.

The New Jersey Angel Tax Credit allows an eligible investor to apply for a tax credit against the New Jersey corporation business or gross income tax. In fact, 10% of your qualified investment, up to a maximum allowed credit of $500,000 for each qualified investment, can be credited.

There are four criteria that must be met for the New Jersey emerging technology business to be qualified:

1. The business employs less than 225 employees, at least 75% of whom work in New Jersey
2. The entity must conduct business, employ or own capital or property, or maintain an office in New Jersey
3. The business conducts at least one of the following activities in New Jersey

• Incurs qualified research expenses in the State.
• Conducts pilot scale manufacturing in the State.
• Commercializes one or more of the following eligible technologies in the State: Advanced Computing, Advanced Materials, Biotechnology, Electronic Devices, Information Technology, Life Sciences, Medical Devices, Mobile Communications, and Renewable Energy Technology.
• Has an eligible technology (as listed above) as its primary business

1. Non-refundable transfers (must be held or not expire for at least 2 calendar years) of funds made directly to the New Jersey emerging technology business can be qualified investments. For example, purchasing stock, interests in partnerships, licenses, marketing rights, rights to use technology or a purchase, production or research agreement are considered transfers.

The tax credits may be refunded as an overpayment, but no interest on the overpayment will be paid.

A non-refundable application fee in the amount of $500 applies for investment amounts of $50,000 or less, and $1,000 for investment amounts exceeding $50,000. There is also an approval fee for qualified investments over $50,000, which is 5% of the amount of the tax credit or $2,500, whichever is greater. Your application fee can be credited toward payment of the approval fee.

If you have any questions about the New Jersey Angel Tax Credit or would like to discuss your investment strategies, please contact me or the Scarinci Hollenbeck attorney with whom you work.