The Angel Investor Tax Credit

The Angel Investor Tax Credit 

A Unique Way to Invest Capital in a Louisiana Business

Among other Louisiana state tax credits – such as the Louisiana film and entertainment tax credit – the Louisiana angel investor tax credit offers a unique opportunity for investors to make investments in certain Louisiana start-up businesses.  The program provides a 35% tax credit on investments made by an accredited investor who makes an investment in a business certified by Louisiana Economic Development (“LED”), a state agency.  These businesses must be certified as Louisiana entrepreneurial businesses by LED.  It is important to note that the total annual tax credits allotted by the State are capped at $5,000,000.00 and the accredited investor may only invest up to $1,000,000.00 per year and $2,000,000.00 in total in a qualified business.  Under the current law, the program is set to expire in June of 2015.

The angel investor tax credits are not available for all investments in Louisiana businesses.  In general, the credits are not available for businesses involved in retail sales, real estate, professional services, gaming, natural gas exploration and other financial services.  Furthermore, only certain uses of the funds invested qualify for credits, namely; capital improvements, research and development, and general working capital.  Investments may not be used to pay dividends and/or repay shareholder loans and debt.

It is important to note that an accredited investor is generally defined as any natural person who has a net worth of over $1,000,000.00 and an individual income of $200,000.00 or joint income of $300,000.00, if married.  A pool of Angel Investors, all of whom are accredited – may also be eligible to make an investment.

An application to LED should be submitted through its website and include proof of investment.  In exchange, LED will issue a tax certification letter stating that the investment qualifies for tax credits and the years of eligibility for which the credits may be applied against Louisiana income and corporate franchise tax liabilities of the investor.  The tax credits may also be sold to a third party.  Applications are received on a first-come, first-served basis, and the tax credits are issued in the order in which they are received until the annual allotment has been exhausted.

If you or a client has an interest in learning more about the Angel Investment Tax Credit Program, please contact Christian Weiler at cweiler@wrtaxlaw.com or (504)524-2944.

**This information is provided by Weiler & Rees, LLC for educational and informational purposes only and is not intended, nor should it be construed as legal advice.