Key Takeaways:
- Massachusetts offers an Angel Investor Tax Credit program that could give investors a tax credit of up to 30% of a “qualifying investment.”
- The deadline to submit an application for qualifying investments made during calendar year 2023 is Tuesday, January 16, 2024 at 5pm EST.
Are you an investor who has or is interested in funding an early-stage life sciences company in Massachusetts? If so, we have good news. Massachusetts offers an Angel Investor Tax Credit program that could provide certain investors a credit against Massachusetts tax of up to 30% of a “qualifying investment.”
Generally, under the new Angel Investor Tax Credit program, an investment in a life sciences business can qualify for a 20% tax credit if the business:
(i) has a principal place of business in the Commonwealth of Massachusetts;
(ii) has at least 50% of its employees located in the Commonwealth of Massachusetts;
(iii) has a fully developed business plan that includes all appropriate long-term and short-term forecasts and contingencies of business operations, including research and development, profit, loss and cash flow projections and details of angel investor funding;
(iv) employs 20 or fewer full-time employees at the time of the taxpayer investor’s initial “qualifying investment” in the business;
(v) has a federal tax identification number; and
(vi) has gross revenues equal to or less than $500,000 in the fiscal year prior to claiming eligibility.
In addition, the investor could qualify for up to a 30% credit for investments in businesses located in a “gateway municipality.”
[1]
Investors are eligible to receive credits up to $50,000 in any one taxable year for “up to $125,000 of qualifying investments per qualifying business per year, and up to $250,000 in cumulative qualifying investments for each qualifying business.” See 830 CMR 62.00; M.G.L. c. 14, § 6(1); c. 62, §§ 63M and 63, c. 62C, § 3 and c. 63, § 38EE.
To be eligible to receive credits, the investor must be an “accredited” investor (as defined by the U.S. Securities and Exchange Commission) and may not be a principal owner of the business or involved in the business in a full-time professional capacity. Recipients of the tax credit and the qualifying business in which they have invested are required to provide annual reports to monitor compliance.
The deadline to submit an application for qualifying investments made during calendar year 2023 is Tuesday, January 16, 2024 at 5pm EST. The application is a two-step process that requires information from the investor and the qualifying business. If you are an investor, you can apply here: https://airtable.com/appohV6TWqqrdfDP9/shrR9t7u5cB7Xakc7.
[1] A Massachusetts municipality with a population greater than 35,000 and less than 250,000 with a median household income below Massachusetts’ average and a rate of educational attainment of a bachelor’s degree or above that is below Massachusetts’ average.
