JumpStart NJ Angel Network Chairman Touts Angel Investor Tax Credit Expansion as “Win-Win” for State’s Innovation Ecosystem
TRENTON, N.J. (January 24, 2020) – When New Jersey’s Angel Investor Tax Credit Program expansion took effect on January 1, it, among other things, doubled the amount of tax credits angel investors can receive on qualified investments into early-stage New Jersey technology and life sciences companies. The expansion has been hailed by the investor community as a necessary and important step in increasing the amount of capital injected into eligible businesses, an integral part of Governor Phil Murphy’s vision to reclaim New Jersey’s role as a leader in innovation.
The Angel Investor Tax Credit Program offers a refundable tax credit against New Jersey corporation business or gross income tax for qualified investments in an emerging technology business with a physical presence in New Jersey that conducts research, manufacturing, or technology commercialization in the state. Businesses must have fewer than 225 employees, and at least three quarters of those employees must work in New Jersey. The program is administered by the New Jersey Economic Development Authority (NJEDA) in partnership with the Department of the Treasury’s Division of Taxation.
In addition to increasing the tax credit from 10 percent to 20 percent of a qualified investment, the program now offers an additional five percent bonus available for investments in a business located in a qualified opportunity zone, low-income community, or a business that is certified by the State as minority- or women-owned.
“With the expansion of our Angel Investor Tax Credit Program, we’re building upon the robust suite of tools that entrepreneurs can leverage to grow their companies, create new jobs, and bring their products to market,” said NJEDA Chief Executive Officer Tim Sullivan.
Jumpstart NJ Angel Network Chairman Stephen Dyer has been a vocal advocate of the expansion of the Angel Investor Tax Credit Program. JumpStart, one of the largest angel-investing networks in the Mid-Atlantic region, began in 2003 as a collaborative effort between the NJEDA and the New Jersey Technology Council (NJTC).
NJEDA spoke to Dyer about how he sees the expansion of the Angel Investor Tax Credit Program impacting New Jersey’s innovation ecosystem:
How do you see the expansion of the Angel Investor Tax Credit Program benefitting New Jersey’s investors in the future? Similarly, how do you see it impacting the startup community moving forward?
Raising angel capital will always be a challenge as the demand for capital far exceeds the supply available from angel investors. An informed angel investor will certainly factor the benefits from the NJ Tax Credit Program into their decision on where they are going to commit their capital. I believe that the expansion of the program will lead to an in increase the amount of dollars individuals are willing to invest in the New Jersey startup community. This is a win-win situation for both the investor and the early-stage companies, as well as the State’s innovation community as a whole.
What advice do you have on how early-stage companies can use the expansion of this program as they pitch to investors?
The Angel Investor Tax Credit Program is a tremendous tool for entrepreneurs to leverage. The NJEDA has many programs and resources that are well detailed on its website and understanding what is available is important as you make decisions. My word of advice is to make sure you understand the details of the program to ensure that the capital you are raising from angels qualifies for the program. For example, if the capital the early-stage company is pitching is structured as convertible debt (instead of equity), it precludes investors’ capital from initially qualifying for the Tax Credit Program.
What do you recommend to a person looking to begin investing as an angel ?
I have two recommendations. First, join an angel group! This will open you up to deal flow, assist in analyzing the potential investment opportunity you find of interest, support diligence, as well as economies and diversification created with additional capital from other angel group members. Second, with respect to specific investment opportunities, the talent of the entrepreneur and their team can often be more important than the market problem the business is attempting to solve.
To learn about the multitude of resources available to help technology and life sciences companies thrive, visit https://www.njeda.gov/tls and follow @NewJerseyEDA on Facebook, Twitter and LinkedIn.