EDA unveils expansion of tax break for early tech investors

Angel Investor Tax Credit Incentive Doubled

The Economic Development Authority on July 10 formally rolled out an expansion of the Angel Investor Tax Credit program, an economic incentive aimed at enticing investors to back technology startups considering locations in New Jersey.

The previous scheme provided a refundable tax break of up to 10 percent of an investment.

Under the expansion, the incentive is doubled to 20 percent, and can go up to 25 percent for investments in low-income communities, federal “opportunity zones,” or businesses owned by women or people of color.

A product of the 2017 federal tax cut law, opportunity zones allow investors to shield gains from gains taxation by investing in certain low-income communities for up to 10 years. There are 8,000 such zones across the country, and 169 opportunity zones spanning 75 municipalities in all 21 New Jersey counties.

Pursuant to the Angel Investor Tax Credit program, the tax break is guaranteed money the investor will get back if even their investment falls through. With a $100,000 investment, for example, the backer is guaranteed to walk away with no less than $20,000. The other $80,000 is ultimately a risk the investor will have to bear.

Between the creation of the program in 2013 and May 31, 2019 the Economic Development Authority – which oversees the program – approved 1,186 applications for 85 New Jersey-based businesses totaling at least $534 million, according to the agency.

“Innovation is what allows today’s emerging New Jersey-based companies to become tomorrow’s major New Jersey-based companies. It drives sustainable economic growth at a time when re-establishing New Jersey’s position as a national innovation leader is critical to building a stronger, fairer economy,” EDA Chief Executive Officer Tim Sullivan said in a statement.

“This is why the Governor’s comprehensive economic plan identified the expansion of the Angel Investor Tax Credit as an impactful way to support early-stage companies, and ensure New Jersey is home to innovative companies for years to come,” Sullivan added.

The state’s largest incentive programs – the Grow New Jersey corporate tax breaks and the Economic Redevelopment and Growth gap financing program for residential projects which awarded billions of dollars in incentives in 2013 – both expired on July 1.

Gov. Phil Murphy, a critic of Grow NJ and ERG, declined to sign legislation extending the program for seven months to buy time for he and legislative leaders to hash out a new set of incentives. The governor and Democratic legislative leaders have been embroiled in a political dispute over the fate of those incentives.

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