Newburg Update for 7/30/2020 - Update: Massachusetts Angel Investor Tax Credit

Final Regulations on the Massachusetts Angel Investor Credit were issued on 7/24/20. The complete regulation can be found here.

The credit helps expand life sciences-related employment opportunities, promote health-related innovations and stimulate research and development, manufacturing and commercialization in the life sciences industry, according to the Massachusetts Life Sciences Center (MLSC), who has been charged with administration of the credit.

The Massachusetts Angel Investor Tax Credit is a credit against the Massachusetts personal income tax up to an amount equal to 20% of the qualifying investment(s) in a qualifying business, or 30% of the amount if that qualifying business is located in a “Gateway municipality”, as defined in M.G.L. c. 23A, § 3A. Follow THIS LINK for details on “Gateway municipalities”.

According to the MLSC, credits are available up to $50,000 in any one taxable year for qualifying investments of up to $125,000 per qualifying business per year and up to $250,000 in cumulative qualifying investments for each qualifying business. Any amount of credit allowed that exceeds a taxpayer investor’s tax due for a taxable year under M.G.L. c. 62 may be carried forward to any of the three subsequent taxable years. There is also a recapture provision if the qualifying business ceases to have its principal place of business in the Commonwealth within three taxable years following the investment. Credits will be awarded by the MLSC in its sole discretion, in accordance with the MLSC’s statutory obligations to support economic development in the life sciences across the Commonwealth.

Eligibility & Evaluation (per MLSC):

Taxpayer Investors must be “accredited” as defined by the U.S. Securities and Exchange Commission and may not be a principal owner of the business or involved in a full-time professional capacity.
Be a ‘Qualifying Business’ as detailed below
Meet the ‘Qualifying Investment’ criteria as detailed below

Qualifying Business:

Has its principal place of business in the Commonwealth engaged in the life sciences as defined in MGL c. 231, § 2;
has at least 50% of its employees located in the business’ principal place of business;
has a full 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;
employs 20 or fewer full-time employees at the time of the taxpayer investor’s initial qualifying investment in a business;
has a federal tax identification number; and
has gross revenues equal to or less than $500,000 in the fiscal year prior to claiming eligibility.

Further, the business must provide to MLSC the following:

certification that attests to the criteria above
fully developed business plan
its federal tax id number
a letter from the business’s CPA firm that confirms revenues equal to or less than $500,000
Certificates in Good Standing (issued by the Secretary and the MDOR) within the previous 6 months
annual reporting to the MLSC specific information (including a list of the uses and dollar amounts to which any qualifying investment as applied)

Qualifying Investment:

A monetary investment that is at risk and is not secured or guaranteed; provided, however, that a qualifying investment shall not include venture capital funds, hedge funds or commodity funds with institutional investors or investments in a business involved in retail, real estate, professional services, gaming or financial services. Investments must be used to support a qualifying business for purposes such as capital improvements, plant equipment, research and development and working capital.

For application information and to inquire directly with the MLSC please follow this link (https://www.masslifesciences.com/programs/angel-tax-incentive-credit/)