Now Law: Freiman, Pinkin, Milam, Zwicker, Land Measure to Raise Tax Credit Amount Provided Under “New Jersey Angel Investor Tax Credit Act”

Increases Tax Credit from 10 to 20 Percent, 25 Percent

in Certain Instances

(TRENTON) – Looking to encourage investment into women and minority owned businesses, a bill to increase the Angel Investor Tax credit percentage by a taxpayer into a New Jersey emerging technology business from 10 to 20 percent of the qualified investment was signed into law Sunday by Governor Phil Murphy.
The measure (A-5604), sponsored by Assembly Democrats Roy Freiman, Nancy Pinkin, Matthew Milam, Andrew Zwicker and R. Bruce Land, also allows for the increased credit percentage when the qualified investment is made into a New Jersey emerging technology business holding company making a verified transfer of funds into a New Jersey emerging technology business for all applicants.

The law also stipulates that a taxpayer may be allowed a tax credit of 25 percent of the qualified investment if the emerging technology business is located in a qualified opportunity zone, low-income community, or is a certified minority or women-owned business.

The measure passed the full Assembly last month by a vote of 75-2, and the Senate 37-0.
“This new law is a win for investors who are truly committed to seeing innovation technology businesses grow and thrive in New Jersey,” said Freiman (D-Hunterdon, Mercer, Middlesex and Somerset). “It serves as an incentive for doing what is right.”
“There are so many businesses that have the potential to be successful and to thrive,” said Pinkin (D-Middlesex). “They just lack sufficient financial backing. This law is designed to help them in their efforts.”
“Women and minority owned businesses can provide first-class, top-tier goods and services just as any other business,” said Milam (D-Atlantic, Cape May and Cumberland).  “They just need to be given a chance, and financial backing helps to ensure that they are given a solid opportunity.”

“New Jersey is striving to have an innovation economy,” said Zwicker (D- Hunterdon, Mercer, Middlesex and Somerset). “A key component of that economy is financial backing, especially for new businesses looking to be a part of that economy. This law will help make that possible.”
“Investing into women and minority-owned companies is a wise business decision that has been a long time in the making,” said R. Bruce Land (D-Atlantic, Cape May, Cumberland). “It is proving to be rewarding financially and socially.”
The Angel Investor Tax Credit Program was approved by the Legislature in 2013. The program, which is jointly administered by the Economic Development Authority and the New Jersey Department of Taxation, provides refundable tax credits against New Jersey corporation business or gross income tax for 10 percent of a qualified investment in an emerging technology business with a physical presence in New Jersey that conducts research, manufacturing, or technology commercialization.

Currently, the Angel Investor Tax Credit Program provides an angel investor with a tax credit of 10 percent of the qualified investment made in a New Jersey emerging technology business, up to a maximum allowed credit of $500,000 for each qualified investment per tax year. While this is and continues to be an attractive incentive for the angel investor, a common critique among the life sciences and technology community is that the program could go further in providing a benefit to the business receiving the angel investment, as well as the investor.

In 2016, the Legislature created the “New Jersey Biotechnology Task Force” for the purpose of communicating with the biotechnology industry to develop recommendations for steps that the Legislature and State could take to retain and attract new biotechnology companies to New Jersey. On June 13, 2018, the New Jersey Biotechnology Task Force released a final report of policy recommendations to retain and attract biotechnology companies to New Jersey.  One of the legislative recommendations was to enhance the Angel Investor Tax Credit Program.
Effectively immediately, the law applies to qualified investments made during privilege periods and taxable years beginning on and after January 1, 2020.