On January 31, 2013, New Jersey Governor Chris Christie signed into law Senate Bill S581 entitled the New Jersey Angel Investor Tax Credit Act (the Act). The Act aims to stimulate early stage or "angel" investment in New Jersey emerging technology companies by providing angel investors with tax credits to offset New Jersey corporation business or gross income taxes. Angel investors are corporate or high net worth individual taxpayers who provide early stage financial backing ("seed" capital) for small startups or entrepreneurs.

The new legislation provides the angel investor with a tax credit in an amount equal to 10 percent of the qualified investment made by the taxpayer in New Jersey emerging technology businesses. In order to qualify under the Act as a "New Jersey emerging technology business," a company must meet the following requirements:

  • The company must have fewer than 225 employees;
  • 75 percent of the company's employees must work in the state; and
  • The company must be in one of the following industries:
    • Advanced computing
    • Advanced materials
    • Biotechnology
    • Electronic device technology
    • Information technology
    • Life sciences
    • Medical device technology
    • Mobile communications technology
    • Renewable energy technology

Under the Act, a New Jersey taxpayer can receive a maximum credit of $500,000 in any given year. A corporate taxpayer can choose to either receive a refund on the excess tax credit, or a carry over the tax credit for a maximum of 15 years. The New Jersey Economic Development Authority in consultation with the Director of the Division of Taxation will approve a taxpayer's application for the tax credit.

The program is capped at maximum availability of $25 million in tax credits on an annual basis.

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