One thing that makes a startup investment in Kentucky extremely attractive is the Kentucky Angel Investment Tax Credit.
If you’re an accredited investor and a Kentucky resident, you can get an amazing tax credit (40 to 50%) on startup company investments.
This is a TAX CREDIT, not a deduction. In other words, you get a dollar for dollar reduction of your tax for up to 50% of your investment in a qualified Kentucky startup company.
These tax credits were designed to encourage qualified individual investors to make capital investments in Kentucky small businesses, create additional jobs, and promote the development of new products and technologies. And, they have been extremely successful.
Tax credits are non-refundable (only count toward actual Kentucky state taxes that you owe). The amounts that you can claim in any one tax year may not exceed fifty percent (50%) of the total amount of credit awarded or transferred to the taxpayer. However, any unused credits may carry-forward for up to fifteen (15) years.
A tax credit may be transferred by a Qualified Investor to an individual taxpayer in accordance with procedures outlined by the Department of Revenue.
The state maintains a list of Qualified Small Businesses, and these businesses must:
♦ be engaged in bioscience; environmental and energy technology; health and human development; information technology and communications; materials science and advanced manufacturing; or other new economy knowledge based activity;
♦ have no more than one hundred (100) full-time employees; and
♦ have more than 50% of its assets, operations, and employees located within the Commonwealth of Kentucky.
The business must also meet one of the following conditions:
♦ a net worth of ten million dollars ($10,000,000) or less, or;
♦ a net income after federal income taxes for each of the two (2) preceding fiscal years of three million dollars ($3,000,000) or less;
♦ has not received investments eligible for more than one million dollars ($1,000,000) in aggregate angel investor tax credits; and
♦ has filed an application with and received KEDFA certification as a Qualified Small Business in the program.
To be a Qualified Investor, you must be:
♦ an individual, natural person;
♦ an accredited investor according to Regulation D of the U.S. Securities and Exchange Commission in
effect as of the date of the requested certification;
♦ no more than a twenty percent (20%) owner in and is not employed by the Qualified Small Business prior to making a Qualified Investment in that business;
♦ not the parent, spouse or child of an individual holding in excess of twenty percent (20%) ownership interest in, or who is employed by, the Qualified Small Business prior to making the Qualified Investment;
♦ seeking a financial return from the Qualified Investment; and
♦ an approved Qualified Investor in the program.
A Qualified Investment is:
♦ a minimum cash investment of $10,000 made by a Qualified Investor in a Qualified Small Business;
♦ offered and executed in compliance with applicable state and federal securities laws and regulations;
♦ is exchanged for consideration in the form of equity interest in the Qualified Small Business; and
♦ has been approved by KEDFA as a Qualified Investment in advance of actual investment
The total amount of tax credits or each calendar year, the total amount of tax credits available for the Kentucky Angel Investment Act program shall not exceed $3,000,000. The total amount of tax credits approved to a Qualified Investor in a calendar year shall not exceed $200,000 in aggregate.
Steps to Invest
Step 1 – Complete this form: http://thinkkentucky.com/KYEDC/pdfs/Angel_Investor_Application.xls, and pay a non-refundable $25 application fee made payable to the Kentucky Economic Development Finance Authority (KEDFA) must be submitted along with the application. The application fee may be paid via credit card or ACH at: http://www.thinkkentucky.com/epayments.
Step 2 – After approval, select a company in which to invest, fill out this form: http://thinkkentucky.com/KYEDC/pdfs/Angel_Investment_Act_Investment_Application.xls, and pay a non-refundable $250 invest fee made payable to the Kentucky Economic Development Finance Authority (KEDFA) must be submitted along with the application. The application fee may be paid via credit card or ACH at: http://www.thinkkentucky.com/epayments.
Step 3 – Finalize investment in company within 60 days of approval by Kentucky Economic Development Finance Authority.
Once again, please take a look at investing in our qualified companies at: http://metrostartuplauncher.com/invest/.
Contact me at Alan Grosheider – email@example.com or 502.807.3896 with any questions.