Massachusetts Tax Credit Available to Investors of Life Science Businesses
Last month, the Massachusetts Department of Revenue (DOR) issued guidance regarding the Angel Investor Tax Credit, which generally allows taxpayers who make a qualifying investment in a qualifying life science business to claim a personal income tax credit up to 20% of the qualifying investment.
Designed to encourage investments in early-stage life science, R&D and manufacturing businesses in Massachusetts, the regulation is the result of collaboration between the DOR, the Massachusetts Life Sciences Center (MLSC) and the Executive Office of Housing and Economic Development.
Qualifying Investments
Angel investments are permitted from “accredited” investors only and are limited to $125,000 in any one business in a single year or $250,000 total for any single business. The total credit for a taxpayer-investor may not exceed $50,000 in one taxable year.
Venture capital funds, hedge funds, and other commodity funds are not eligible for the angel investor tax credit.
Qualifying Businesses
Businesses eligible to receive angel investments must:
- Have a principal place of business in Massachusetts;
- Have gross revenues of less than $500,000;
- Employ fewer than 20 employees, 50% of whom must work at the principal place of business; and
- Maintain a full business plan including forecasts and additional financial information.
In addition to the general 20% credit, taxpayers that invest in “gateway municipality” companies are eligible for a higher credit of 30%. Gateway municipalities in Massachusetts include: Attleboro, Barnstable, Brockton, Chelsea, Chicopee, Everett, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, Malden, Methuen, New Bedford, Peabody, Pittsfield, Quincy, Revere, Salem, Springfield, Taunton, Westfield and Worcester.
Interested investors can find the application on the MLSC’s website.
Material discussed in this communication is meant to provide general information and should not be acted on without obtaining professional advice tailored to you or your company’s individual and specific needs. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used by any person or entity, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. This information is for general guidance only and is not a substitute for professional advice.
The information contained herein should not be construed as personalized investment advice. Investment in securities involves the risk of loss, and past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this document will come to pass. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. There can be no assurances that your portfolio will match or outperform any particular benchmark.
Information presented was obtained from sources deemed qualified and reliable; however, MFA makes no representations as to accuracy, completeness, suitability, or validity of any information within this communication and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any forward-looking statements are believed to be reasonable; however, MFA gives no assurance that such expectations will prove to be correct.
Related posts
FAQ: R&D Tax Credits for Large and Small Businesses
Federal R&D tax credits benefit large and small companies across nearly every industry. Here are…
Read More
Tax Considerations in Life Sciences Collaboration Arrangements
Collaborative agreements within the life sciences sector generally provide for three types of payments. To…
Read More