January marks the return of the Kentucky Angel Investment Tax Credit (KAITC), a program designed to spur capital investment in startups and small businesses based in the Commonwealth.
While the program will begin accepting Qualified Investment applications Jan. 4 from investors for 2021 tax credits, qualified investors and qualified small businesses must apply for and receive certification prior to tax credit approval. These applications currently are being accepted for the 2021 calendar year. Investors and businesses are encouraged to begin their respective certification processes as soon as possible in order to ensure timely processing of application materials. Businesses and investors certified in previous years must re-apply for 2021 certification.
“Now more than ever, it’s essential we lift up Kentucky’s small businesses and support our state’s entrepreneurs with programs like the Angel Investment Tax Credit,” Gov. Andy Beshear said. “Startups are always a key economic engine, producing jobs and spurring innovation. During a time of economic recovery, these businesses are even more vital to creating a better Kentucky. This program invests in the people who help our economy grow and provide the job opportunities for Kentuckians throughout the Commonwealth.”
The program allows angel investors – who provide important early-stage funding for startups – to receive tax credits, encouraging these individuals to invest in Kentucky’s small businesses, create additional jobs and promote the development of new products and technologies. Qualified Investment applications are processed on a first-come, first-served basis.
“Early-stage investment is critical to growing the kinds of innovative companies that will drive Kentucky’s future economy,” said Ellie Puckett, deputy executive director of KY Innovation. “The Angel Tax Credit was a valuable tool for encouraging that investment and was missed when it was inactive over the last year. It immediately becomes a powerful incentive for more investors to fuel promising technologies and businesses at a time when they might otherwise fail. Research shows that startups are the major net new job creators coming out of recessions, so the timing of this is even more important.”
Qualified investors can receive tax credits for up to 40% of their investments made in companies based in enhanced counties – those with high unemployment rates – and 25% for all other counties. Individual investors can receive up to $200,000 in angel tax credits per calendar year.
Small businesses seeking certification must demonstrate capabilities in a knowledge-based activity field including, but not necessarily limited to:
· Bioscience
· Environmental and energy technology
· Information technology and communications
· Material science and advanced manufacturing
· Health and human development
These areas encompass existing and emerging sectors such as agritech, fintech, advanced logistics, software as a service and others in which Kentucky is poised for growth.
The Commonwealth, through the Kentucky Economic Development Finance Authority (KEDFA), allocates the credits to qualified investors. To be eligible for tax credit consideration, planned investments must be approved by KEDFA prior to investment. KEDFA can award an overall maximum of $3 million per calendar year in angel tax credits.
To view detailed guidelines for the 2021 Angel Investment Tax Credit Program or to apply for small business or angel investor certification, click here.
