N.D. Cent. Code § 57-38-01.26
Angel investor tax credit
Redline — December 1, 2021 → current.View current text →
Current — March 1, 2022
As of December 1, 2021
(1) A taxpayer is entitled to a credit against state income tax liability under section 57-38-30 or 57-38-30.3 for an investment made prior to July 1, 2017, in an angel fund that is a domestic organization organized before July 1, 2017, under the laws of this state. The amount of the credit to which a taxpayer is entitled is forty-five percent of the amount remitted by the taxpayer to an angel fund during the taxable year. The aggregate annual credit for which a taxpayer may obtain a tax credit is not more than forty-five thousand dollars. The aggregate lifetime credits under this section that may be obtained by an individual, married couple, passthrough entity and its affiliates, or other taxpayer is five hundred thousand dollars. The investment used to calculate the credit under this section may not be used to calculate any other income tax deduction or credit allowed by law.
(2) To be eligible for the credit, the investment must be at risk in the angel fund for at least three years. An investment made in a qualified business from the assets of a retirement plan is deemed to be the retirement plan participant’s investment for the purpose of this section if a separate account is maintained for the plan participant and the participant directly controls where the account assets are invested. Investments placed in escrow do not qualify for the credit. The credit must be claimed in the taxable year in which the investment in the angel fund was received by the angel fund. The credit allowed may not exceed the liability for tax under this chapter. If the amount of credit determined under this section exceeds the liability for tax under this chapter, the excess may be carried forward to each of the seven succeeding taxable years. A taxpayer claiming a credit under this section may not claim any credit available to the taxpayer as a result of an investment made by the angel fund in a qualified business under chapter 57-38.5 or 57-38.6.
(3) An angel fund must: Be a partnership, limited partnership, corporation, limited liability company, limited liability partnership, limited liability limited partnership, trust, or estate organized on a for-profit basis which is headquartered in this state.
(4) Be organized for the purpose of investing in a portfolio of at least three primary sector companies that are early-stage and mid-stage private, nonpublicly traded enterprises with strong growth potential. For purposes of this section, an early-stage entity means an entity with annual revenues of up to two million dollars and a mid-stage entity means an entity with annual revenues over two million dollars not to exceed ten million dollars. Investments in real estate or real estate holding companies are not eligible investments by certified angel funds. Any angel fund certified before January 1, 2013, which has invested in real estate or a real estate holding company is not eligible for recertification.
(5) Consist of at least six accredited investors as defined by securities and exchange commission regulation D, rule 501.
(6) Not have more than twenty-five percent of its capitalized investment assets owned by an individual investor.
(7) Have at least five hundred thousand dollars in commitments from accredited investors and that capital must be subject to call to be invested over an unspecified number of years to build a portfolio of investments in enterprises.
(8) Be member-managed or a manager-managed limited liability company and the investor members or a designated board that includes investor members must make decisions as a group on which enterprises are worthy of investments.
(9) Be certified as an angel fund that meets the requirements of this section by the department of commerce.
(10) Be in compliance with the securities laws of this state.
(11) Within thirty days after the date on which an investment in an angel fund is made, the angel fund shall file with the tax commissioner and provide to the investor completed forms prescribed by the tax commissioner which show as to each investment in the angel fund the following: The name, address, and social security number or federal employer identification number of the taxpayer or passthrough entity that made the investment;
(12) The dollar amount remitted by the taxpayer or passthrough entity; and
(13) The date the payment was received by the angel fund for the investment.
(14) Within thirty days after the end of a calendar year, the angel fund shall file with the tax commissioner a report showing the name and principal place of business of each enterprise in which the angel fund has an investment and the amount of the investment.
(15) The tax commissioner may disclose to the legislative management the reported information described under paragraphs 2 and 3 of subdivision i of subsection 3 and the reported information described under subdivision j of subsection 3.
(16) Angel fund investors may be actively involved in the enterprises in which the angel fund invests but the angel fund may not invest in any enterprise if any one angel fund investor owns directly or indirectly more than forty-nine percent of the ownership interests in the enterprise. The angel fund may not invest in an enterprise if any one partner, shareholder, or member of a passthrough entity that directly or indirectly owns more than forty-nine percent of the ownership interests in the enterprise.
(17) Investors in one angel fund may not receive more than five million dollars in aggregate credits under this section during the life of the angel fund but this provision may not be interpreted to limit additional investments in that angel fund.
A taxpayer that is an employer in this state is entitled to a credit as determined under this section against state income tax liability under section 57-38-30 or 57-38-30. 3 for costs the taxpayer incurred during the tax year to recruit and hire employees for hard-to-fill employment positions within this state for which the annual salary for the position meets or exceeds the state average wage.
(1) The amount of the credit to which a taxpayer is entitled is five percent of the salary paid for the first twelve consecutive months to the employee hired for the hard-to-fill employment position. To qualify for the credit under this section, the employee must be employed by the taxpayer in the hard-to-fill employment position for twelve consecutive months.
(2) For purposes of this section: “Extraordinary recruitment methods” means using all of the following: A person with the exclusive business purpose of recruiting employees and for which a fee is charged by that recruiter.
(3) An advertisement in a professional trade journal, magazine, or other publication, the main emphasis of which is providing information to a particular trade or profession.
(4) A website, the sole purpose of which is to recruit employees and for which a fee is charged by the website.
(5) Payment of a signing bonus, moving expenses, or nontypical fringe benefits.
(6) “Hard-to-fill employment position” means a job that requires the employer to use extraordinary recruitment methods and for which the employer’s recruitment efforts for the specific position have been unsuccessful for six consecutive calendar months.
(7) “State average wage” means one hundred twenty-five percent of the state average wage published annually by job service North Dakota and which is in effect at the time the employee is hired.
(8) The taxpayer may claim the credit in the first tax year beginning after the employee hired for the hard-to-fill position has completed the employee’s first twelve consecutive months of employment in the hard-to-fill position with the taxpayer.
(9) The credit under this section may not exceed a taxpayer’s liability for the taxable year as determined under this chapter. Any amount of unused credit may be carried forward for up to four taxable years after the taxable year in which the credit could initially be claimed.
(10) A passthrough entity that is entitled to the credit under this section must be considered to be the taxpayer for purposes of this section and the amount of the credit allowed must be determined at the passthrough entity level. The amount of the total credit determined at the passthrough entity level must be allowed to the partners, shareholders, or members in proportion to their respective interests in the passthrough entity.
(19) The tax commissioner may adopt rules to establish necessary administrative provisions for the credit under this section.
Official source: North Dakota Legislative Branch. Reproduced from public-domain North Dakota statutes; confirm against the official source for the current text. Not legal advice.