Venture Investment Income Tax Credit

Your venture capital investment may qualify for a new Michigan tax credit that is designed to encourage participation in venture capital funds and angel investor groups. 

Public Act No. 235 of 2010 (the Act), which recently became law, creates a Venture Investment Income Tax Credit.  Subject to certain restrictions, the Act permits qualifying taxpayers who make a "qualified investment" in a "qualified business" after December 31, 2010 and before January 1, 2013 to claim the Venture Investment Income Tax Credit equal to 25% of the qualified investment.

A "qualified investment" is an investment of at least $20,000 that is certified by the Michigan Strategic Fund (MSF) and is made in connection with a seed venture capital or angel investor group that is registered with the MSF.    

In general, a "qualified business" includes a business that the MSF certifies as: (i) a seed or early stage business, (ii) headquartered in Michigan, (iii) having been in existence for less than five years, (iv) a non retail establishment, and (v) having a pre-investment valuation of under $10 million and fewer than 100 full-time employees.  An otherwise qualified investment will not, however, qualify if made in a business in which a member of the investor's family is an employee or owner.