Angel fund debate, bill draft review takes place today

BISMARCK -- An interim committee reviewing the state's economic development tax incentives will begin its review of a pair of bill drafts today as a decision in pushing either to reform and beef up or to eliminate the angel fund investment tax cr...

BISMARCK -- An interim committee reviewing the state’s economic development tax incentives will begin its review of a pair of bill drafts today as a decision in pushing either to reform and beef up or to eliminate the angel fund investment tax credit draws near.

Members of the interim Political Subdivision Taxation Committee also will question officials with various angel fund groups that will be attending the meeting in the Roughrider Room of the state Capitol.

Committee chairman Rep. Jason Dockter, R-Bismarck, said the committee has two directions it’s considering.

The first bill draft would eliminate the angel fund tax credit and expand the state’s seed capital investment tax credit. A second option is to develop more rigid reporting and certification requirements for angel funds similar to that of other states; the committee compared North Dakota reporting requirements to Minnesota at its last meeting in April.

“We’re planning to look at which one is more viable,” Dockter said.


The angel fund investment tax credit was created during the 2007 session and has been modified repeatedly since.

The North Dakota angel fund investment tax credit is available to all income taxpayers. A taxpayer can claim 45 percent of the amount to each angel fund each taxable year, capped at $45,000 per year with a lifetime limit of $500,000 in credits.

Criteria for being granted the credit includes that an angel fund must be organized with the intent of investing in at least three primary-sector non-publicly traded businesses with strong growth potential.

Prior to its creation, the seed capital investment tax credit was a popular program but had more requirements to meet, Dockter said. Investors began to flock to the angel fund following its creation likely due to its more lax requirements.

During the course of the interim study of incentives, lawmakers have increasingly begun to question the effectiveness and the return on investment to North Dakota through angel funds. The issue of investments being made in out-of-state companies that may not be providing a return for North Dakota has also been a concern.

“We have learned quite a bit,” Dockter said. “This has really opened the eyes of the legislators. We need to make sure we have a rate of return.”

Dockter said a firm decision on which bill to move forward won’t be made today but he expects one to be made at a future meeting. He plans for the committee to hold two or three more meetings this interim.

“I’m hoping we get some really good testimony from angel fund investors,” Sen. Dwight Cook, R-Mandan, said.


Cook said he’ll start to make up his mind on which option for the angel fund he favors during the discussion with angel fund investors, adding that the seed capital investment tax credit already has many of the more stringent requirements in place.

“We have to start being smarter with our money. We’re in a competitive society,” Cook said.

Also today, the committee will review four other draft bills, all of which would do away with little or never-used tax incentives that have been on the books for decades. Decisions on at least some of them may be made at today’s meeting. Those under consideration for elimination include a microbusiness income tax credit as well as a wage and salary tax credit.

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