Are you raising private capital for your business. If so, you may be able to offer an additional incentive to your investors – a hefty tax credit. The Indiana Venture Capital Tax Credit is a statutory incentive for investors to make investments in early stage Indiana business startups. Investors who provide qualified debt or equity capital to Indiana companies receive a credit against their Indiana income tax liability.
(In case you don’t know, a tax credit is a direct offset of the income tax you owe. In this case, if your tax liability for a given year is $2,000, and you have a tax credit of $1,000, your tax liability is reduced to $1,000. Ding!)
This is a great incentive to offer your investors – assuming they have Indiana income tax liability. If someone has no Indiana tax liability, the Indiana Venture Capital Tax Credit will have little to know value to them.
In order to become a qualified Indiana businesses for purposes of the Venture Capital Tax Credit, Indiana businesses must go through a certification process by submitting an application to the the Indiana Economic Development Corporation. Additionally, after a taxpayer makes the investment, the taxpayer must submit proof of investment to the IEDC from which the IEDC shall issue the taxpayer a letter indicating that the taxpayer is entitled to a tax credit.
The maximum amount of tax credits available to investors in a qualified Indiana business equals the lesser of either (a) the total amount of qualified investment capital provided to the qualified Indiana business in the calendar year, multiplied by 20%; or (b) $500,000.
If you trying, or intend to try, to raise capital, make sure you explore this option.
If you have had experience using this tax credit, either as company raising capital or an investor, please share your thoughts in the comments!