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IMPORTANT: As of July 1st, 2011, functions once performed by the Wisconsin Department of Commerce have been moved to other state agencies and the Wisconsin Economic Development Corporation. The former Commerce web site will continue to exist for the next several months as resources are moved to new web site locations. We will make every attempt possible to direct our users to the new locations as web resources are moved.
Frequently Asked Questions About Wisconsin's Qualified New Business Venture Tax Certification Who is an eligible investor?What is an accredited investor? What types of entities are NOT eligible for Angel Credits?What is an eligible investment? What is meant by a cash investment? Can debt be converted into equity and earn Tax Credits? Can accrued interest of the converted debt be eligible for Tax Credits? When an investment is made in a qualified company do I automatically earn a 25% Tax credit? Are tax credits considered income? Can unused credits be carried forward to future years? Investors may not have invested in, or have any ownership interest in, the QNBV prior to certification. Investors who have invested in the company before QNBV certification are not eligible for tax credits if they make further investment. There are two types of credits and therefore two types of eligible investor categories:Angel/Angel Network/Angel Entity:
Qualified Venture Funds: Investment Funds that are legally organized specifically to invest in early stage companies. These funds must be certified by Commerce to be eligible for Venture Fund Credits in Commerce certified Qualified New Business Ventures prior to investment What is an accredited investor? ALL angel investors, members of an angel network or angel entity must complete the Accredited Investor Worksheet. The business subscription documents often include this type of information, but for WI tax credit purposes, you are required to complete the Department's form for each QNBV investment.What types of entities are NOT eligible for Angel Credits? Pensions, 401(k)s, IRAs, profit sharing accounts, operating companies, ongoing, and any other for-profit business entity that would not be eligible to utilize individual angel tax credits. Please consult Commerce/DOR for a determination of eligibility prior to commitment. What is an eligible investment? An eligible investment MUST meet each of the following: 1) Is made after a business is certified as a Qualified New Business Venture (QNBV) 2) Must be clearly identifiable as a cash investment 3) The investor must be an eligible investor 4) The investment must be or have been converted into common stock, a partnership or membership interest, preferred stock or an equivalent ownership interest that is acceptable to Commerce. What is meant by a cash investment? A cash investment is the exchange of money for ownership or debt, as evidenced by canceled checks, deposit slips and deposit receipts.This means that products and/or services exchanged for debt and/or equity would not qualify as a cash investment. Can debt be converted into equity and earn Tax Credits? Yes. However, the original investment must be documented to evidence that:
Can accrued interest of the converted debt be eligible for Tax Credits? No. Unrealized interest is not considered a cash investment. When an investment is made in a qualified company do I automatically earn a 25% Tax Credit? No. The investment must be verified by Commerce before a credit is earned. Commerce allocates credits on a first-come, first-serve basis. Therefore, if an investment is made in the first quarter of a tax year and not submitted to Commerce until the fourth quarter, then investors are at risk of that specific tax years credits running out. Are tax credits considered income?Yes for 2005 - 2006. Credits are income and must be reported on your Wisconsin franchise of income tax return. See 2006 Schedule VC and Instructions. No for tax years beginning after 12/31/06. See Schedule VC and Instructions. Can unused credits be carried forward to future years? Yes. If you cannot use the full amount of a credit certified for this year, you may carry part or all of it forward for up to 15 years. See 2006 Schedule VC and Instructions. |
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