Louisiana Laws - Louisiana State Legislature (2023)

§6020. Angel Investor Tax Credit Program

A. Purpose. The legislature finds that the welfare of the state is enhanced by ahealthy entrepreneurial business environment and that ready sources of capital necessary tosupport this environment are not currently available. The Angel Investor Tax Credit Programis intended to achieve the following purposes:

(1) To encourage third parties to invest in early stage wealth-creating businesses inthe state.

(2) To expand the economy of the state by enlarging its base of wealth-creatingbusinesses.

(3) To enlarge the number of quality jobs available to retain the presence of youngpeople educated in Louisiana.

B. Administration. (1) Program. Investments made on or after January 1, 2011, byqualifying individuals or entities that invest in a Louisiana Entrepreneurial Business asdefined by R.S. 51:2303(5) may apply for, and if qualified, be granted a tax credit. Theadministration of tax credit applications, certification of eligibility and qualification ofapplicants for tax credits, and the provision for these credits shall be known as the AngelInvestor Tax Credit Program, hereinafter referred to as "program".

(2) Rules. The program shall be implemented and administered by the Departmentof Economic Development, hereinafter referred to as "department". In compliance with theAdministrative Procedure Act, the department shall adopt and promulgate rules as arenecessary for the efficient and effective administration of this program in keeping with thepurposes for which it is enacted. The department shall work closely with the secretary of theDepartment of Revenue in the development and promulgation of rules. The rules shallinclude provisions for:

(a) An application process through which the department may certify the eligibilityof an investor applicant for receipt of the tax credit and the qualification of an investor toclaim the credit against state tax liability.

(b) The presentation of an investor's eligibility certification and any otherdocumentation required in order to earn or claim a credit.

(c) The submission of annual reports by the Louisiana Entrepreneurial Businessregarding the use of proceeds, number of employees, amount of payroll, annual revenue, andany other information requested by the department.

C. Qualifications. (1) To qualify for a tax credit, the investor and the investmentshall meet all of the following requirements:

(a) The investment in the Louisiana Entrepreneurial Business must be an investmentthat is at risk and not secured or guaranteed. "At risk" means that the repayment of theinvestment is entirely dependent on the success of the Louisiana Entrepreneurial Business. The funds invested by the applicant cannot have been raised as a result of illegal activity.

(b) For the purposes of the program, an angel investor or investors cannot be theprincipal owner or owners of the business who are involved in the operation of the businessas a full-time professional activity, nor can their spouses and relatives within the third degreeof consanguinity or affinity. A principal owner means one or more persons who own anaggregate of fifty percent or more of the Louisiana Entrepreneurial Business.

(c) The use of proceeds from the investment must be used for capital improvements,plant equipment, research and development, working capital for the business, or otherbusiness activity as may be approved by the department. The proceeds cannot be used to paydividends, repay shareholder's loans, redeem shares, or repay debt unless approved by thedepartment.

(d) The investor applicant shall meet the definition of accredited investor establishedby Rule 501 in Regulation D of the General Rules and Regulations promulgated under theSecurities Act of 1933.

(e) The investment in the Louisiana Entrepreneurial Business by the applicant mustbe maintained for three years unless otherwise approved by the Department of EconomicDevelopment.

(2) To qualify for an angel investor tax credit, the Louisiana EntrepreneurialBusiness in which the investment is made shall meet all the following requirements:

(a) The principal business operations of the business are located in Louisiana.

(b) Prior to the award of the credit, the department has certified the business as aLouisiana Entrepreneurial Business under the program.

(c) The business must demonstrate that it will be a wealth-creating business forLouisiana by demonstrating in its business plan that it will have more than fifty percent ofits sales from outside Louisiana.

(d) The business is not a business engaged primarily in retail sales, real estate,professional services, gaming or gambling, natural resource extraction or exploration, orfinancial services including venture capital funds.

D. Tax credits. (1) The total amount of tax credits granted by the department in anycalendar year shall not exceed three million six hundred thousand dollars. The departmentshall by rule establish the method of allocating available tax credits to investors includingbut not limited to a first-come, first-served system, reservation of tax credits for a specifictime period, or other method which the department, in its discretion, may find beneficial tothe program. If the department does not grant the entire three million six hundred thousanddollars in tax credits in any calendar year, the amount of residual unused tax credits shallcarry forward to subsequent calendar years and may be granted in any year without regardto the three million six hundred thousand dollar per year limitation. After the approval ofan investor pool, the department shall issue a letter identifying the amount of tax credits thatare available to that pool; however, no tax credit shall be granted to an investor until theinvestment has been made in the Louisiana Entrepreneurial Business.

(2)(a) An investor may apply for and, if qualified, be granted a credit on any incomeor corporation franchise tax liability owed to the state by the taxpayer seeking to claim thecredit in the amount approved by the secretary of the department. The amount of the taxcredit shall be based upon the amount of money invested by the investor in the LouisianaEntrepreneurial Business, which investment shall not exceed seven hundred twenty thousanddollars per year per business and one million four hundred forty thousand dollars total perbusiness. Except as otherwise provided in Subparagraph (b) of this Paragraph, the creditshall be allowed against the income tax for the taxable period in which the credit is earnedand the franchise tax for the taxable period following the period in which the credit is earned.The credits approved by the department shall be granted at the rate of twenty-five percent ofthe amount of the investment with the credit divided in equal portions for two years.

(b) After certifying the eligibility of the Louisiana Entrepreneurial Business and theamount of the investment, the secretary of the department shall issue a tax credit certificate,a copy of which is to be attached to the tax return of the angel investor. The tax creditavailable in the first year shall become deductible from tax liability in the taxpayer's incometax year which occurs twenty-four months from the date the department certifies the amountof the investment.

(c) The tax credit certificate shall contain the investor's name, address, taxidentification number, the amount of credit, the name of the qualifying LouisianaEntrepreneurial Business, a statement certifying that the Louisiana Entrepreneurial Businesswas domiciled in Louisiana at the close of the previous calendar year, and other informationwhich may be required by the Department of Revenue. The tax credit certificate, unlessrescinded by the department, shall be accepted by the Department of Revenue as proof of thecredit.

(d) The department shall maintain a list of the tax credit certificates issued.

(3)(a) All entities taxed as corporations for Louisiana income or corporationfranchise tax purposes shall claim any credit allowed under this Section on their corporationincome and corporation franchise tax return.

(b) Individuals shall claim any credit allowed under this Section on their individualincome tax return.

(c) Estates or trusts shall claim any credit allowed under this Section on theirfiduciary income tax returns.

(d) Entities not taxed as corporations shall claim any credit allowed under thisSection on the returns of the partners or members as follows:

(i) Corporate partners or members shall claim their share of the credit on theircorporation income or corporation franchise tax returns.

(ii) Individual partners or members shall claim their share of the credit on theirindividual income tax returns.

(iii) Partners or members that are estates or trusts shall claim their share of the crediton their fiduciary income tax returns.

(4) A tax credit granted pursuant to the Angel Investor Program shall expire and haveno value or effect on tax liability beginning with the eleventh tax year after the tax year inwhich it was originally granted.

(5)(a) If at the close of any calendar year in the five-year period beginning with thefirst year in which a tax credit certificate was issued to an investor, the LouisianaEntrepreneurial Business is no longer domiciled in Louisiana, the tax credit shall berecaptured from the investor unless change of domicile is the result of a merger,consolidation, or other acquisition of such business or all or substantially all of the assets ofthe business with or by a party not affiliated with the business.

(b) If at the close of any calendar year in the three-year period beginning with thefirst year a tax credit certificate was issued to an investor, the investor transfers the equityreceived in connection with the qualified investment, the tax credit shall be recaptured fromthe investor unless the transfer results from any of the following circumstances:

(i) The liquidation of the business issuing the equity.

(ii) The merger, consolidation, or other acquisition of thebusiness or all orsubstantially all of the assets of the business with or by a party not affiliated with thebusiness.

(iii) The death of the investor.

(iv) The transfer of the equity in the Louisiana Entrepreneurial Business by theinvestor is to an entity, trust, or other organization under the control of the investor. Forpurposes of this Subparagraph, an entity shall be deemed to be in control of an investor if theinvestor is the beneficiary owner of at least a majority of the outstanding equity securities ofthe entity or has the right to control the voting power of the entity, trust, or other organizationto which the securities are transferred.

E.(1) Any person making an application, claim for tax credit, or any report, return,statement, or other instrument or providing any other information pursuant to the provisionsof the Angel Investor Tax Credit Program who willfully makes a false or fraudulentapplication, claim, report, return, statement, invoice, or other instrument or who willfullyprovides any false or fraudulent information, any person who willfully aids or abets anotherin making a false or fraudulent application, claim, report, return, statement, invoice, or otherinstrument, or any person who willfully aids or abets another in providing any false orfraudulent information, shall be guilty, upon conviction, of a felony and shall be punishedby the imposition of a fine of not less than one thousand dollars and not more than fiftythousand dollars or imprisoned for not less than two years and not more than five years, orboth.

(2) Any person convicted of a violation of this Section shall be liable for therepayment of all tax credit amounts which were granted to that person. Interest shall be dueon such repayments at the rate of fifteen percent per annum.

F. Transferability of the credit. Any Angel Investor Tax Credits not previouslyclaimed by any taxpayer against its tax may be transferred or sold to another Louisianataxpayer, subject to the following conditions:

(1) A single transfer or sale may involve one or more transferees. The transferee ofthe tax credits may transfer or sell such tax credits subject to the conditions of thisSubsection.

(2) Transferors and transferees shall submit to the Department of Revenue, inwriting, a notification of any transfer or sale of tax credits within ten business days after thetransfer or sale of such tax credits. The notification shall include the transferor's tax creditbalance prior to transfer, a copy of any tax credit certificate issued by the secretary of theDepartment of Economic Development, the transferor's remaining tax credit balance aftertransfer, all tax identification numbers for both transferor and transferee, the date of transfer,the amount transferred, the price paid by the transferee to the transferor, and any otherinformation required by the department or the Department of Revenue. Any informationsubmitted by a transferor or transferee shall be treated by the department and the Departmentof Revenue as proprietary to the entity or person reporting such information and thereforeconfidential. However, this shall not prevent the publication of summary data that includesno fewer than three transactions.

(3) Failure to comply with this Subsection will result in the disallowance of the taxcredit until the taxpayers are in full compliance.

(4) The transfer or sale of this credit does not extend the time in which the credit canbe used. The carryforward period for credit that is transferred or sold begins on the date onwhich the credit was earned.

(5) To the extent that the transferor did not have rights to claim or use the credit atthe time of the transfer, the Department of Revenue shall either disallow the credit claimedby the transferee or recapture the credit from the transferee through any collection methodauthorized by this Section or R.S. 47:1561. The transferee's recourse is against thetransferor.

G. Except as provided for in Paragraph (3) of this Subsection, applications receivedon or after July 1, 2020, for investments that meet the requirements of Subsection C of thisSection and the requirements of 26 U.S.C. 1400Z-1, 1400Z-2, and applicable federalregulations shall be entitled to an enhanced credit in accordance with the provisions of thisSubsection.

(1) The amount of the credit granted by the department shall be thirty-five percentof the amount of the investment with the credit divided in equal portions for two years.

(2) In addition to the credit cap provided for in Subsection D of this Section, the totalamount of credits granted under this Subsection shall not exceed three million six hundredthousand dollars per year for a total program cap of seven million two hundred thousanddollars per year. If the department does not grant the entire three million six hundredthousand dollars in tax credits in any calendar year authorized pursuant to this Subsection,the amount of unused tax credits shall carry forward to subsequent calendar years and maybe granted in any year without regard to the three million six hundred thousand dollar annualcap provided for in this Subsection.

(3) To the extent that federal laws and regulations relative to opportunity zonesrequire that business revenues be derived from within the opportunity zone, otherwiseeligible businesses shall be exempt from the requirement that fifty percent or more of salesshall come from out of state as specified in Subsection C of this Section.

H. No credits shall be granted or reserved under this program for reservationapplications received by the department on or after July 1, 2025.

Acts 2005, No. 400, §1; Acts 2011, No. 414, §1, eff. July 8, 2011; Acts 2013, No.418, §1, eff. June 21, 2013; Acts 2015, No. 104, § , eff. June 19, 2015; Acts 2015, No. 125,§2, eff. July 1, 2015; Acts 2016, 1st Ex. Sess., No. 29, §2; Acts 2017, No. 323, §§1, 3, eff.June 22, 2017; Acts 2017, No. 345, §1, eff. July 1, 2017 and §§2, 3, eff. July 1, 2018; Acts2017, No. 400, §§1, 2, and 4, eff. June 26, 2017; Acts 2020 1st Ex. Sess., No. 19, §1; Acts2020 1st Ex. Sess., No. 22, §1, eff. July 13, 2020.

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