NOTICE: Effective January 1, 2022, pursuant to legislation approved by the Indiana State legislature, the following changes have been made to the Venture Capital Investment (VCI) tax credit program:
- A new category of Qualified Indiana Business is established for W/MBEs with a higher allocation
- Funds may now be qualified to participate in the VCI Program to offer tax credits to investors
- Increases were made to the tax credit percentages
Effective 1.1.2022 Indiana Code 6-3.1-24 sets the maximum annual amount of tax credits that may be awarded at twenty million dollars ($20,000,000).
The Venture Capital Investment Tax Credit program improves access to capital for fast growing Indiana companies by providing individual and corporate investors an additional incentive to invest in early- stage firms and qualified investment funds. Investors
who provide qualified debt or equity capital to qualified Indiana businesses or qualified investment funds may receive a credit against their Indiana tax liability. The Venture Capital Investment Tax Credit is established by I.C. 6-3.1-24.
Calculation of Credits
The maximum amount of tax credits available for qualified investment capital to a particular qualified Indiana business equals the lesser of: The total amount of qualified investment capital
provided to the qualified Indiana business in the calendar year, multiplied by 25 percent subject to a maximum lifetime allocation of up to $1,000,000. The maximum amount of tax credits available for qualified investment capital to a particular
W/MBE qualified Indiana business equals the lesser of: The total amount of qualified investment capital provided to the W/MBE qualified Indiana business in the calendar year, multiplied by 30 percent subject to a maximum lifetime allocation of up
to $1,500,000. The maximum amount of tax credits available for qualified investment capital to a particular qualified Indiana investment fund equals the lesser of: The total amount of qualified investment capital provided to the qualified Indiana
investment fund in the calendar year, multiplied by 20 percent or $5,000,000 per calendar year. The maximum annual amount of tax credits that may be awarded for all qualified investment capital to all qualified Indiana investment funds is $7,500,000.
If the amount of credit exceeds the taxpayer’s state tax liability for that taxable year, the taxpayer may carry over the excess credit for a period not to exceed the taxpayer’s following five taxable years. A taxpayer is not entitled
to a carryback or a refund of any unused credit amount. An investor may assign certified credits.
Eligibility
This credit is open to approved taxpayers and pass through entities. A business must first be certified by the IEDC as a Qualified Indiana Business or a fund must first be certified by the IEDC as a Qualified Indiana
Investment Fund. Next, the investor must submit a capital investment application for approval by the IEDC prior to making an investment. After the investment application is approved, the taxpayer may make a qualifying investment and submit supporting
documentation to the IEDC for the investment to be certified. The taxpayer’s investment must be made within two years after the date on which the IEDC approves the investment plan.
Certification
Any current
investor who or which holds a majority ownership position prior to the proposed investment in a Qualified Indiana Business generally is not eligible for the VCI tax credit. Any current investor who or which, as a result of making the proposed
investment, will hold a majority ownership position in a Qualified Indiana Business generally is eligible for the VCI tax credit for the investment portion up to 50% ownership position. An investor who or which does not hold any ownership position
and does not have a potential ownership position of any kind, prior to making the proposed investment generally is eligible for the VCI tax credit on the entire proposed investment regardless of proposed ownership position in a Qualified Indiana Business.
An investor may be an individual or an entity. An investor holds an ownership position when such investor (1) could potentially derive a financial benefit from a tax credit when another investor claims such tax credit, or (2) has tacit
or express control over the interests of another investor in the Qualified Indiana Business, and in either such case the combined interest of those investors constitutes an ownership position in the Qualified Indiana Business. For the purpose
of clarity, such benefit or control shall automatically be presumed to be associated with an individual investor in the following circumstances: (a) with respect to the spouse and unemancipated children of such individual investor; (b) with
respect to any trust, family limited partnership, family limited liability company or other estate planning entity, the beneficiaries, partners or members of which include such individual investor or such individual investor’s spouse or unemancipated
children; and (c) with respect to any partnership, corporation, limited liability company, joint venture, association, trust, or other such organization in which such individual investor possesses any ownership interest.
Debt investments
from financial institutions secured by a valid mortgage, security agreement or other agreement or document that establishes a collateral or security position for the financial institution that is senior to all collateral or security interests of other
taxpayers that provide debt or equity capital to the Qualified Indiana Business do not qualify for VCI Tax Credits. Further, debt investments may not qualify to the extent that principal be paid or repaid prior to the expiration of a period
of at least thirty-six (36) months.
Applications
Effective 1.1.2022 businesses, funds, and investors must establish an Access Indiana account before they can submit any information to the IEDC. Please
use this link to establish your account: https://access.in.gov/signup/
Pursuant to IC 6-3.1-24-7(d), the IEDC may impose an application fee of not more than two hundred
dollars ($200) upon those companies that submit the QIB application. The IEDC is not charging an application fee at this time.
ASSIGNMENT OF CREDITS
Policy
This Policy encourages the attraction of Qualified Capital Investments from outside investors in order to attract more capital to the State and is supported by I.C. 6-3.1-24-7(a)(2)(A) bring substantial capital into
Indiana. An investor may assign certified credits for investments made in qualified Indiana businesses. However, I.C. 6-3.1-24-12 establishes limits on how credits may be assigned to another taxpayer. Those rules are further defined by this policy.
- I.C. 6-3.1-24-12(c)(1) prohibits the assignment of less than ten thousand dollars ($10,000) in tax credit. The IEDC requires the minimum amount established by this provision to come from a single certification letter with a corresponding unique PIN
number. Multiple Certification Letters/PIN numbers may not be combined to meet the minimum assignment amount threshold.
Tax Credits may only be assigned to another taxpayer in exchange for currency. This can include forms of currency that are not in United States Dollars (USD); however, if the taxpayer is assigning credits in exchange for currency that is not USD
the Assignor/Seller and the Assignee/Purchaser may be asked to confirm that the value of the currency conforms with the requirements of I.C. 6-3.1-24-12(c)(5).
- I.C. 6-3.1-24-12(c)(5) bars an Assignor/Seller from receiving value in connection with an assignment that exceeds the value of the part of the credit assigned. This policy requires the value of the Tax Credit to be its face value, and not some other
calculated price based on its perceived value to the Assignor/Seller and/or the Assignee/Purchaser.
Process
A prospective Assignor/Seller that is seeking to exchange certified Tax Credits to an Assignee/Purchaser must notify the IEDC of the assignment before it
is made. Both parties must complete a single VCI Tax Credit Notice of Assignment Form which can be found
on the IEDC webpage before the transaction is completed.
VCI Tax Credit Assignment Form Submission
Contact
Lee Robinson
LRobinson@iedc.in.gov
463.214.0351
NOTE: If you experience issues opening the above application links, please try opening them in a different internet browser or device.