Angel Investor Tax Credit
Income Taxpayer-Effective for all taxable years beginning after December 31, 2004 and prior to January 1, 2027.
An income tax credit shall be allowed for an investor that makes a cash investment in the qualified securities of a qualified Kansas business.
You may download the application guidelines for angel investors here.
Qualifications
A Kansas business must make application with the Kansas Department of Commerce and receive approval from Commerce prior to the date on which any cash investment is made.
Kansas Department of Commerce
1000 SW Jackson, Suite 100
Topeka, KS 66612
785-296-5272
https://www.kansascommerce.gov/
You may download the certification process for becoming a qualified Kansas business.
Credit Amount
For tax year 2021 and all tax years thereafter, the credit is up to 50 percent of the investors’ cash investment in the qualified securities of a qualified Kansas business.
Limitation of Credit
If the amount of credit exceeds the investor’s tax liability in any one taxable year, the remaining portion of the credit may be carried forward until the total amount of the credit is used.
For tax year 2021 and all tax years thereafter, the Kansas Department of Revenue will not allow tax credits of more than $100,000 for a single Kansas business or a total of $350,000 of tax credits for a single year per investor who is a natural person or owner of a permitted entity investor.
No angel investor tax credits shall be allowed for any cash investments in qualified securities for any year after the year 2026.
The cumulative aggregate amount of angel investor tax credits allowed shall not exceed $4 million during tax year 2007 and $6 million for tax year 2008 through 2010 and 2012 through 2022. For tax year 2011 the tax credits allowed shall not exceed $5 million.
The amount of tax credit shall not exceed the following for the indicated year:
- $6,500,000 for tax year 2023
- $7,000,000 for tax year 2024
- $7,500,000 for tax year 2025
- $8,000,000 for tax year 2026
Transfer of Credit
Any investor without a current tax liability at the time of the investment in a qualified Kansas business, who does not reasonably believe that it will owe any tax for the current taxable year and who makes a cash investment in a qualified security of a qualified Kansas business shall be deemed to acquire an interest in the nature of a transferable credit limited, for tax year 2021 and all tax years thereafter, to an amount up to 50 percent of this cash investment. This interest may be transferred to any natural person whether or not such person is then an investor and be claimed by the transferee as a credit against the transferee's Kansas income tax liability in the year the cash investment was made by the original investor. Only the full credit for any one investment may be transferred and this interest may only be transferred one time.
Procedures to Claim the Credit
You may download Schedule K-30 to claim the angel investor tax credit. This schedule must be completed and submitted with the income tax return. You may also call the Department of Revenue voice mail system at 785-296-4937 to request Schedule K-30. You will be asked to give your name, address, phone number and form(s) you desire. Please allow two weeks for delivery of your forms.
Angel Investor and Investor
Angel investor and investor means An accredited investor who is a natural person or an owner of a permitted entity investor who is of high net worth, as defined in 17 C.F.R. 230.501(a) as in effect on July 1, 2004, and who seeks high returns through private investments in start-up companies and may seek active involvement in business, such as consulting and mentoring the entrepreneur. A person who serves as an executive, officer, employee, vendor or independent contractor of the business in which an otherwise qualified cash investment is made is not an angel investor and shall not qualify for the issuance of tax credits for such investment.
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Cash Investment
Cash investment means money or money equivalent in consideration for qualified securities.
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Qualified Securities
Qualified securities means a cash investment through any form or combination of forms of financial assistance that have been approved in form and substance by the secretary of commerce. Such forms of financial assistance are: (1) any form of equity, such as: (A) a general or limited partnership interest; (B) common stock; or (C) preferred stock, without regard to voting rights, or seniority position, and whether or not convertible into common stock; or (2) any debt instrument, subordinate to the general creditors of the qualified Kansas business debtor that requires no payment from the qualified Kansas business debtor, and that shall convert to some form of equity prior to the qualified Kansas business debtor raising any additional funds.
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Qualified Kansas Business
Qualified Kansas business means the Kansas businesses that are approved and certified as qualified Kansas businesses as provided in K.S.A. 74-8134, and amendments thereto.
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Kansas Business
Kansas business means any business owned by an individual, any partnership, association or corporation domiciled in Kansas, or any corporation, even if a wholly owned subsidiary of a foreign corporation, that does business primarily in Kansas or does substantially all of such businesses’ production in Kansas.
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Owner
Owner means any natural person who is, directly or indirectly, a partner, stockholder, or member in a permitted entity investor.
Permitted Entity Investor
Permitted entity investor means (A) Any general partnership, limited partnership, corporation, that has in effect a valid election to be taxed as an S corporation under the United States internal revenue code, or a limited liability company that has elected to be taxed as a partnership under the United States internal revenue code; and (B) that was established and is operated for the sole purpose of making investments in other entities.