Iowa Incentivizes Investments in Entrepreneurial Efforts

In order to qualify for a qualified business or community-based seed capital fund investment credit under these regulations, the taxpayer must make an equity investment in either a qualifying business or community-based seed capital fund on or after Jan. 1, 2011.

The maximum amount of credit allowed for an investment is $50,000 per qualifying business and a taxpayer may not claim a credit for more than five different investments in five different qualifying businesses.

The regulations also explain the verification requirements for qualifying businesses and community-based seed capital funds. Once the qualifying business or community-based seed capital fund has been verified and registered by the authority, the Iowa Economic Development Board will approve the issuance of a tax credit certificate to the taxpayer.

In addition, the regulations address the requirements for the innovation fund investment credit, which are similar to those of the qualified business or community-based seed capital investment credit. For tax years starting on or after Jan. 1, 2011, a taxpayer may claim a credit equal to 20% of the taxpayer's equity investment in a certified innovation fund.

An innovation fund is a private, early-state capital fund certified by the board.

If the taxpayer is a venture capital investment fund allocation manager for the Iowa fund of funds, or a taxpayer who receives a credit for the same investment in a community-based seed capital fund or qualifying business, then the taxpayer must not claim the innovation fund credit.

The regulations explain the procedure for verifying innovation funds and approving credits.

For fiscal year 2012 and beyond, the aggregate amount of credits that may be allocated cannot exceed $8 million.