The Arkansas Economic Development Commission (AEDC) passed the Equity Investment Incentive Act of 2007 to encourage angel investors to invest in innovative technology businesses that pay wages over the state or county wage averages. The program offers an income tax credit for up to 33.33% of the amount invested in equity or convertible equity securities of an eligible business. The tax credit can be used annually for up to 50% of the investor’s Arkansas income tax liability and any unused portion of the tax credit can be carried forward for up to nine years. The tax credits may also be sold if approved by the AEDC. For eligibility, please read the guidelines below.
Eligible Business
- Targeted businesses as defined in section 15-4-2703(43); or
- A business that receives assistance in the form of equity investments from capital investment funds that target early-stage businesses and start-up businesses, if the business
- (a) Pays at least one hundred fifty percent (150%) of the lesser of the county average wage or the state average wage; and
- (b) Meets at least two (2) of the following conditions: (i) The business is in one (1) of the business sectors set forth in section 15-4-2703(43)(A)(i)-(vi); (ii) The business is identified in a local or regional economic development plan as the type of business targeted for recruitment or growth within the community or region; (iii) The business is supported by a resolution of the city council or quorum court in the municipality or county in which the business is located or plans to locate; (iv) The business is supported by business incubators certified under
section 26-51-815(d); (v) The business is supported by federal small business innovation research grants; or (vi) The business is supported by technology development or seed capital investments made by instrumentalities of the state.
Approval
- A business plan describing the proposed business for which an equity
investment incentive tax credit is sought; - A projection of the amount of capital being sought for the proposed business;
- If the application proposes to use a convertible financing structure, a clear statement concerning the timing and conditions under which the convertible financing structure converts into equity; and
- Other information requested jointly by the Executive Director of the Arkansas Economic Development Commission and the President of the Arkansas Development Finance Authority.
How do I apply for the Arkansas Equity Incentive Tax Credit?
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.
