1. Angel Tax Credit

2. Tennessee Angel Tax Credit
Why ATC?
Launch Tennessee Capital Formation multi-pronged approach
Connecting companies to investors across the state, region, and nation
Educating companies and investors through EC’s and TENN program
INCITE fund investment matching
Direct incentives to encourage investment
The Angel Tax Credit Incentive Program is the Most Recent Initiative
Simple and direct approach to encourage angel investment
Similar programs successful in other states
Goals
Fill gap in early stage funding, the most critical piece of capital puzzle
Bring new angel investors off sidelines
Encourage continued positive momentum with existing angel investors

3. How Will the Tax Credits Work?
Tennessee Angel Tax Credit
How Will the Tax Credits Work?
Individual Angel investor invests in qualifying company:
Three basic requirements:
Company (details on next slide)
TN nexus, early stage, high growth potential
Investment
Equity: includes common, preferred, convertible debt
Minimum investment = $15,000
Cannot exceed 40% of company’s capital at time of investment
Investor must be accredited per SEC rules

4. How Will the Tax Credits Work?
Tennessee Angel Tax Credit
How Will the Tax Credits Work?
Angel investors receives credit versus Hall income tax
33% credit of total investment (50% for companies in Tier 4 county)
Max credit for investor = $50,000 / year
Unused credits can be carried over for up to 5 years

5. Company Qualification
Tennessee Angel Tax Credit
Company Qualification
Early Stage
Less than 5 years in business
Less than $3 million in revenue in previous year
50 or fewer full-time employees
Tennessee nexus
60% of full-time employees perform majority of their work in TN
Meet any 1 of 3 tests:
Qualify as having high-growth and institutional investment potential
Company has received SBIR/STTR funding
Commercializing tech developed at TN-based research institution

6. Company Qualification
Tennessee Angel Tax Credit
Company Qualification
Industry Restrictions
Cannot be a professional services firm or “primarily” engaged in certain industries:
Construction, leisure, hospitality, retail, real estate, insurance, banking, lobbying, alcohol, gambling
However, technology companies leveraging disruptive technology and innovating in these industries are qualified
For example:
A fintech company would qualify, a bank would not.
A company 3D printing construction materials would qualify, a residential or commercial construction company would not.
Property management software for hotels would qualify, a hotel would not.

7. Logistics and Applications
Tennessee Angel Tax Credit
Logistics and Applications
Start date – investments made beginning Jan 1, 2017
Forms and Information on Launch website by November 15th, 2016
Processing will start Jan 1st
Company Application
Can be filed prior to investment for pre-certification
Must be filed within 60 days of investment

8. Logistics and Applications
Tennessee Angel Tax Credit
Logistics and Applications
Investor Application
Must be an accredited investor defined by SEC rules
Must be filed within 60 days of investment
Maximum credits allocated:
$3M in 2017, $4M in 2018, $5M for 2019 and beyond
Credits allocated on first-come, first-served basis
Investment put in queue once BOTH applications are complete 

9. Tennessee Angel Tax Credit
Examples
$60,000 investment in qualifying company
Investor receives $20,000 (33%) tax credit vs Hall income tax
If tax liability is less than $20,000, excess carried forward up to 5 years
Investor can receive remaining $30,000 credits for other investments in that same year
$60,000 investment in qualifying company (in Tier 4 county)
Investor receives $30,000 (50%) tax credit vs Hall income tax
If tax liability is less than $30,000, excess carried forward up to 5 years
$200,000 investment made in qualifying company
Investor receives maximum $50,000 tax credit vs Hall income tax
10 angels each invest $90,000 in a single qualifying company
Each investor receives $30,000 tax credit vs Hall income tax
No limit on amount of qualifying investments in a qualified company

10. Tennessee Angel Tax Credit
Summary
Generous program
It’s good for investors – reduces risk and increases upside return
It’s good for companies – encourages early stage capital formation where it is most needed
Get started now looking for investment opportunities
If you’re new to angel investing, consider connecting with a local/regional angel group
Pre-qualified companies will be listed on the LaunchTN website

11. John Lanahan - John@LaunchTN.org
Tennessee Angel Tax Credit
Questions?
Contact Information:
LaunchTN.org
John Lanahan -