Community-Based Seed Capital Funds Tax Credit

The Investments in Community-Based Seed Capital Funds tax credits, along with the Qualifying Businesses Tax Credits, were created to enhance the quality of life for citizens of Iowa by increasing the availability and accessibility of venture capital, particularly for ventures at the seed capital investment stage, thereby encouraging the creation of wealth through high-paid, new jobs while promoting industrial development and innovation. The Community-Based Seed Capital Funds tax credit program is designed to encourage venture capital investment at the seed capital stage. The total amount of tax credits available to be issued for investments in Qualifying Businesses and Community-Based Seed Capital Funds (Angel Investor Tax Credits) is $2 million per fiscal year.

Tax Credit Details

  • Investors receive tax credits equal to 20 percent of the investor’s equity investment in a Community-Based Seed Capital Fund.
  • Investors must invest in the form of cash to purchase equity or near-equity in a Community-Based Seed Capital Fund.
  • Tax credits are awarded on a first-come, first-serve basis.
  • Tax credit certificates are eligible for redemption three years after the investment in a Community-Based Seed Capital Fund.

Eligibility Requirements for a Community-Based Seed Capital Fund

  • The fund is organized as a limited partnership or limited liability company.
  • The fund has a total of capital commitments from both investors and investments in Qualifying Businesses of at least $125,000, but not more than $3 million.
    • If the fund is either a rural business investment company under the Rural Business Investment Program of the federal Farm Security and Rural Investment Act of 2002 or an Iowa-based seed capital fund with at least 40 percent of its committed capital subscribed by community-based seed capital funds, the fund may have more than $3 million of capital commitments from both investors and investments in qualifying businesses.
  • The fund has at least five investors that are not affiliates, as defined by Rule 261-115.2, with no single investor and affiliates of that investor owning a total of more than 25 percent of the ownership interests outstanding in the fund.
  • See the Administrative Rules for more information about the tax credit.

How to Apply:

  • Eligible funds must submit a certification application and required documents to the Iowa Economic Development Authority within 180 days of receiving the first investments which qualify for tax credits. The business must be verified and registered as an eligible Community-Based Seed Capital Fund before individual investors can be approved to receive a tax credit.
  • Investors must submit an application by March 31 of the year following the calendar year in which the investor made the equity investment.

To learn more:

kristin.hanks-bents@iowa.gov
Phone: 515.725.0440

Resources
PDF
IAC Chapter 261.115