The document outlines Michigan's Small Business Investment (Angel) Tax Credit program, including guidelines for qualified investors and businesses, the application process, and required forms. It provides an overview of eligibility criteria for investors and businesses to qualify for tax credits worth 25% of investments in Michigan-based seed or early-stage small businesses. The program aims to incentivize investment in innovative small businesses that have potential for high growth.

1. Small Business Investment
(Angel) Tax Credit
Public Presentation

2. Contents
• Public Act 235 of 2010
• SBITC Program Guidelines
• Summary Application Process
• Investment Monitoring
• Contact Information
• SBITC Program Application Forms
Current as of 01/19/2011 2

3. Public Act 235 of 2010
• Signed into law by Governor on 12/14/2010
• Amends 1967 PA281 “Income tax act of 1967”
(MCL 206.1 – 206.532) by adding section 278
• Small Business Investment Tax Credit
(“SBITC”) provides Qualified Investors an
income-tax credit equal to 25% of a Qualified
Investment in a Michigan-based, seed or early-
stage Qualified Business
Current as of 01/19/2011 3

4. SBITC Program Guidelines
Qualified Investors Inclusion Criteria
• Individual taxpayer or an
incorporated entity subject to
Michigan income tax laws as
stated in Income Tax Act, PA 281
of 1967
Current as of 01/19/2011 4

5. SBITC Program Guidelines
Qualified Investors Exclusion Criteria
• Has been convicted of a felony involving a
fiduciary obligation or the conversion or
misappropriation of funds or insurance accounts,
theft, deceit, fraud, misrepresentation, or
corruption
• Claiming a credit of more than $250,000 for
investment in a single Qualified Business
Current as of 01/19/2011 5

6. SBITC Program Guidelines
Qualified Investors Exclusion Criteria
• Claiming a credit of more than $250,000 for
Qualified Investments in any Qualified
Businesses in any 1 tax year
• Has not paid or entered in an installment
agreement regarding a final assessment of an
unpaid liability for a state tax for which all appeals
had been exhausted
• Currently in a bankruptcy01/19/2011
Current as of
proceeding 6

7. SBITC Program Guidelines
Qualified Businesses Inclusion Criteria
• Innovative small businesses with potential for high
growth, for example companies in fields such as
but not limited to alternative energy; defense and
homeland security; information technology; life
science (as defined in Section 88A of the MSF Act);
medical devices; and next-generation
manufacturing
• Domiciled and headquartered in Michigan
Current as of 01/19/2011 7

8. SBITC Program Guidelines
Qualified Businesses Inclusion Criteria
• Seed or early stage business as defined in section
3 of the Michigan Early Stage Venture Investment
Act of 2003, 2003 PA 296, MCL 125.2233 [a
business that has not fully established
commercial operations and may also be engaged
in continued research and product development,
or that is engaged in product, service, or
technology development and initial
manufacturing, marketing, or sales activities]
Current as of 01/19/2011 8

9. SBITC Program Guidelines
Qualified Businesses Inclusion Criteria
• Has been in existence less than 5 years, or 10 years
if business activity is derived from research at an
institution of higher education in Michigan or a
501(c)(3) organization in Michigan
• Has greater than 50.1% of its employees working
in the state
• Has fewer than 100 FTEs
• Has pre-investment valuation of less than
$10,000,000
Current as of 01/19/2011 9

10. SBITC Program Guidelines
Qualified Businesses Exclusion Criteria
• Has received SBITC certification on more than
$1,000,000 in Qualified Investments
• Is a retail establishment as defined by Sec. 44-45,
NAICS 1997
• Is a recipient of MEGA (Section 431) or film-
related tax credits (Sections 455, 457, and459)
• Is operating a construction, transportation, hotel,
motel, restaurant, or real estate business
Current as of 01/19/2011 10

11. SBITC Program Guidelines
Qualified Investments
• At least $20,000 in a Qualified Business, disbursed
in one tranche
• Investment is syndicated with or passes through a
MEDC-registered seed venture capital or angel
investor group (“Qualified Investment Group”)
• Equity investment that meets other Qualified
Investment eligibility criteria
Current as of 01/19/2011 11

12. SBITC Program Guidelines
Qualified Investments
• Debt investment that meets other Qualified
Investment eligibility criteria
• Maintain investment in Qualified Business for at least
3 years unless legitimate exit opportunity occurs
• Investment is not in business that employs or is owned
by any member of investor’s family or with which
investor or any member of investor’s family has
preexisting fiduciary relationship
Current as of 01/19/2011 12

13. SBITC Program Guidelines
Qualified Investments
• Qualified Investor will submit annual report to
the MEDC staff on the growth of the Qualified
Small Business
• SBITCs provided to Qualified Investments made
through a registered seed venture capital group
will not exceed $4M
Current as of 01/19/2011 13

14. SBITC Program Guidelines
Qualified Investment Group
• At least 2 unrelated members
• Conduct regular officer or general partner
meetings at least semi-annually
• Registered with the MEDC
– Investment Group must be registered with the MEDC in order for
an investor to apply for tax credit
– Investment Groups may register with the MEDC by completing and
submitting Form SBITC-005
– MEDC will accept Form SBITC-005 submissions after January 26,
2011, after the Michigan Strategic Fund Board has approved the
guidelines of the SBITC Program
Current as of 01/19/2011 14

15. Summary Application Process
•Qualified Investor
•Business submits
compiles the following
application (SBITC-001)
forms, downloadable
for a preliminary
from MEDC website,
eligibility assessment
with supporting
for the SBITC Program
documentation:
•MEDC notifies business
on preliminary
•Small Business Qualified Investor
Qualifying Application Submits Forms to
eligibility status
Qualified (SBITC-002 )
•Investor Application MEDC •If approved,
Business (SBITC-003) Qualified Investor
•Registered Investment
Closes Group Application •Requests for tax
receives tax credit
certificate to attach to
(SBITC-004)
Business Financing •An Investment Group credits should be annual return
•Additional
Preliminary made within 60
Round gains registration
status after submission days of a information requests
Eligibility of Investment Group Qualified or decline notices will
Assessment Registration Form be communicated to
(SBITC-005); Investment Qualified Investor
Investment Group must
be registered prior to
investment
SBITC Review
Qualified Investor Committee Reviews
OPTIONAL STEP Compiles Application and
Application Issues Notice to
Qualified Investor
Current as of 01/19/2011 15

16. Summary Application Process
Additional Notes
• Tax Credit Application
 If Tax Credit Application is approved, MEDC will email
an approval notification to Qualified Investor and issue a
Certificate of SBITC in the amount equal to the total
eligible credit. Qualified Investor will submit the
Certificate with the tax filing.
 If information is incomplete or additional documentation
is required for the review of the Tax Credit Application,
MEDC will email an information request to the Investor.
Current as of 01/19/2011 16

17. Summary Application Process
Additional Notes
• Tax Credit Application
 If Tax Credit Application is denied, MEDC will
send notification email to Investor indicating
reason(s) for denial. Denied applicants may be
eligible to reapply; reapplication instructions and
conditions will be provided in notification email.
Current as of 01/19/2011 17

18. Summary Application Process
Additional Notes
• If the amount of the credit awarded exceeds the tax liability
of the Qualified Investor for the tax year, that portion of the
credit that exceeds the tax liability for the tax year shall not
be refunded but may be carried forward to offset tax liability
in subsequent tax years for a period not to exceed 5 tax years
or until used up, whichever occurs first.
• The amount of the tax credit is provided in equal
installments over 2 years beginning with the tax year in
which the tax certificate was issued.
Current as of 01/19/2011 18

19. Summary Application Process
Additional Notes
• The
total amount of SBITCs that the MSF certifies
cannot exceed $9M in a calendar year.
• 60-day time window: Qualified Investor must
request SBITC for a Qualified Investment within 60
days of making a Qualified Investment.
Current as of 01/19/2011 19

20. Summary Application Process
Application Forms Overview
Form Name Completed By Completed When Submitted To
SBITC-001: Small Business Preliminary Company Before MEDC
Eligibility Assessment optional investment
SBITC-002: Small Business Qualifying Company After investment Investor
Application
SBITC-003: Investor Application Investor After investment MEDC
SBITC-004: Registered Investment Investment After investment Investor
Group Application Group
SBITC-005: Investment Group Investment Before MEDC
Registration Application Group investment
SBITC-006: Investor Annual Report Investor After investment MEDC
Current as of 01/19/2011 20

21. Investment Monitoring
Investors will file an Annual Report to the
MEDC with the following information:
• Job creation
• MBT or equivalent taxes paid
• Additional investments
Current as of 01/19/2011 21

22. Contact Information
For all questions and comments on the Small
Business Investment Tax Credit Program,
please use the following contact information:
MEDC Capital Access Group
Email: SBITC@michigan.org
Phone: (888) 522-0103
Current as of 01/19/2011 22