Instructions for 2023 Schedule VC

 Angel Investment Credit and Early Stage Seed Investment Credit 
 
Purpose of Schedule VC 
Use Schedule VC to claim a credit for investing in qualified new business ventures. Two credits are available: (1) an 
angel investment credit for individuals and networks of individuals who directly invest in qualified new business ventures, 
and (2) an early stage seed investment credit for payments made to certified fund managers to invest in qualified new 
business ventures. 
 
The Wisconsin Economic Development Corporation (WEDC) administers the qualified new business venture program. 
To qualify for an investment tax credit, the investor must first apply to WEDC and receive a tax credit verification form 
showing the total tax credit, the years for which the credit applies, and the amount of tax credit. For more information 
about the program, visit the WEDC web site at inwisconsin.com,   or call 1-855-469-4249. 
 
Note:  An investment partnership or joint venture must file a Wisconsin partnership return, Form 3, in order to compute 
and pass through the credit to its partners or members. 
 
What Is a Qualified New Business Venture  
To be certified as a qualified new business venture, a company must meet certain requirements, including the following: 
 
•  Have its headquarters in Wisconsin. 
 
•  Have less than 100 employees, at least 51% of whom are employed in Wisconsin. 
 
•  Have the potential for increasing jobs in this state, increasing capital investment in this state, or both, and any of the 
 following apply: (1) It is engaged in, or has committed to engage in, innovation in manufacturing, biotechnology, nano-
 technology, communications, agriculture, or clean energy creation or storage technology; processing or assembling 
 products, including medical devices, pharmaceuticals, computer software, computer hardware, semiconductors, any 
 other innovative technology products, or other products that are produced using manufacturing methods that are enabled 
 by applying proprietary technology; or services that are enabled by applying proprietary technology; or (2) it is undertak-
 ing pre−commercialization activity related to proprietary technology that includes conducting research, developing a new 
 product or business process, or developing a service that is principally reliant on applying proprietary technology. 
 
•  Not engage in real estate development, insurance, banking, lending, lobbying, political consulting, professional ser-
 vices provided by attorneys, accountants, business consultants, physicians, or health care consultants, wholesale or 
 retail trade, leisure, hospitality, transportation, or construction, except construction of power production plants that 
 derive energy from a renewable resource, as defined in s.196.378(1)(h), Wis. Stats. 
 
•  Have been in operation in Wisconsin for not more than 10 consecutive years. 
 
•  Have not received more than $8 million in investments that qualify for early stage seed investment tax credits.  
 
•  Have not received aggregate private equity investment in cash of more than $10 million prior to being certified. 
 
For additional requirements, see the WEDC web site. Qualified new business status lasts for one year from the certifica-
tion date. A business may reapply to WEDC each year for certification for that year. 
 
Credit Reduces Basis of Investment    

The credits that you compute on Schedule VC reduce the basis of your investment. This is true even if you cannot use 
the full amount of credit computed due to insufficient income to offset the credit. 
 
Carryover of Unused Credits 

The angel investment credit and early stage seed investment credit are nonrefundable. Any unused credits may be 
carried forward for 15 years. If there is a reorganization of a corporation claiming an early stage seed investment credit, 
the limitations provided by Internal Revenue Code section 383 may apply to the carryover of any unused credit. 
 
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                                 2023 Schedule VC Instructions 

Part I – Angel Investment Credit 
 
The angel investment credit is available to individuals who are “angel investors” or members of an “angel investment 
network.” An “angel investor” is an “accredited investor” who makes a “bona fide angel investment.” An “accredited in-
vestor,” as defined by WEDC, is an individual who meets certain requirements, including the following: 
 
(a)  Invests their own monies in a qualified new business venture. 
(b)  Does not own, control, or hold power to vote 20% or more of the outstanding securities of the qualified new business 
    venture. 
(c)  Is not a spouse, parent, grandparent, sibling, child, stepchild, or grandchild of an individual who owns, controls, or 
    holds power to vote 20% or more of the outstanding securities of the qualified new business venture. 
(d)  Meets any of the following requirements at the time that the original investment is made: 
  •     Has a net worth, or a joint net worth together in excess of $1 million. 
  •     Had an income in excess of $200,000 in each of the prior 2 years or a joint income in excess of $300,000 in each 
        of those years and reasonably expects to reach the same income level in the current year. 
  •     Is a director, executive officer, or general partner of the issuer of the securities being offered or sold, or a director, 
        executive officer, or general partner of a general partner of that issuer. 
  •     Has knowledge and experience in financial and business matters and he or she is capable of evaluating the 
        merits and risks of the prospective investment, or the issuer reasonably believes immediately prior to making any 
        sale that the purchaser comes within this description. 
   
An “angel investment network” is a group of angel investors organized for the sole purpose of making a bona fide angel 
investment in a single qualified new business venture. It includes a partnership or LLC (but not a tax-option (S) corpora-
tion) that is a nonoperating entity as determined by WEDC, an individual, or a fiduciary. 
 
A “bona fide angel investment” means an investment made by an accredited investor or an angel investment network in 
a qualified new business venture. An investment is the investment of cash in exchange for common stock, partnership 
or membership interest, preferred stock, or an equivalent ownership interest in the qualified new business venture ac-
ceptable to WEDC. 
 
Effective May 25, 2010, a claimant that invests in a business that was located outside Wisconsin qualifies for the angel 
investment credit if the investment was made no more than 60 days before the business relocated to Wisconsin and the 
business was certified as a qualified new business venture no later than 180 days after relocating to Wisconsin. 
 
For additional information, visit WEDC's website at:  https://wedc.org/programs-and-resources/qualified-new-business-
venture/   
  
Line 1. Fill in the information requested regarding your investments in qualified new business ventures that WEDC has 
verified as first eligible for a tax credit for 2023. Include a copy of the WEDC certification with your tax return. 
 
Line 3. Fill in the angel investment credit passed through to you from an angel investment network that WEDC has 
verified as first eligible for a tax credit for 2023. 
 
Line 4. Add lines 2 and 3d. This is the total 2023 angel investment credit. Reduce the basis in the investment by this 
amount. 
 
Special instructions apply to partnerships, LLCs treated as partnerships, and fiduciaries.  
 
• Partnerships and LLCs treated as partnerships:        Prorate the angel investment credit on line 4 among the partners 
  or members based on their ownership interests or as specially allocated in their governing or organic documents. 
  Show only the credit for each partner or member on Schedule 3K-1. 
• Fiduciaries:  Prorate the angel investment credit on line 4 among the beneficiaries based on their ownership interests 
  or as specially allocated in their governing or organic documents. Show only the credit for each beneficiary on Sched-
  ule 2K-1. 
 
Line 5. Prepare Schedule CF detailing your computation of the amount reported on line 5 and submit it with Schedule 
VC. 
 
Line 6. Add lines 4 and 5. This is the available angel investment credit. Enter the amount of credit from line 6 on the 

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                                          2023 Schedule VC Instructions 

appropriate line of Schedule CR.  See the following exceptions: 
• Tax-option (S) corporations, partnerships, and LLCs treated as partnerships should prorate the amount of credit on 
  line 6 among the shareholders, partners, or members based on their ownership interest. Show the credit for each 
  shareholder on Schedule 5K-1 and for each partner or member on Schedule 3K-1.  

Required Attachments to Schedule VC 
To claim the angel investment credit, you must include the following with Schedule VC: 

• For claimants not receiving the credit passed through from a partnership, tax-option(S) corporation, limited liability com-
  pany, estate, or trust: 
       o   Schedule VC 
       o   A copy of the qualified new business venture certification form provided by WEDC. 
       o  The tax credit verification form issued by WEDC. 

• For claimants receiving the credit passed through from a partnership, tax-option (S) corporation, limited liability com-
  pany, estate, or trust:   
       o  A copy of your Schedule 5K-1, 3K-1, or 2K-1. 
       o  Schedule VC 

Recovery of Angel Investment Credit 
If you hold an investment on which a credit is based for less than three years, you must repay to the Department of 
Revenue the amount of the credit that you received for that investment unless the investment becomes worthless, as 
determined by WEDC, during the 3-year period, or you kept the investment for no less than 12 months and a bona fide 
liquidity event, as determined by WEDC, occurs during the 3-year period. 
 
Part II – Early Stage Seed Investment Credit 
 
The early stage seed investment credit is based on a claimant’s investment paid to a certified fund manager that the fund 
manager invests in a qualified new business venture. 
 
An investment fund manager must apply to WEDC for certification. Only fund managers who meet certain requirements 
and commit to investing in qualified new business ventures may receive certification. The initial investment by a certified 
fund manager into a qualified new business venture must occur after the date the fund manager is certified. 
 
For additional information, visit WEDC's website at:   https://wedc.org/programs-and-resources/qualified-new-business-
venture/   
 
Line 7. Fill in the information requested regarding your investments paid to a certified fund manager that WEDC has 
verified as eligible for a tax credit in 2023.  Include a copy of the WEDC certification with your tax return.  
 
Line 9. Fill in the amount of early stage seed investment credit passed through from other entities. 
 
If you are a partner, shareholder, or member of a pass-through entity that purchased early stage seed investment credits 
in the current taxable year, enter your share of the credits allocated to you by the pass-through entity.  
 
Line 10.  Fill in the amount of credit transferred from other taxpayers in 2023. This is the amount from Part III, page 3.  
 
Line 11. Add lines 8, 9d, and 10. This is the total 2023 early stage seed investment credit. Reduce the basis in the 
investment by this amount. 
 
Special instructions apply to tax-option (S) corporations, partnerships, LLCs treated as partnerships, and fidu-
ciaries. 
 
• Tax-option (S) corporations, partnerships, and LLCs treated as partnerships:          Prorate the early stage seed 
  investment credit on line 11 among the shareholders, partners, or members based on their ownership interests or as 
  specially allocated in their governing or organic documents. Show only the credit for each shareholder on Schedule 
  5K-1 and for each partner or member on Schedule 3K-1. 

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                                    2023 Schedule VC Instructions 

• Fiduciaries:  Prorate the early stage seed investment credit that otherwise would be entered on line 11 between the 
  fiduciary itself and its beneficiaries based on their ownership interests or as specially allocated in their governing or 
  organic documents. Show only the fiduciary’s portion of the credit on line 11b. Show the beneficiaries’ portion of the 
  credit on line 11a and show the credit for each beneficiary on Schedule 2K-1. 
 
Line 12. Prepare Schedule CF detailing your computation of the amount reported on line 12 and include it with Schedule 
VC. If you are a partner, shareholder, or member of a pass-through entity that purchased early stage seed investment 
credits in a prior taxable year and those credits were not fully used to offset your tax liability, enter the amount of eligible 
remaining carryover.  
 
Line 13. Add lines 11 and 12 (lines 11b and 12 if fiduciary). This is the available early stage seed investment credit. 
 
Line 14. Fill in the amount of credit transferred to other taxpayers in 2023. 
 
Line 15. Subtract line 14 from line 13. This is the available early stage seed investment credit. Enter the amount from 
line 15 on the appropriate line of Schedule CR. See the following exceptions: 
 
• If the claimant is a combined group member, enter the amount of credit on Form 6, Part V, line 1 instead of Schedule 
  CR. 
 
• Tax-option (S) corporations, partnerships, and LLCs treated as partnerships should prorate the amount of credit on 
  line 15 among the shareholders, partners, or members based on their ownership interest. Show the credit for each 
  shareholder on Schedule 5K-1 and for each partner or member on Schedule 3K-1.  
 
Required Attachments to Schedule VC 
To claim the early stage seed investment credit, you must include the following with Schedule VC: 

• For corporations, partnerships, tax-option(S) corporations, limited liability companies, estates, or trusts: 
  o  Schedule VC 
  o        A copy of the certification issued by WEDC to the business and to the fund manager. 
  o        A statement from the fund manager containing all of the following information: 
                   Name and address of the fund manager. 
                   For each investment, the date, total amount of investment, amount invested in a qualified new busi-
                    ness venture, name and address of the qualified new business venture, and amount of tax credit. 

• For claimants not receiving the credit passed through from a partnership, tax-option(S) corporation, limited liability com-
  pany, estate, or trust: 
  o        Schedule VC 
  o        A copy of the certification issued by WEDC to the business and to the fund manager. 
  o        A statement from the fund manager containing all of the following information: 
                   Name and address of the fund manager. 
                   For each investment, the date, total amount of investment, amount invested in a qualified new busi-
                    ness venture, name and address of the qualified new business venture, and amount of tax credit. 

• For claimants receiving the credit passed through from a partnership, tax-option (S) corporation, limited liability com-
  pany, estate, or trust:   
  o  Schedule VC 
  o  A copy of your Schedule 5K-1, 3K-1, or 2K-1. 
 
Recovery of Early Stage Seed Investment Credit 
If you hold an investment on which a credit is based for less than three years, you must repay to the Department of 
Revenue the amount of the credit that you received for that investment unless the investment becomes worthless, as 
determined by WEDC, during the 3-year period, or you kept the investment for no less than 12 months and a bona fide 
liquidity event, as determined by WEDC, occurs during the 3-year period. 

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                                          2023 Schedule VC Instructions 

Part III – Sale or Transfer of Early Stage Seed Investment Credit 
 
For taxable years beginning on or after January 1, 2009, a person who is eligible to claim the early stage seed investment 
credit may sell or otherwise transfer the credit to another person who is subject to tax if the person receives prior authori-
zation from the investment  fund manager and the manager then notifies WEDC and the Department of Revenue of the 
transfer and submits with the notification a copy of the transfer documents. No person may sell or otherwise transfer a credit 
more than once in a 12-month period. WEDC may charge any person selling or otherwise transferring a credit a fee equal 
up to five percent of the credit amount sold or transferred.   
 
Seller 
 
The entity selling the tax credits will be required to recognize a capital gain on the sale of the credits equal to the difference 
between the basis of the tax credits, which would be zero unless the seller previously purchased the tax credits for consid-
eration, and the amount of consideration received for the credits.  The character of the capital gain as either short-term or 
long-term is determined based on the amount of time between the date the seller made the qualifying investment and the 
date the credits are sold.  If the time period is more than one year, it is a long-term capital gain; if the time period is one year 
or less, it is a short-term capital gain. 
 
Purchaser 
 
The entity purchasing the tax credits will recognize capital gain income when the credits are used to offset a Wisconsin 
income tax liability.  The capital gain recognized is equal to the difference between the purchaser's basis in the tax credits, 
which is the value of consideration paid for the tax credits and any transaction costs incurred to acquire the tax credits, and 
the amount of Wisconsin income tax liability satisfied by use of the tax credits.  The character of the capital gain as either 
short-term or long-term is determined based on the amount of time between the date the purchaser acquired the tax credits 
and the date the credits are used to offset the purchasers Wisconsin income tax liability.  If the time period is more than one 
year, it is a long-term capital gain; if the time period is one year or less, it is a short-term capital gain.       
 
The purchaser will not be allowed to apply credits to years prior to which the credits were purchased. For example, if tax 
year 2019 credits are purchased in 2023, the credits can only be used for taxable years beginning in 2023 and beyond. 
 
The carryforward period for credits purchased will continue to be the remaining carryforward period of the original holder of 
the credits. For example, if a claimant purchases early stage seed investment credits with a remaining carryforward of 8 
years at the time of purchase, the purchaser will also have an 8 year credit carryforward. 
 
Lines 1, 2, & 3. Fill in the information requested regarding the transfer in 2023 of early stage seed investment credits by 
a person eligible to claim the credit to a person subject to tax under ch. 71 or subch. III or ch. 76. 

Additional Information 
For more information, you may: 

• E-mail your questions to: DORFranchise@wisconsin.gov 
• Send a FAX to (608) 267-0834 
• Call (608) 266-2772 
  (Telephone help is also available using TTY equipment. Call the Wisconsin Telecommunications Relay System at 711 or, 
  if no answer, (800) 947-3529. These numbers are to be used only when calling with TTY equipment.) 
 
                                          Applicable Laws and Rules 
  This document provides statements or interpretations of the following laws and regulations enacted as of December 
  1, 2023: Chapter 71 Wis. Stats., and Chapter Tax 2, Wis. Adm. Code 

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