A Halifax businessman I respect recently told me there was no way the Nova Scotia government would ever extend equity tax credits (or a reasonable facsimile) to people living outside the province. It was a non-starter, he said, because the government doesn’t send cheques to non-residents.

I told him that Nova Scotia—indeed, all of the Atlantic provinces—should consider it. In fact, it’s happening in at least one U.S. state. Although I lost the argument with the businessman, I’m pigheaded enough to look deeper and discovered that Minnesota has a remarkable Angel Tax Credit program, and you don’t have to live there to benefit from it.

I’d like to thank Michael Arbow, the former Capital Markets Specialist at the New Brunswick Securities Commission and now a partner at RSD Solutions Inc., for pointing me in the right direction. He praised the Minnesota program in a speech at the first Invest Atlantic conference two years ago. “Minnesota has done some great work in this area,” he says. “It follows the view that all startup money is good startup money.”

A few years ago, Minnesota decided it wanted an equity tax credit to support young technology companies. In most cases, equity tax credits are extended only to residents of a state or a province investing in a company based in their home jurisdiction. That means the government can reduce the investors’ income tax in proportion to their investment.

When Minnesota adopted its Angel Tax Credit in July of 2010, it did things differently. It decided that it didn’t matter whether the investor was a fund or an individual; he, she, or it would still get a tax credit worth 25% of the amount invested, up to a maximum of $125,000 per year. Then, in a revolutionary move, the state decided that it didn’t matter whether investors were based in Minnesota, another state, or even another country; they would still get the tax credit.

That’s right—you or I or any other Atlantic Canadian could invest in a qualifying company in Minnesota, and a few months from now we’d get a cheque in the mail worth one quarter of the investment. An out-of-state person investing in a qualifying company has to file a Minnesota tax return. The return would show that his or her income within the state was zero, which means the equity tax credit would move taxes owed to a negative number. That means the investor would get a cheque as a tax refund.

“The program’s main goal is to provide investment to fund high-tech businesses within the state and to create high-paying jobs,” says Jeff Nelson, the program’s state administrator. “We’re happy to export a bit of money as long as we do that.”

The program is only two years old, but already it has helped businesses raise a total of $116 million—yet it costs the state treasury only a maximum $12 million a year. Last year, which was the first full year of the program, 114 businesses received more than $64 million in investments. Already this year, the state has approved $7 million in credits, and Nelson expects the remaining $5 million will be committed by the end of summer or early fall.

The state legislature has discussed amending the program, but there has been no movement to curtail the provisions that allow payments to people outside the state. Rather, there has been some debate about increasing the credit to 40% of invested capital in areas outside Minneapolis-Saint Paul. (Newfoundland and Labrador’s tax credit has this type of two-tier system to encourage rural investment.)

One other provision that legislators are examining is a clause demanding that companies using the Angel Tax Credit must pay their Minnesota staff at least 175% more than the poverty line, or about $40,000. There has been an effort to waive this provision for university students serving as interns. Atlantic Canada could be creating more jobs—in particular, for young people—by reforming equity tax credits. It would be great for our region to become as revolutionary in its thinking as Minnesota.