Recently, during a review which began with a study passed during the 2015 legislature, state lawmakers discovered that North Dakota tax credits for angel funds investments were being used on ventures out of state that had no discernible benefit for North Dakotans.
No commerce in North Dakota. No goods or services provided to North Dakotans. No jobs in North Dakota.
I think most of us would agree that North Dakota taxpayers shouldn’t be on the hook for subsidizing investments that have nothing at all to do with North Dakota.
One of the people caught up in this controversy is Fargo businessman Doug Burgum. The involvement of his Arthur Ventures investment group raised eyebrows because Burgum is also running for governor. That investors involved in his company received these tax credits was newsworthy.
But in an editorial the Fargo Forum is now trying to claim that the controversy over these tax credits is all just politics from the legislature where Burgum has few friends:
Endorsed Republican governor candidate Wayne Stenehjem was quick to pounce on Burgum’s Angel Fund involvement, trying to make a case that Burgum, who has made more major investments in North Dakota than anyone else on the ballot, was investing out of state to grab the tax break. He was. The tax break is the incentive to invest. But he also was investing in in-state ventures, and all of it is permitted under the legislation. Indeed, the purpose of attracting investor interest in North Dakota is served when out-of-state investors get involved via the fund.
Maybe the fund’s rules need tweaking. The Legislature can take that up next year. But let’s not get fooled by the politics of the governor’s race by swallowing the fiction that Burgum was improperly using the Angel Fund. The charge is more political canard than substance.
To be clear, neither Burgum nor the investors involved in Arthur Ventures violated the law. It was not, and is not, explicitly illegal to use these tax credits out of state. And to the extent that the Legislature passed a poorly-written law which failed to provide the proper level of scrutiny and transparency for the tax credits, then shame on them. They are responsible for that.
But that doesn’t mean it’s kosher to use these sort of tax credits out of state. Legislators, who have admittedly done a poor job of oversight here, say their intent was for the tax credits to be used in state. I can’t imagine that tax credits for out of state subsidies would have passed the Legislature.
What has happened is that these investors who have used the tax credits found themselves a loophole in the law. And now that the Legislature is looking at closing it, they’re getting pushback from those exploiting it.
Including from Doug Burgum’s partner in Arthur Ventures, James Burgum, who was lobbying the Legislature back in January to keep the status quo.
The Forum is treating this as a black-and-white, right-or-wrong situation when it’s not. There is plenty of blame here both for the Legislature and for the investors who exploited this loophole.