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Minnesota Tax Committee Chair Ann Lenczewski

ST. PAUL, Minnesota — I’ll say this about Rep. Ann Lenczewski: She certainly makes Minnesota politics interesting.

The powerful chairwoman of the House Tax Committee, a long-time opponent of tax credits for angel investors, has finally embraced the idea, just not the bill actually supported by angel investors like Twin Cities Angels and Rain Source Capital , and other groups like the Minnesota High Tech Association, LifeScience Alley and the University of Minnesota.

Last week, Lenczewski and House Speaker Margaret Kelliher held a press conference to tout a jobs creation bill. First item on the 26-page bill: a three year, $9 million tax credit to investors and funds with a heavy focus on “green” companies. To receive the credit, regional investment funds must devote 50 percent of its money toward “qualifying green job small businesses.”

If that proposal looks familiar, it should. Minnesota Gov. Tim Pawlenty offered a strikingly similar Green Jobs Investment Initiative in 2008 that ultimately failed. So let me get this straight: The liberal Democratic tax chair who hates tax credits offers a competing investment grant bill, then embraces tax credits once championed by her staunch ideological, Republican foe.

I’m not sure what caused Lenczewski’s change of heart, or the fate of her grants bill. Next Tuesday, a joint hearing of the House Tax and Bioscience and Workplace Development committees will examine Lenczewski’s proposals and another angel bill carefully crafted by the Pawlenty Administration, Democratic lawmakers and business leaders.

Lenczewski did not immediately respond to a phone call and e-mail. But she did send yours truly a blistering reply to a column I recently wrote that slammed her grants proposal.

“I introduced this [grants] bill because I believe that grants will work better than tax credits in attracting angel investments to Minnesota,” Lenczewski wrote. “I believe this for two reasons: First, if properly structured, they can avoid the adverse federal tax consequences that result from giving tax credits/reductions to high-income taxpayers. … Second, grants can be more effective in attracting out-of-state investors (who pay no Minnesota tax and thus are not interested in Minnesota tax reductions.)”

More on that last sentence. But for now, let’s just focus on the competing angel bills. I still believe legislation, championed by Sen. Kathy Saltzman, is superior. Here’s why:

MONEY Saltzman’s bill offers more of it. Her plan calls for the state to award $40 million in tax credits over four years compared to $9 million ($6 million to funds, $3 million to individuals) in Lenczewski’s proposal.

TIMING Investors can immediately claim their credits in Saltzman’s bill; taxpayers must wait three years in Lenczewski’s version.

PORTABILITY Saltzman’s legislation, modeled after Wisconsin, allows out-of-state investors with no tax liability in Minnesota to transfer their credits to someone with a state tax bill. For example, an investor from Arizona puts $100,000 into a Minneapolis start-up. He can’t claim the credit but can convince a Minnesota investor to also fund the company by transferring the credit he would have earned to the local investor. That should help address Lenczewski’s concern that tax credits won’t help Minnesota attract outside investors.

SCOPE Saltzman’s bill establishes a broad umbrella for eligible industries and angel funds. The state can award credits to investors in “green manufacturing” and “qualified high-technology field including, but not limited to, aerospace, agricultural processing, alternative energy, environmental engineering, food technology, cellulosic ethanol, information technology, material science technology, nanotechnology, telecommunications, biotechnology, medical device products, pharmaceuticals, biologics and veterinary sciences.” In fact, those industries mirror the high-growth markets identified by the BioBusiness Alliance of Minnesota’s Destination 2025 report.

Lenczewski’s bill focuses mostly on green companies with no specific references to medical devices, a curious omission given Minnesota’s dominance in medical technology. The bill does define “qualifying small businesses” as companies involved in “biotechnology, technology, manufacturing, agriculture, or assembling products, conducing research and development, or developing a new product or business process.”

My main beef with Lenczewski’s bill is the same one I had with Pawlenty’s Green Jobs Investment Initiative: too many strings attached. To receive credits, regional investment funds must spend 50 percent of its money on green jobs and distribute at least 60 percent of its money to a specific geographic area.

This is what I call public micromanagement. Most investors will tell you that money usually finds the best ideas, no matter the location or the industry. An investor will fund a breakthrough, revolutionary technology whether the company is based in Minneapolis or East Grand Forks.

It’s possible that Lenczewski will support both the investment tax credit and grants. In that case, Godspeed — who can possibly oppose $9 million in credits AND $40 million nondilutive grants? I doubt it though, given Lenczewski’s historic distaste for angel credits.

In the end, some angel credits will probably pass. But Lenczewski will play hardball. Remember, the jobs bill crafted by House leaders contain Lenczewski’s tax credits, not Saltzman and Co. And let’s not forget Lenczewski’s long-time ally who stood beside her at last week’s press conference: House Democratic Leader and gubernatorial candidate Margaret Kelliher.