BISMARCK - A North Dakota firm said Wednesday that the state Department of Commerce's decision to revoke its angel fund certification was "arbitrary and capricious" and requested a meeting with state officials.
A letter to Commerce Commissioner Jay Schuler from Minot-based Legendary Investments attorney Tim Purdon, dated Wednesday, April 19, came in response to the Commerce Department's April 4 notice that it was revoking the firm's angel fund certification because it violated the prohibition on investing in real estate or real estate holding companies. The department cited state statute governing angel fund income tax credits.
Purdon argued "Legendary has not invested in any real estate or real estate holding company that was not a primary-sector business" and "any association by Legendary with entities that might own real estate involves loans of money, not the purchase of equity."
Purdon said the Commerce Department can't retroactively apply the standards included in a bill adjusting angel fund requirements that Gov. Doug Burgum signed last week.
"These changes by the North Dakota Legislature are, of course, applicable only to future conduct that takes place after this new law goes on the books on June 30, 2017," Purdon wrote. "They cannot be applied by the North Dakota executive branch retrospectively on actions that angel funds have taken that were in in compliance with the prior version of the angel fund law."
The Legendary Investments decision represented the first time the Commerce Department revoked an angel fund's certification. As of late 2015, Legendary investors had earned more than $2.1 million in tax credits. It had 89 investors with almost $4.8 million invested.
The revocation is effective Jan. 1, 2015. The Commerce Department's letter advised investors to contact the Office of the State Tax Commissioner regarding filing amended income tax returns.
Tax Commissioner Ryan Rauschenberger said tax credits earned for investments made into the fund in 2015 and 2016 would be ineligible.
Purdon asks Schuler for a response by April 28, but said Legendary "will continue to explore all legal options" until then.
Commerce Department spokesman Jesse Bradley said they hadn't received the letter as of late Wednesday morning. He said they'll "review and determine next steps" once they do.