Connecticut General Statutes 12-704d – Credits for angel investors
(a) As used in this section:
Terms Used In Connecticut General Statutes 12-704d
- Commissioner: means the Commissioner of Revenue Services or his authorized agent. See Connecticut General Statutes 12-701
- company: means any person, partnership, association, company, limited liability company or corporation, except an incorporated municipality. See Connecticut General Statutes 12-1
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- federal: refer to the corresponding terms defined in the laws of the United States. See Connecticut General Statutes 12-701
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
- National Bank: A bank that is subject to the supervision of the Comptroller of the Currency. The Office of the Comptroller of the Currency is a bureau of the U.S. Treasury Department. A national bank can be recognized because it must have "national" or "national association" in its name. Source: OCC
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Partnership: means a partnership as defined in Section 7701(a)(2) of the Internal Revenue Code and the regulations adopted thereunder, as from time to time amended, and any reference in this chapter or in regulations adopted under this chapter to a partnership shall include a limited liability company that is treated as a partnership for federal income tax purposes. See Connecticut General Statutes 12-701
- Person: means a person as defined in section 12-1, but shall not include any corporation or association which is taxable as a corporation for the purposes of chapter 208, provided, for purposes of sections 12-735, 12-736 and 12-737, the term "person" shall include an individual, corporation or partnership and any officer or employee of any corporation, including a dissolved corporation, and a member or employee of any partnership who, as such officer, employee or member, is under a duty to perform the act in respect of which the violation occurs. See Connecticut General Statutes 12-701
- succeeding: when used by way of reference to any section or sections, mean the section or sections next preceding, next following or next succeeding, unless some other section is expressly designated in such reference. See Connecticut General Statutes 1-1
- Taxable year: means taxable year as determined in accordance with section 12-708. See Connecticut General Statutes 12-701
(1) “Angel investor” means an accredited investor, as defined by the Securities and Exchange Commission, or network of accredited investors who review new or proposed businesses for potential investment and who may seek active involvement, such as consulting and mentoring, in a qualified Connecticut business or a qualified cannabis business, but “angel investor” does not include (A) a person controlling fifty per cent or more of the Connecticut business or cannabis business invested in by the angel investor, (B) a venture capital company, or (C) any bank, bank and trust company, insurance company, trust company, national bank, savings association or building and loan association for activities that are a part of its normal course of business;
(2) “Cash investment” means the contribution of cash, at a risk of loss, to a qualified Connecticut business or a qualified cannabis business in exchange for qualified securities;
(3) “Connecticut business” means any business, other than a cannabis business, with its principal place of business in Connecticut;
(4) “Bioscience” means manufacturing pharmaceuticals, medicines, medical equipment or medical devices and analytical laboratory instruments, operating medical or diagnostic testing laboratories, or conducting pure research and development in life sciences;
(5) “Advanced materials” means developing, formulating or manufacturing advanced alloys, coatings, lubricants, refrigerants, surfactants, emulsifiers or substrates;
(6) “Photonics” means generation, emission, transmission, modulation, signal processing, switching, amplification, detection and sensing of light from ultraviolet to infrared and the manufacture, research or development of opto-electronic devices, including, but not limited to, lasers, masers, fiber optic devices, quantum devices, holographic devices and related technologies;
(7) “Information technology” means software publishing, motion picture and video production, teleproduction and postproduction services, telecommunications, data processing, hosting and related services, custom computer programming services, computer system design, computer facilities management services, other computer related services and computer training;
(8) “Clean technology” means the production, manufacture, design, research or development of clean energy, green buildings, smart grid, high-efficiency transportation vehicles and alternative fuels, environmental products, environmental remediation and pollution prevention;
(9) “Qualified securities” means any form of equity, including a general or limited partnership interest, common stock, preferred stock, with or without voting rights, without regard to seniority position that must be convertible into common stock;
(10) “Emerging technology business” means any business that is engaged in bioscience, advanced materials, photonics, information technology, clean technology or any other emerging technology as determined by the Commissioner of Economic and Community Development;
(11) “Cannabis business” means a cannabis establishment (A) for which a social equity applicant has been granted a provisional license or a license, (B) in which a social equity applicant or social equity applicants have an ownership interest of at least sixty-five per cent, and (C) such social equity applicant or social equity applicants have control of such establishment;
(12) “Social equity applicant” has the same meaning as provided in section 21a-420;
(13) “Cannabis” has the same meaning as provided in section 21a-420; and
(14) “Cannabis establishment” has the same meaning as provided in section 21a-420.
(b) There shall be allowed a credit against the tax imposed under this chapter, other than the liability imposed by section 12-707, for a cash investment by an angel investor of not less than twenty-five thousand dollars in the qualified securities of a Connecticut business or a cannabis business. The credit shall be in an amount equal to (1) twenty-five per cent of such investor’s cash investment in a Connecticut business, or (2) forty per cent of such investor’s cash investment in a cannabis business, provided the total tax credits allowed to any angel investor shall not exceed five hundred thousand dollars. The credit shall be claimed in the taxable year in which such cash investment is made by the angel investor. The credit may be sold, assigned or otherwise transferred, in whole or in part.
(c) To qualify for a tax credit pursuant to this section, a cash investment shall be in:
(1) A Connecticut business that (A) has been approved as a qualified Connecticut business pursuant to subsection (d) of this section; (B) had annual gross revenues of less than one million dollars in the most recent income year of such business; (C) has fewer than twenty-five employees, not less than seventy-five per cent of whom reside in this state; (D) has been operating in this state for less than seven consecutive years; (E) is primarily owned by the management of the business and their families; and (F) received less than two million dollars in cash investments eligible for the tax credits provided by this section; or
(2) A cannabis business that (A) has been approved as a qualified cannabis business pursuant to subsection (d) of this section; (B) had annual gross revenues of less than one million dollars in the most recent income year of such business; (C) has fewer than twenty-five employees, not less than seventy-five per cent of whom reside in this state; (D) is primarily owned by the management of the business and their families; and (E) received less than two million dollars in cash investments eligible for the tax credits provided by this section.
(d) (1) A Connecticut business or a cannabis business may apply to Connecticut Innovations, Incorporated, for approval as a Connecticut business or cannabis business, as applicable, qualified to receive cash investments eligible for a tax credit pursuant to this section. The application shall include (A) the name of the business and a copy of the organizational documents of such business, (B) a business plan, including a description of the business and the management, product, market and financial plan of the business, (C) a description of the business’s innovative technology, product or service, (D) a statement of the potential economic impact of the business, including the number, location and types of jobs expected to be created, (E) a description of the qualified securities to be issued and the amount of cash investment sought by the business, (F) a statement of the amount, timing and projected use of the proceeds to be raised from the proposed sale of qualified securities, and (G) such other information as the chief executive officer of Connecticut Innovations, Incorporated, may require.
(2) Said chief executive officer shall, on a monthly basis, compile a list of approved applications, categorized by the cash investments being sought by the qualified Connecticut business or the qualified cannabis business and type of qualified securities offered.
(e) (1) Any angel investor that intends to make a cash investment in a business on such list may apply to Connecticut Innovations, Incorporated, to reserve a tax credit in the amount indicated by such investor. Connecticut Innovations, Incorporated, shall not reserve tax credits under this section for any investments made in a qualified Connecticut business on or after July 1, 2028, or for any investments made in a qualified cannabis business on or after July 1, 2023.
(2) The aggregate amount of all tax credits under this section that may be reserved by Connecticut Innovations, Incorporated, shall not exceed (A) for cash investments made in qualified Connecticut businesses, six million dollars annually for the fiscal years commencing July 1, 2010, to July 1, 2012, inclusive, and five million dollars for each fiscal year thereafter, and (B) for cash investments made in qualified cannabis businesses, fifteen million dollars annually for the fiscal years commencing July 1, 2021, and July 1, 2022.
(3) With respect to the tax credits available under this section for investments in qualified Connecticut businesses, Connecticut Innovations, Incorporated, shall not reserve more than seventy-five per cent of such tax credits for investments in emerging technology businesses, except if any such credits remain available for reservation after April first in any fiscal year, such remaining credits may be reserved for investments in such businesses and may be prioritized for veteran-owned, women-owned or minority-owned businesses and businesses owned by individuals with disabilities.
(4) The amount of the credit allowed to any investor pursuant to this section shall not exceed the amount of tax due from such investor under this chapter, other than section 12-707, with respect to such taxable year. Any tax credit that is claimed by the angel investor but not applied against the tax due under this chapter, other than the liability imposed under section 12-707, may be carried forward for the five immediately succeeding taxable years until the full credit has been applied.
(f) If the angel investor is an S corporation or an entity treated as a partnership for federal income tax purposes, the tax credit may be claimed by the shareholders or partners of the angel investor. If the angel investor is a single member limited liability company that is disregarded as an entity separate from its owner, the tax credit may be claimed by such limited liability company’s owner, provided such owner is a person subject to the tax imposed under this chapter.
(g) A review of the cumulative effectiveness of the credit under this section shall be conducted by Connecticut Innovations, Incorporated, by July first annually. Such review shall include, but need not be limited to, the number and type of Connecticut businesses and cannabis businesses that received angel investments, the number of angel investors and the aggregate amount of cash investments, the current status of each Connecticut business and cannabis business that received angel investments, the number of employees employed in each year following the year in which such Connecticut business or cannabis business received the angel investment and the economic impact in the state of the Connecticut business or cannabis business that received the angel investment. Such review shall be submitted to the Office of Policy and Management and to the joint standing committee of the General Assembly having cognizance of matters relating to commerce, in accordance with the provisions of section 11-4a.