Researcher: RP Page 1 5/10/21
OLR Bill Analysis
SB 1095
AN ACT EXPANDING THE ANGEL INVESTOR TAX CREDIT
PROGRAM TO SOCIAL EQUITY APPLICANTS.
SUMMARY
The angel investor tax credit program provides personal income tax
credits to angel investors (i.e., investors who the Securities and
Exchange Commission considers “accredited investors”) who make
qualifying cash investments in eligible Connecticut businesses. This
bill extends the tax credit program to eligible cannabis establishments
for which social equity applicants have been granted a license or
provisional license (i.e., “cannabis businesses”). Under the bill,
cannabis is marijuana as defined under existing law (see
BACKGROUND).
Under the bill, eligible investors may receive income tax credits
equal to 40% of their credit-eligible investments in qualifying cannabis
businesses, subject to a $15 million per fiscal year cap on the credits.
The bill increases the total credits allowed under the program from $5
million to $20 million per fiscal year.
The bill makes numerous conforming changes to the program’s
statutes. As under existing law, the angel investor tax credit program
expires on June 30, 2024.
EFFECTIVE DATE: July 1, 2021
ELIGIBLE CANNABIS BUSINESSES
By law, a business must apply for and receive approval from
Connecticut Innovations, Inc. (CI) in order to receive credit-eligible
investments. The bill extends this requirement to “cannabis
businesses,” which the bill defines as a “cannabis establishment” for
which a “social equity applicant” has been granted a license or
provisional license. It also establishes specific criteria these businesses 2021SB-01095-R000669-BA.DOCX
Researcher: RP Page 2 5/10/21
must meet in order to qualify for the tax credit program, as described
below.
Cannabis Establishments
Under the bill, a “cannabis establishment” has the same meaning as
in sSB 888 of the current session. Specifically, it is a producer,
dispensary facility, cultivator, micro-cultivator, retailer, hybrid retailer
(i.e., licensed to sell both recreational cannabis and medical marijuana),
food and beverage manufacturer, product manufacturer, product
packager, or delivery service, as those terms are defined in sSB 888.
Social Equity Applicants
The bill defines a “social equity applicant” as an applicant for a
cannabis establishment license, provided the establishment is either at
least 51% owned by, or under the day-to-day control of, an individual
or individuals who:
1. have a prior arrest or conviction, as an adult or juvenile, for the
sale, possession, use, manufacture, or cultivation of cannabis;
2. have a parent, spouse, or child who has such an arrest or
conviction;
3. have been a resident of a disproportionately affected
community for at least five of the 10 years immediately before
applying for the license; or
4. reside on tribal land.
In addition, these individuals’ primary addresses must have been in
Connecticut for at least five years immediately before applying for the
license.
A “disproportionately affected community” is either of the
following:
1. one of the top 20 communities on the most recent Public
Investment Community index prepared by the Office of Policy
and Management (OPM) (this index ranks municipalities in 2021SB-01095-R000669-BA.DOCX
Researcher: RP Page 3 5/10/21
descending order based on their relative wealth and need,
according to specified criteria); or
2. a census tract in any municipality whose unemployment rate,
and percentage of town residents below the federal poverty
level, is greater than the statewide rate and percentage,
respectively.
Eligibility Criteria
Under the bill, a cannabis business must generally meet the same
criteria that existing law specifies for other eligible businesses.
Specifically, the cannabis business must be primarily owned by the
managers of the business and their families and have:
1. gross revenues of less than $1 million in the most recent income
year;
2. fewer than 25 employees, more than 75% of whom are
Connecticut residents; and
3. received less than $2 million in investments from credit-eligible
angel investors.
Businesses eligible under current law must meet these same criteria,
as well as having (1) their principal place of business in Connecticut
and (2) operated in Connecticut for less than seven consecutive years.
CREDIT AMOUNT
Under the bill, angel investors who invest at least $25,000 in
approved cannabis businesses are eligible for a personal income tax
credit equal to 40% of their investment, up to $500,000. As under
current law, investments in other approved businesses continue to
qualify for a 25% credit, subject to the same minimum investment and
maximum credit requirements.
CREDIT CAP
The bill establishes a $15 million per fiscal year cap on the amount
of tax credits CI may reserve for cash investments made in qualified 2021SB-01095-R000669-BA.DOCX
Researcher: RP Page 4 5/10/21
cannabis businesses. As under existing law, CI may reserve up to $5
million in credits each fiscal year for investments in other qualified
businesses. Thus, the bill increases, from $5 million to $20 million, the
aggregate amount of angel investor credits CI may reserve each fiscal
year, beginning with FY 22.
UNRESERVED CREDITS
Under current law, the amount of credits that CI may reserve each
year for investments in emerging technology businesses is generally
capped at 75% of the total amount of credits available that year. The
bill specifies that this limitation applies only to credits available for
investments under the current program (i.e., not to cannabis
businesses).
By law, CI may exceed this 75% cap if any unreserved credits
remain after April 1 in each year and it may prioritize the unreserved
credits for veteran-owned, women-owned, or minority-owned
businesses and businesses owned by individuals with disabilities. The
bill additionally allows CI to reserve these unreserved credits for
investments in qualified cannabis businesses. (It is unclear whether
these credits would apply against the $15 million cap for cannabis
businesses or $5 million cap for other businesses.)
BACKGROUND
Definition of Marijuana Under Existing Law
The law defines “marijuana” to include parts of a plant or species of
the genus cannabis, whether or not it is growing, and including its
seeds and resin; its compounds, manufactures, salts, derivatives,
mixtures, and preparations; and cannabinon, cannabinol, cannabidiol
(CBD), and similar compounds unless derived from hemp as defined
in federal law. Among other things, the definition excludes a plant’s
mature stalks; fiber made from the stalks; oil or cake made from the
seeds; a compound, manufacture, salt, derivative, mixture, or
preparation made from the stalks, except the extracted resin; and hemp
(CGS § 21a-240(29)).
Related Bill 2021SB-01095-R000669-BA.DOCX
Researcher: RP Page 5 5/10/21
sSB 888 (File 569), favorably reported by the Judiciary Committee,
contains identical provisions (§ 133).
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 35 Nay 11 (04/22/2021)