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General Assembly Substitute Bill No. 5300
February Session, 2024
AN ACT CONCERNING THE INVEST CT FUND PROGRAM.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Subsection (c) of section 38a-88a of the general statutes is 1
repealed and the following is substituted in lieu thereof (Effective October 2
1, 2024): 3
(c) (1) As used in this subsection: 4
(A) "Allocation date" means the date an invest CT fund receives an 5
investment of eligible capital equaling the amount of credits against the 6
tax imposed under chapter 207 and section 38a-743 allocated to 7
taxpayers who invest in such invest CT fund; 8
(B) "Cybersecurity business" means an eligible business primarily 9
engaged in providing information technology products, goods or 10
services intended to detect, prevent or respond to activity intended to 11
result in unauthorized access to, exfiltration of, manipulation of, or 12
impairment to the integrity, confidentiality or availability of an 13
information technology system or information stored on, or transiting, 14
an information technology system; 15
(C) "Eligible business" means a business that has its principal 16
business operations in Connecticut, has fewer than two hundred fifty 17 Substitute Bill No. 5300
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employees at the time of investment and not more than ten million 18
dollars in net income in the previous year; 19
(D) "Eligible capital" means an investment of cash by a taxpayer in an 20
invest CT fund that fully funds the purchase price of an equity interest 21
in the invest CT fund or an eligible debt instrument issued by an invest 22
CT fund, at par value or a premium, that (i) has an original maturity 23
date of at least five years after the date of issuance, (ii) has a repayment 24
schedule that is not faster than a level principal amortization over five 25
years, and (iii) has no interest, distribution or payment features tied to 26
the invest CT fund's profitability or the success of the investments; 27
(E) "Green technology business" means an eligible business with not 28
less than twenty-five per cent of its employment positions being 29
positions in which green technology is employed or developed and may 30
include the occupation codes identified as green jobs by the Department 31
of Economic and Community Development and the Labor Department 32
for such purposes; 33
(F) "Income year" means the income year as determined in chapter 34
207 for the taxpayer; 35
(G) "Invest CT fund" means a Connecticut partnership, corporation, 36
trust or limited liability company, whether organized on a profit or not-37
for-profit basis, that (i) is managed by at least two principals or persons 38
that have at least four years of experience each in managing venture 39
capital or private equity funds, with at least fifty million dollars of such 40
funds from people unaffiliated with the manager, (ii) has received an 41
equity investment of capital other than eligible capital equal to no less 42
than five per cent of the total amount of the eligible capital to be invested 43
in such invest CT fund on or before June 30, 2015, and equal to not less 44
than ten per cent of the total amount of eligible capital to be invested in 45
such invest CT fund on or after September 1, 2015, and (iii) is not, or will 46
not be after the receipt of eligible capital, controlled by or under 47
common control with, one or more insurance companies. An investment 48
of eligible capital shall not result in insurance company control unless 49 Substitute Bill No. 5300
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such investment exceeds forty million dollars per taxpayer and results 50
in insurance companies having the right to vote more than fifty per cent 51
of the equity interests of the invest CT fund cash invested in such invest 52
CT fund, provided this provision shall not prohibit the interim control 53
of an invest CT fund by one or more insurance companies upon a breach 54
of any payment obligation of the invest CT fund or contractual or other 55
agreement by the invest CT fund that is designed to ensure compliance 56
with this section; and 57
(H) "Principal business operations" means at least eighty per cent of 58
the business organization's employees reside in the state or eighty per 59
cent of the business payroll is paid to individuals living in this state. 60
(2) A taxpayer that makes an investment of eligible capital shall, in 61
the year of investment, earn a vested credit against the premium tax 62
imposed pursuant to chapter 207 and section 38a-743. Such credit shall 63
be available as follows: (A) With respect to investments of eligible 64
capital made on or before June 30, 2015, (i) commencing with the tax 65
return due for the first to third, inclusive, tax years, zero per cent; (ii) 66
commencing with the tax return due for the fourth to seventh, inclusive, 67
tax years, not more than ten per cent; and (iii) commencing with the tax 68
return due for the eighth to tenth, inclusive, tax years, not more than 69
twenty per cent; and (B) with respect to investments of eligible capital 70
made on or after September 1, 2015, (i) commencing with the tax return 71
due for the first to fifth, inclusive, tax years, zero per cent; and (ii) 72
commencing with the tax return due for the sixth to tenth, inclusive, tax 73
years, not more than twenty per cent. The maximum amount of eligible 74
capital for which credits may be allowed under this subsection shall not 75
result in more than forty million dollars of tax credits being used in any 76
one year exclusive of any carried forward credits and no fund shall 77
apply for more than the total amount of credits available under this 78
section. 79
(3) (A) On or before July 1, 2010, the Commissioner of Economic and 80
Community Development shall begin to accept applications for 81
certification as an invest CT fund and for allocations of tax credits under 82 Substitute Bill No. 5300
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this subsection with allocation dates of June 30, 2015, or earlier. On and 83
after September 1, 2015, the commissioner shall accept applications for 84
certification as an invest CT fund and for allocations of tax credits under 85
this subsection with allocation dates of September 1, 2015, or later. 86
Applications shall include: [(A)] (i) The amount of eligible capital the 87
applicant will raise; [(B)] (ii) a nonrefundable application fee of seven 88
thousand five hundred dollars; [(C)] (iii) evidence of satisfaction of the 89
requirements of the definition of "invest CT fund" pursuant to 90
subparagraph (G) of subdivision (1) of this subsection; [(D)] (iv) an 91
affidavit by each taxpayer committing an investment of eligible capital; 92
[(E)] (v) a business plan detailing [(i)] (I) the approximate percentage of 93
eligible capital the applicant will invest in eligible businesses by the 94
third, fifth, seventh and ninth anniversaries of its allocation date, [(ii)] 95
(II) the industry segments listed by the North American Industrial 96
Classification System code and percentage of eligible capital in which 97
the applicant will invest, [(iii)] (III) the number of jobs that will be 98
created or retained as a result of the applicant's investments once all 99
eligible capital has been invested, [(iv)] (IV) the percentage of eligible 100
capital to be invested in eligible businesses primarily engaged in 101
conducting research and development or manufacturing, processing or 102
assembling technology–based products, and [(v)] (V) a revenue impact 103
assessment demonstrating that the applicant's business plan has a 104
revenue neutral or positive impact on the state; [(F)] (vi) a commitment 105
to invest at least twenty-five per cent of its eligible capital in green 106
technology businesses; [(G)] (vii) with respect to applications submitted 107
on or before June 30, 2015, a commitment to invest, by the third 108
anniversary of its allocation date, three per cent of its eligible capital in 109
preseed investments, and with respect to applications submitted on or 110
after September 1, 2015, a commitment to invest, by the fourth 111
anniversary of the allocation date, seven per cent of its eligible capital in 112
preseed investments, in consultation with Connecticut Innovations, 113
Incorporated, pursuant to the corporation's program for preseed 114
financing established pursuant to section 32-41x; and [(H)] (viii) with 115
respect to applications submitted on or after September 1, 2015, a 116
commitment to invest at least three per cent of its eligible capital in 117 Substitute Bill No. 5300
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cybersecurity businesses and at least twenty-five per cent of its eligible 118
capital in eligible businesses located in municipalities with a population 119
greater than eighty thousand. The commissioner may require the 120
applicant to obtain a revenue impact assessment conducted by an 121
independent third party. 122
(B) (i) From October 1, 2024, to September 30, 2026, inclusive, an 123
applicant may submit to the commissioner a request, in such form and 124
manner prescribed by the commissioner, to consider as an eligible 125
business a business that does not have its principal business operations 126
in Connecticut. The commissioner may approve such a request if the 127
commissioner determines that such an approval would significantly 128
advance the objectives of the invest CT fund program, provided such 129
business complies with all other requirements under subparagraph (A) 130
of this subdivision. 131
(ii) Not later than January 1, 2026, the commissioner shall submit a 132
report, in accordance with the provisions of section 11-4a, on any 133
requests approved by the commissioner pursuant to subparagraph 134
(B)(i) of this subdivision during the period of October 1, 2024, to 135
September 30, 2025, inclusive, to the joint standing committee of the 136
General Assembly having cognizance of matters relating to commerce. 137
Not later than January 1, 2027, the commissioner shall submit a report, 138
in accordance with the provisions of section 11-4a, on any requests 139
approved by the commissioner pursuant to subparagraph (B)(i) of this 140
subdivision during the period of October 1, 2025, to September 30, 2026, 141
inclusive, to the joint standing committee of the General Assembly 142
having cognizance of matters relating to commerce. Such reports shall 143
include, but need not be limited to, a list of the applicants whose 144
requests were approved by the commissioner and an analysis of the 145
benefit to and impact on the state resulting from such approvals. 146
(4) Applications for tax credits pursuant to this subsection shall be 147
accepted and approved on a first-come, first-served basis with all 148
applications received on the same date deemed to be received 149
simultaneously and approvals being made on a pro rata basis if such 150 Substitute Bill No. 5300
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applications exceed the amount of remaining credits. 151
(5) The commissioner shall issue an allocation of credits subject to 152
confirmation by the fund on a form prescribed by the commissioner that 153
an investment of eligible capital was received within five business days. 154
If an invest CT fund does not receive an investment of eligible capital 155
equaling the amount of credits against the tax imposed under chapter 156
207 and section 38a-743 allocated to a taxpayer, for which it filed an 157
affidavit with its application prior to the fifth business day after receipt 158
of certification, the invest CT fund shall notify the commissioner by 159
overnight common carrier delivery service and that portion of eligible 160
capital allocated to the insurance company shall be forfeited. Such invest 161
CT fund and forfeiting taxpayer shall each be assessed a twenty-five-162
thousand-dollar administrative penalty. The commissioner shall 163
reallocate the forfeited eligible capital among all other remaining 164
taxpayers that invested eligible capital. 165
(6) To continue to be certified, an invest CT fund shall (A) be in 166
compliance with the investment parameters set forth in its business 167
plan, provided an invest CT fund may apply to the commissioner to 168
amend its business plan based on unavoidable or reasonably 169
unanticipated changes to various conditions, including, but not limited 170
to, the general economic climate of the state or particular sectors of the 171
economy, technological advances and high employment and revenue 172
growth opportunities, with approval for such changes not to be 173
unreasonably withheld by the commissioner; (B) be in compliance with 174
the revenue impact assessment provided in the application 175
demonstrating that the fund's business plan continues to have a revenue 176
neutral or positive impact on the state; (C) have invested one hundred 177
per cent of its eligible capital in eligible businesses by the tenth 178
anniversary of its allocation date, with a minimum of twenty-five per 179
cent of eligible capital invested in green technology businesses; (D) for 180
allocation dates of June 30, 2015, or earlier: (i) Have invested sixty per 181
cent of its eligible capital in eligible businesses by the fourth anniversary 182
of such allocation date, and (ii) have invested a minimum of three per 183
cent of such eligible capital in preseed investments, as described in 184 Substitute Bill No. 5300
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subparagraph (A) of subdivision (3) of this subsection, by the third 185
anniversary of such allocation date; and (E) for allocation dates of 186
September 1, 2015, or later: (i) Have invested sixty per cent of its eligible 187
capital in eligible businesses by the sixth anniversary of such allocation 188
date, (ii) have invested a minimum of seven per cent of its eligible capital 189
in preseed investments, as described in subparagraph (A) of subdivision 190
(3) of this subsection, by the fourth anniversary of such allocation date, 191
(iii) have invested a minimum of three per cent of its eligible capital in 192
cybersecurity businesses, and (iv) have invested a minimum of twenty-193
five per cent of its eligible capital in eligible businesses located in 194
municipalities with a population greater than eighty thousand. An 195
invest CT fund shall only invest eligible capital in eligible businesses, 196
bank deposits, certificates of deposit or other fixed income securities and 197
may not invest more than fifteen per cent of its eligible capital in any 198
one eligible business without prior approval of the commissioner. 199
(7) Not later than January thirty-first annually, each invest CT fund 200
shall report to the commissioner: (A) The amount of eligible capital 201
remaining at the end of the preceding year; (B) each investment in an 202
eligible business during the preceding year and, with respect to each 203
eligible business, its location and North American Industrial 204
Classification System code; (C) the percentage of eligible capital 205
invested in green technology businesses, preseed investments, 206
cybersecurity businesses and eligible businesses located in 207
municipalities with a population greater than eighty thousand; and (D) 208
distributions made by the invest CT fund in the preceding year. In the 209
annual report due in the third, fifth, seventh and ninth years after its 210
allocation date, each invest CT fund shall also report to the 211
commissioner its compliance with the investment parameters set forth 212
in its business plan and the revenue impact assessment provided in the 213
application demonstrating that the fund's business plan continues to 214
have a revenue neutral or positive impact on the state. Each invest CT 215
fund shall provide to the commissioner annual audited financial 216
statements. 217
(8) To make a distribution or payment, an invest CT fund certified by 218 Substitute Bill No. 5300
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the commissioner on or before June 30, 2015, must have invested one 219
hundred per cent of its eligible capital in eligible businesses, with a 220
minimum of twenty-five per cent of eligible capital invested in green 221
technology businesses and a minimum of three per cent of eligible 222
capital invested in preseed investment, as described in subparagraph 223
(A) of subdivision (3) of this subsection, with principal business 224
operations in this state at the time of such determination except: (A) 225
Distributions related to the payment of any projected increase in federal 226
or state taxes, including penalties and interest related to state and 227
federal income taxes, of the equity owners of the invest CT fund 228
resulting from the earnings or other tax liability of the invest CT fund to 229
the extent that the increase is related to the ownership, management or 230
operation of the invest CT fund; (B) payments of interest and principal 231
on the debt of the invest CT fund, provided after such payment, the 232
invest CT fund still has cash and other marketable securities in an 233
amount that, when added to the cumulative investments it has made in 234
eligible recipients, equals not less than sixty per cent of the eligible 235
capital invested in such reinvestment fund; or (C) payments related to 236
the reasonable costs and expenses of forming, syndicating, managing 237
and operating the fund, provided the distribution or payment is not 238
made directly or indirectly to an insurance company that has invested 239
eligible capital in the invest CT fund, including: (i) Reasonable and 240
necessary fees paid for professional services, including legal and 241
accounting services, related to the formation and operation of the invest 242
CT fund; and (ii) an annual management fee in an amount that does not 243
exceed two and one-half per cent of the eligible capital of the invest CT 244
fund. The state shall receive a share of any distribution, except as set 245
forth in subparagraphs (A), (B) and (C) of this subdivision and 246
distributions made to return any equity capital invested in the invest CT 247
fund that is not eligible capital, in the following percentages: (I) Ten per 248
cent when less than eighty per cent but more than sixty per cent of the 249
jobs set forth in the invest CT fund's business plan are created or 250
retained, and (II) twenty per cent when sixty per cent or less of the jobs 251
set forth in the invest CT fund's business plan are created or retained. 252 Substitute Bill No. 5300
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(9) To make a distribution or payment, an invest CT fund certified by 253
the commissioner on or after September 1, 2015, must have invested one 254
hundred per cent of its eligible capital in eligible businesses, with a 255
minimum of twenty-five per cent of eligible capital invested in green 256
technology businesses, a minimum of seven per cent of eligible capital 257
invested in preseed investments, as described in subparagraph (A) of 258
subdivision (3) of this subsection, a minimum of three per cent of eligible 259
capital invested in cybersecurity businesses, and a minimum of twenty-260
five per cent of eligible capital invested in businesses located in 261
municipalities with a population greater than eighty thousand, with 262
principal business operations in this state at the time of such 263
determination, except: (A) Distributions related to the payment of any 264
projected increase in federal or state taxes, including penalties and 265
interest related to state and federal income taxes, of the equity owners 266
of the invest CT fund resulting from the earnings or other tax liability of 267
the invest CT fund to the extent that the increase is related to the 268
ownership, management or operation of the invest CT fund; (B) 269
payments of interest and principal on the debt of the invest CT fund, 270
provided after such payment, the invest CT fund still has cash and other 271
marketable securities in an amount that, when added to the cumulative 272
investments it has made in eligible recipients, equals not less than sixty 273
per cent of the eligible capital invested in such reinvestment fund; or (C) 274
payments related to the reasonable costs and expenses of forming, 275
syndicating, managing and operating the fund, provided the 276
distribution or payment is not made directly or indirectly to an 277
insurance company that has invested eligible capital in the invest CT 278
fund, including: (i) Reasonable and necessary fees paid for professional 279
services, including legal and accounting services, related to the 280
formation and operation of the invest CT fund; and (ii) an annual 281
management fee in an amount that does not exceed two and one-half 282
per cent of the eligible capital of the invest CT fund. The state shall 283
receive a share of any distribution, except as set forth in subparagraphs 284
(A), (B) and (C) of this subdivision and distributions made to return any 285
equity capital invested in the invest CT fund that is not eligible capital, 286
in the following percentages: (I) Ten per cent when less than eighty per 287 Substitute Bill No. 5300
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cent but more than sixty per cent of the jobs set forth in the invest CT 288
fund's business plan are created or retained, and (II) twenty per cent 289
when sixty per cent or less of the jobs set forth in the invest CT fund's 290
business plan are created or retained. 291
(10) The commissioner shall review each annual report to ensure 292
compliance with subdivisions (6), (7), (8) and (9) of this subsection. A 293
material variation from subdivision (6), (7), (8) or (9) of this subsection 294
is grounds for decertification of the invest CT fund. If the commissioner 295
determines that an invest CT fund is not in compliance with subdivision 296
(6), (7), (8) or (9) of this subsection or the investment parameters of its 297
business plan, the commissioner shall notify the officers of the invest CT 298
fund, in writing, that the invest CT fund may be subject to 299
decertification after the one hundred twentieth day after the date of 300
mailing the notice, unless the deficiencies are waived by the 301
commissioner or are corrected and the invest CT fund returns to 302
compliance with subdivisions (6), (7), (8) and (9) of this subsection. 303
(11) Decertification of an invest CT fund shall cause the forfeiture of 304
future credits against the tax imposed by chapter 207 and section 38a-305
743 to be claimed with respect to an invest CT fund when (A) such 306
decertification occurs on or before the fourth anniversary of an 307
allocation date of June 30, 2015, or earlier, or on or before the sixth 308
anniversary of an allocation date of September 1, 2015, or later, and (B) 309
such fund has invested less than sixty per cent of its eligible capital in 310
eligible businesses by said anniversary. The commissioner shall send 311
written notice to the last-known address of each taxpayer whose credit 312
against the tax imposed by chapter 207 is subject to recapture or 313
forfeiture. 314
This act shall take effect as follows and shall amend the following
sections:
Section 1 October 1, 2024 38a-88a(c)
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Statement of Legislative Commissioners:
Throughout Subdiv. (3)(B)(ii), "section 11-4a of the general statutes,"
was changed to "section 11-4a," for consistency with standard drafting
conventions.
CE Joint Favorable Subst.