Substitute House Bill No. 5300
Public Act No. 24-33
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
repealed and the following is substituted in lieu thereof (Effective October
1, 2024):
(c) (1) As used in this subsection:
(A) "Allocation date" means the date an invest CT fund receives an
investment of eligible capital equaling the amount of credits against the
tax imposed under chapter 207 and section 38a-743 allocated to
taxpayers who invest in such invest CT fund;
(B) "Cybersecurity business" means an eligible business primarily
engaged in providing information technology products, goods or
services intended to detect, prevent or respond to activity intended to
result in unauthorized access to, exfiltration of, manipulation of, or
impairment to the integrity, confidentiality or availability of an
information technology system or information stored on, or transiting,
an information technology system;
(C) "Eligible business" means a business that has its principal
business operations in Connecticut, has fewer than two hundred fifty Substitute House Bill No. 5300
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employees at the time of investment and not more than ten million
dollars in net income in the previous year;
(D) "Eligible capital" means an investment of cash by a taxpayer in an
invest CT fund that fully funds the purchase price of an equity interest
in the invest CT fund or an eligible debt instrument issued by an invest
CT fund, at par value or a premium, that (i) has an original maturity
date of at least five years after the date of issuance, (ii) has a repayment
schedule that is not faster than a level principal amortization over five
years, and (iii) has no interest, distribution or payment features tied to
the invest CT fund's profitability or the success of the investments;
(E) "Green technology business" means an eligible business with not
less than twenty-five per cent of its employment positions being
positions in which green technology is employed or developed and may
include the occupation codes identified as green jobs by the Department
of Economic and Community Development and the Labor Department
for such purposes;
(F) "Income year" means the income year as determined in chapter
207 for the taxpayer;
(G) "Invest CT fund" means a Connecticut partnership, corporation,
trust or limited liability company, whether organized on a profit or not-
for-profit basis, that (i) is managed by at least two principals or persons
that have at least four years of experience each in managing venture
capital or private equity funds, with at least fifty million dollars of such
funds from people unaffiliated with the manager, (ii) has received an
equity investment of capital other than eligible capital equal to no less
than five per cent of the total amount of the eligible capital to be invested
in such invest CT fund on or before June 30, 2015, and equal to not less
than ten per cent of the total amount of eligible capital to be invested in
such invest CT fund on or after September 1, 2015, and (iii) is not, or will
not be after the receipt of eligible capital, controlled by or under Substitute House Bill No. 5300
Public Act No. 24-33 3 of 11
common control with, one or more insurance companies. An investment
of eligible capital shall not result in insurance company control unless
such investment exceeds forty million dollars per taxpayer and results
in insurance companies having the right to vote more than fifty per cent
of the equity interests of the invest CT fund cash invested in such invest
CT fund, provided this provision shall not prohibit the interim control
of an invest CT fund by one or more insurance companies upon a breach
of any payment obligation of the invest CT fund or contractual or other
agreement by the invest CT fund that is designed to ensure compliance
with this section; and
(H) "Principal business operations" means at least eighty per cent of
the business organization's employees reside in the state or eighty per
cent of the business payroll is paid to individuals living in this state.
(2) A taxpayer that makes an investment of eligible capital shall, in
the year of investment, earn a vested credit against the premium tax
imposed pursuant to chapter 207 and section 38a-743. Such credit shall
be available as follows: (A) With respect to investments of eligible
capital made on or before June 30, 2015, (i) commencing with the tax
return due for the first to third, inclusive, tax years, zero per cent; (ii)
commencing with the tax return due for the fourth to seventh, inclusive,
tax years, not more than ten per cent; and (iii) commencing with the tax
return due for the eighth to tenth, inclusive, tax years, not more than
twenty per cent; and (B) with respect to investments of eligible capital
made on or after September 1, 2015, (i) commencing with the tax return
due for the first to fifth, inclusive, tax years, zero per cent; and (ii)
commencing with the tax return due for the sixth to tenth, inclusive, tax
years, not more than twenty per cent. The maximum amount of eligible
capital for which credits may be allowed under this subsection shall not
result in more than forty million dollars of tax credits being used in any
one year exclusive of any carried forward credits and no fund shall
apply for more than the total amount of credits available under this Substitute House Bill No. 5300
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section.
(3) (A) On or before July 1, 2010, the Commissioner of Economic and
Community Development shall begin to accept applications for
certification as an invest CT fund and for allocations of tax credits under
this subsection with allocation dates of June 30, 2015, or earlier. On and
after September 1, 2015, the commissioner shall accept applications for
certification as an invest CT fund and for allocations of tax credits under
this subsection with allocation dates of September 1, 2015, or later.
Applications shall include: [(A)] (i) The amount of eligible capital the
applicant will raise; [(B)] (ii) a nonrefundable application fee of seven
thousand five hundred dollars; [(C)] (iii) evidence of satisfaction of the
requirements of the definition of "invest CT fund" pursuant to
subparagraph (G) of subdivision (1) of this subsection; [(D)] (iv) an
affidavit by each taxpayer committing an investment of eligible capital;
[(E)] (v) a business plan detailing [(i)] (I) the approximate percentage of
eligible capital the applicant will invest in eligible businesses by the
third, fifth, seventh and ninth anniversaries of its allocation date, [(ii)]
(II) the industry segments listed by the North American Industrial
Classification System code and percentage of eligible capital in which
the applicant will invest, [(iii)] (III) the number of jobs that will be
created or retained as a result of the applicant's investments once all
eligible capital has been invested, [(iv)] (IV) the percentage of eligible
capital to be invested in eligible businesses primarily engaged in
conducting research and development or manufacturing, processing or
assembling technology–based products, and [(v)] (V) a revenue impact
assessment demonstrating that the applicant's business plan has a
revenue neutral or positive impact on the state; [(F)] (vi) a commitment
to invest at least twenty-five per cent of its eligible capital in green
technology businesses; [(G)] (vii) with respect to applications submitted
on or before June 30, 2015, a commitment to invest, by the third
anniversary of its allocation date, three per cent of its eligible capital in
preseed investments, and with respect to applications submitted on or Substitute House Bill No. 5300
Public Act No. 24-33 5 of 11
after September 1, 2015, a commitment to invest, by the fourth
anniversary of the allocation date, seven per cent of its eligible capital in
preseed investments, in consultation with Connecticut Innovations,
Incorporated, pursuant to the corporation's program for preseed
financing established pursuant to section 32-41x; and [(H)] (viii) with
respect to applications submitted on or after September 1, 2015, a
commitment to invest at least three per cent of its eligible capital in
cybersecurity businesses and at least twenty-five per cent of its eligible
capital in eligible businesses located in municipalities with a population
greater than eighty thousand. The commissioner may require the
applicant to obtain a revenue impact assessment conducted by an
independent third party.
(B) (i) From October 1, 2024, to September 30, 2026, inclusive, an
applicant may submit to the commissioner a request, in such form and
manner prescribed by the commissioner, to consider as an eligible
business a business that does not have its principal business operations
in Connecticut. The commissioner may approve such a request if the
commissioner determines that such an approval would significantly
advance the objectives of the invest CT fund program, provided such
applicant complies with all other requirements under subparagraph (A)
of this subdivision.
(ii) Not later than January 1, 2026, the commissioner shall submit a
report, in accordance with the provisions of section 11-4a, on any
requests approved by the commissioner pursuant to subparagraph
(B)(i) of this subdivision during the period of October 1, 2024, to
September 30, 2025, inclusive, to the joint standing committee of the
General Assembly having cognizance of matters relating to commerce.
Not later than January 1, 2027, the commissioner shall submit a report,
in accordance with the provisions of section 11-4a, on any requests
approved by the commissioner pursuant to subparagraph (B)(i) of this
subdivision during the period of October 1, 2025, to September 30, 2026, Substitute House Bill No. 5300
Public Act No. 24-33 6 of 11
inclusive, to the joint standing committee of the General Assembly
having cognizance of matters relating to commerce. Such reports shall
include, but need not be limited to, a list of the applicants whose
requests were approved by the commissioner and an analysis of the
benefit to and impact on the state resulting from such approvals.
(4) Applications for tax credits pursuant to this subsection shall be
accepted and approved on a first-come, first-served basis with all
applications received on the same date deemed to be received
simultaneously and approvals being made on a pro rata basis if such
applications exceed the amount of remaining credits.
(5) The commissioner shall issue an allocation of credits subject to
confirmation by the fund on a form prescribed by the commissioner that
an investment of eligible capital was received within five business days.
If an invest CT fund does not receive an investment of eligible capital
equaling the amount of credits against the tax imposed under chapter
207 and section 38a-743 allocated to a taxpayer, for which it filed an
affidavit with its application prior to the fifth business day after receipt
of certification, the invest CT fund shall notify the commissioner by
overnight common carrier delivery service and that portion of eligible
capital allocated to the insurance company shall be forfeited. Such invest
CT fund and forfeiting taxpayer shall each be assessed a twenty-five-
thousand-dollar administrative penalty. The commissioner shall
reallocate the forfeited eligible capital among all other remaining
taxpayers that invested eligible capital.
(6) To continue to be certified, an invest CT fund shall (A) be in
compliance with the investment parameters set forth in its business
plan, provided an invest CT fund may apply to the commissioner to
amend its business plan based on unavoidable or reasonably
unanticipated changes to various conditions, including, but not limited
to, the general economic climate of the state or particular sectors of the
economy, technological advances and high employment and revenue Substitute House Bill No. 5300
Public Act No. 24-33 7 of 11
growth opportunities, with approval for such changes not to be
unreasonably withheld by the commissioner; (B) be in compliance with
the revenue impact assessment provided in the application
demonstrating that the fund's business plan continues to have a revenue
neutral or positive impact on the state; (C) have invested one hundred
per cent of its eligible capital in eligible businesses by the tenth
anniversary of its allocation date, with a minimum of twenty-five per
cent of eligible capital invested in green technology businesses; (D) for
allocation dates of June 30, 2015, or earlier: (i) Have invested sixty per
cent of its eligible capital in eligible businesses by the fourth anniversary
of such allocation date, and (ii) have invested a minimum of three per
cent of such eligible capital in preseed investments, as described in
subparagraph (A) of subdivision (3) of this subsection, by the third
anniversary of such allocation date; and (E) for allocation dates of
September 1, 2015, or later: (i) Have invested sixty per cent of its eligible
capital in eligible businesses by the sixth anniversary of such allocation
date, (ii) have invested a minimum of seven per cent of its eligible capital
in preseed investments, as described in subparagraph (A) of subdivision
(3) of this subsection, by the fourth anniversary of such allocation date,
(iii) have invested a minimum of three per cent of its eligible capital in
cybersecurity businesses, and (iv) have invested a minimum of twenty-
five per cent of its eligible capital in eligible businesses located in
municipalities with a population greater than eighty thousand. An
invest CT fund shall only invest eligible capital in eligible businesses,
bank deposits, certificates of deposit or other fixed income securities and
may not invest more than fifteen per cent of its eligible capital in any
one eligible business without prior approval of the commissioner.
(7) Not later than January thirty-first annually, each invest CT fund
shall report to the commissioner: (A) The amount of eligible capital
remaining at the end of the preceding year; (B) each investment in an
eligible business during the preceding year and, with respect to each
eligible business, its location and North American Industrial Substitute House Bill No. 5300
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Classification System code; (C) the percentage of eligible capital
invested in green technology businesses, preseed investments,
cybersecurity businesses and eligible businesses located in
municipalities with a population greater than eighty thousand; and (D)
distributions made by the invest CT fund in the preceding year. In the
annual report due in the third, fifth, seventh and ninth years after its
allocation date, each invest CT fund shall also report to the
commissioner its compliance with the investment parameters set forth
in its business plan and the revenue impact assessment provided in the
application demonstrating that the fund's business plan continues to
have a revenue neutral or positive impact on the state. Each invest CT
fund shall provide to the commissioner annual audited financial
statements.
(8) To make a distribution or payment, an invest CT fund certified by
the commissioner on or before June 30, 2015, must have invested one
hundred per cent of its eligible capital in eligible businesses, with a
minimum of twenty-five per cent of eligible capital invested in green
technology businesses and a minimum of three per cent of eligible
capital invested in preseed investment, as described in subparagraph
(A) of subdivision (3) of this subsection, with principal business
operations in this state at the time of such determination except: (A)
Distributions related to the payment of any projected increase in federal
or state taxes, including penalties and interest related to state and
federal income taxes, of the equity owners of the invest CT fund
resulting from the earnings or other tax liability of the invest CT fund to
the extent that the increase is related to the ownership, management or
operation of the invest CT fund; (B) payments of interest and principal
on the debt of the invest CT fund, provided after such payment, the
invest CT fund still has cash and other marketable securities in an
amount that, when added to the cumulative investments it has made in
eligible recipients, equals not less than sixty per cent of the eligible
capital invested in such reinvestment fund; or (C) payments related to Substitute House Bill No. 5300
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the reasonable costs and expenses of forming, syndicating, managing
and operating the fund, provided the distribution or payment is not
made directly or indirectly to an insurance company that has invested
eligible capital in the invest CT fund, including: (i) Reasonable and
necessary fees paid for professional services, including legal and
accounting services, related to the formation and operation of the invest
CT fund; and (ii) an annual management fee in an amount that does not
exceed two and one-half per cent of the eligible capital of the invest CT
fund. The state shall receive a share of any distribution, except as set
forth in subparagraphs (A), (B) and (C) of this subdivision and
distributions made to return any equity capital invested in the invest CT
fund that is not eligible capital, in the following percentages: (I) Ten per
cent when less than eighty per cent but more than sixty per cent of the
jobs set forth in the invest CT fund's business plan are created or
retained, and (II) twenty per cent when sixty per cent or less of the jobs
set forth in the invest CT fund's business plan are created or retained.
(9) To make a distribution or payment, an invest CT fund certified by
the commissioner on or after September 1, 2015, must have invested one
hundred per cent of its eligible capital in eligible businesses, with a
minimum of twenty-five per cent of eligible capital invested in green
technology businesses, a minimum of seven per cent of eligible capital
invested in preseed investments, as described in subparagraph (A) of
subdivision (3) of this subsection, a minimum of three per cent of eligible
capital invested in cybersecurity businesses, and a minimum of twenty-
five per cent of eligible capital invested in businesses located in
municipalities with a population greater than eighty thousand, with
principal business operations in this state at the time of such
determination, except: (A) Distributions related to the payment of any
projected increase in federal or state taxes, including penalties and
interest related to state and federal income taxes, of the equity owners
of the invest CT fund resulting from the earnings or other tax liability of
the invest CT fund to the extent that the increase is related to the Substitute House Bill No. 5300
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ownership, management or operation of the invest CT fund; (B)
payments of interest and principal on the debt of the invest CT fund,
provided after such payment, the invest CT fund still has cash and other
marketable securities in an amount that, when added to the cumulative
investments it has made in eligible recipients, equals not less than sixty
per cent of the eligible capital invested in such reinvestment fund; or (C)
payments related to the reasonable costs and expenses of forming,
syndicating, managing and operating the fund, provided the
distribution or payment is not made directly or indirectly to an
insurance company that has invested eligible capital in the invest CT
fund, including: (i) Reasonable and necessary fees paid for professional
services, including legal and accounting services, related to the
formation and operation of the invest CT fund; and (ii) an annual
management fee in an amount that does not exceed two and one-half
per cent of the eligible capital of the invest CT fund. The state shall
receive a share of any distribution, except as set forth in subparagraphs
(A), (B) and (C) of this subdivision and distributions made to return any
equity capital invested in the invest CT fund that is not eligible capital,
in the following percentages: (I) Ten per cent when less than eighty per
cent but more than sixty per cent of the jobs set forth in the invest CT
fund's business plan are created or retained, and (II) twenty per cent
when sixty per cent or less of the jobs set forth in the invest CT fund's
business plan are created or retained.
(10) The commissioner shall review each annual report to ensure
compliance with subdivisions (6), (7), (8) and (9) of this subsection. A
material variation from subdivision (6), (7), (8) or (9) of this subsection
is grounds for decertification of the invest CT fund. If the commissioner
determines that an invest CT fund is not in compliance with subdivision
(6), (7), (8) or (9) of this subsection or the investment parameters of its
business plan, the commissioner shall notify the officers of the invest CT
fund, in writing, that the invest CT fund may be subject to
decertification after the one hundred twentieth day after the date of Substitute House Bill No. 5300
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mailing the notice, unless the deficiencies are waived by the
commissioner or are corrected and the invest CT fund returns to
compliance with subdivisions (6), (7), (8) and (9) of this subsection.
(11) Decertification of an invest CT fund shall cause the forfeiture of
future credits against the tax imposed by chapter 207 and section 38a-
743 to be claimed with respect to an invest CT fund when (A) such
decertification occurs on or before the fourth anniversary of an
allocation date of June 30, 2015, or earlier, or on or before the sixth
anniversary of an allocation date of September 1, 2015, or later, and (B)
such fund has invested less than sixty per cent of its eligible capital in
eligible businesses by said anniversary. The commissioner shall send
written notice to the last-known address of each taxpayer whose credit
against the tax imposed by chapter 207 is subject to recapture or
forfeiture.