By Alexander Soule
The Connecticut Senate, in its first bill filed in the 2016 legislative session, is seeking to create “innovation districts” statewide to encourage creation of fast-growth startups.
The bill would extend an existing tax credit for “angel” investments in startups by individual investors, while expanding the applicability of that and other tax credit programs to support startups in newly established “innovation districts.” On a de facto basis, Gov. Dannel P. Malloy created innovation districts across Connecticut in 2011 by freeing up $5 million in funding to support a chain of startup accelerators, including the Stamford Innovation Center, B:Hive in Bridgeport and the Danbury Hackerspace among others, with the Stamford-based Business Council of Fairfield County also winning funding for its own efforts.
As with many bills filed in the opening few weeks of the current legislative session, details were few in advance of lawmakers working through language and cost estimates, while addressing Connecticut’s chronic budget gaps. State Sen. Robert Duff (D-Norwalk, Darien) could not be reached immediately for comment on the bill he is co-sponsoring.
Connecticut has a significant portfolio of tax credit programs intended to incentivize job creation, from its film and tax credit program that has helped production studios like NBC Sports, Blue Sky Studios and WWE; to the InvestCT program that this month helped Petros Partners set up an $18 million fund to invest in companies in the state.
“InvestCT … has been extremely successful, adding 2,600 jobs to the payrolls of more than 100 small businesses across the state of Connecticut,” Duff said in early February while visiting the Norwalk headquarters of Sovereign Home Health, which raised funding from Stamford-based Enhanced Capital as a result of the program. “This particular initiative, though not well known … has been providing really great results for us.”
Under Connecticut’s existing angel tax credit program, 45 companies currently are qualified to generate tax credits for investors, 40 percent of which are located in Fairfield County. The angel investment tax credit applies to investments in companies with less than $1 million in revenue and fewer than 25 employees, if they are focused on life sciences, advanced materials, information technology, green technology or photonics, which is concerned with the properties and transmission of photons in technology such as fiber optics.
In adding geographic criterion to the qualification, Connecticut would be realigning its angel investment tax credit program to the model of myriad other state programs intended to promote business activity in target markets — for instance, an enterprise zone program in several city districts. It also follows the example of the Startup-NY program introduced last year, which persuaded at least two Connecticut companies to move their main offices to New York in Sustainable Waste Power Systems, founded in Ridgefield; and York Analytical Laboratories, long based in Stratford.