Tax Credit Change ‘Angelic’

Allowing more “angels” to help Connecticut businesses grow is paying off in heavenly (economic) ways.

Last fall, lawmakers expanded the state’s angel investor program by lowering from $100,000 to $25,000 the minimum investment that qualifies for the tax credit program.   

Since then, says Connecticut Innovations, the number of angel investors participating in the tax credit program has jumped sixfold: 84 new investors have applied to the program, pledging $8.6 million for 23 companies.

Prior to the boost from the Jobs Session, only 13 angels had applied to the program, with just $2.4 million in pledges for nine small technology companies.

Under the program, eligible investors may take a credit against their Connecticut state income tax for certain investments made in qualifying businesses. The tax credit equals 25% of the cash investment, up to $250,000.

Angel investors play a key role in the development of new businesses by providing seed capital.

By investing in the riskier, early stage of a company’s development cycle, angel investors are different from traditional lenders who generally concentrate on established businesses with proven track records.

Economists say that credit availability is crucial to sustained economic growth, and startup companies are especially vulnerable. The expanded angel investor tax credit is showing how prudent tax policy can help Connecticut’s economy grow.

Qualifying businesses include early-stage, Connecticut-based technology companies engaged in advanced materials, biosciences, clean energy, IT, or photonics.

Application forms are available from Connecticut Innovations.

For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or bonnie.stewart@cbia.com.