SB 1095 — AN ACT EXPANDING THE ANGEL INVESTOR TAX CREDIT PROGRAM TO SOCIAL EQUITY APPLICANTS.

669 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 22 $ FY 23 $ Revenue Serv., Dept.

GF - Revenue Up to 15 Up to 15 Loss million million Note:

GF=General Fund Municipal Impact:

None Explanation The bill, which extends the angel investor tax credit program to eligible cannabis businesses, results in a General Fund revenue loss of up to $15 million annually in FY 22, FY 23, and FY 24 only.

The Out Years The annualized ongoing fiscal impact identified above would continue through FY 24, after which the program sunsets.

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669 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 billextendsthisrequirement to “cannabisbusinesses,” which the bill defines as a “cannabis establishment” for which a “social equity applicant” has been granted a license or provisional license.

It sSB1095 / File No.

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669 also establishes specific criteria these businesses 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 insSB888 ofthecurrent session.Specifically,it isaproducer,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“disproportionatelyaffectedcommunity”iseitherofthefollowing:

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 sSB1095 / File No.

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669 descending order based on their relative wealth and need, according to specified criteria);

or 2.

a census tract in any municipality whose unemployment rate, andpercentage oftownresidentsbelowthefederalpoverty 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 cannabis businesses.

As under existing law, CI may reserve up to $5 sSB1095 / File No.

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669 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 sSB1095 / File No.

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669 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) sSB1095 / File No.

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