Connecticut Angel Investor Tax Credit

angel-investor.jpgAn often-overlooked tax credit is available to individuals who invest in eligible Connecticut start up businesses. This provision provides a viable option for start-ups seeking seed capital. Think Shark Tank. Are you a start-up business seeking investment or an individual looking for somewhere to park your cash? Listen up Charlie because the Angel Investor Tax Credit Program just may be your golden ticket into the chocolate factory.

Here’s what you need to know:

For Investors

To be eligible to claim this credit, you need to meet Connecticut’s definition of an accredited investor or network of accredited investors and invest between $25,000 to $1,000,000 in a Qualified Connecticut Business. Before you go throwing your money at any cute business that bats an eye at you please understand the steps you need to follow in order to be eligible to claim this credit.

  1. Make sure the business you are investing in is on the Qualified Connecticut Company List
  2. Ask for a Tax Credit Reservation Number- this will allow you to move forward with your investment
  3. Register for an Angel Tax Credit Certificate- submit all requested documents with the application form and you will be issued a tax credit authorization document. You will need this document when filing your Connecticut tax return.

For eligible investors, the tax credit is equal to 25% of your total investment. If you invest $1 million in a qualified Connecticut business, the tax credit you can claim on your Connecticut tax return is $250,000.

For Start-Ups

According to ct.gov A business may qualify to receive these investments if they have:

  1. Gross revenues of less than $1 million in the most recent income year
  2. Fewer than 25 employees, at least 75% of whom are Connecticut residents
  3. Operated in Connecticut for fewer than seven consecutive years
  4. Received less than $2 million in eligible investments from angel investors

If your business meets those criteria you can submit an application for consideration along with a $250 non-refundable application fee to Connecticut Innovations, Inc. The application asks for information about the company and their activities, the expected economic impact, the amount of investment sought, and the type of security to be issued. Once approved, the business will be added to the list of Qualified Connecticut Company list and is required to recertify the information in the original application once a year to remain eligible.

Additional Considerations

There is an annual limit to the amount of credits issued so timeliness is key. This credit is reserved for individual investors. Venture capitalists, banks, savings and loan associations, trust and insurance companies and those with controlling interest in the business seeking investment do not qualify. The Connecticut Angel Investor Tax Credit is just one of many options available to a business seeking investment. It is best to consult with a professional to explore options and formulate a game plan.

Contact Us

If you need assistance with the application process, exploring options or projecting financial information please contact an Innovative CPA Group professional at 203-489-0612 or contact us online.