State Codes and Statutes
Statutes > Connecticut > Title38a > Chap698 > Sec38a-88aSec. 38a-88a. Connecticut insurance reinvestment funds, authorized. Tax credits. Regulations. (a) As used in this section:
(1) "Facility" means an insurance business facility;
(2) "Insurance business" means a business with a North American Industry Classification System code of 524113 to 524298, inclusive, that is engaged in the business of insuring risks or of providing services necessary to the business of insuring risks;
(3) "New job" means a job that did not exist in the business of a subject insurance business in this state prior to the subject insurance business's application to the commissioner for an eligibility certificate under this section for a new facility and that is filled by a new employee, but does not include a job created when an employee is shifted from an existing location of the subject insurance business in this state to a new facility;
(4) "New employee" means a person hired by a subject insurance business to fill a position for a new job or a person shifted from an existing location of the subject insurance business outside this state to a new facility in this state, provided (A) in no case shall the total number of new employees allowed for purposes of this credit exceed the total increase in the taxpayer's employment in this state, which increase shall be the difference between (i) the number of employees employed by the subject insurance business in this state at the time of application for an eligibility certificate to the commissioner plus the number of new employees who would be eligible for inclusion under the credit allowed under this section without regard to this calculation, and (ii) the highest number of employees employed by the subject insurance business in this state in the year preceding the subject insurance business's application for an eligibility certificate to the commissioner and (B) a person shall be deemed to be a "new employee" only if such person's duties in connection with the operation of the facility are on a regular, full-time, or equivalent thereof, and permanent basis;
(5) "New facility" means a facility which (A) is acquired by, leased to, or constructed by, a subject insurance business on or after the date of the subject insurance business's application to the commissioner for an eligibility certificate under this section, unless, upon application of the subject insurance business and upon good and sufficient cause shown, the commissioner waives the requirement that such activity take place after the application, and (B) was not in service or use during the one-year period immediately prior to the date of the subject insurance business's application to said commissioner for an eligibility certificate under this section, unless upon application of the subject insurance business and upon good and sufficient cause shown, the commissioner consents to waiving the one-year period;
(6) "Related person" means (A) a corporation, limited liability company, partnership, association or trust controlled by the taxpayer or subject insurance business, as the case may be, (B) an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer or subject insurance business, as the case may be, (C) a corporation, limited liability company, partnership, association or trust controlled by an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer or subject insurance business, as the case may be, or (D) a member of the same controlled group as the taxpayer or subject insurance business, as the case may be. For purposes of this section, "control", with respect to a corporation, means ownership, directly or indirectly, of stock possessing fifty per cent or more of the total combined voting power of all classes of the stock of such corporation entitled to vote. "Control", with respect to a trust, means ownership, directly or indirectly, of fifty per cent or more of the beneficial interest in the principal or income of such trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in Section 267(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, other than paragraph (3) of such section;
(7) "Moneys of the taxpayer" means all amounts invested in a fund, directly or indirectly, on behalf of a taxpayer, including but not limited to (A) direct investments made by the taxpayer, and (B) loans made to the fund for the benefit of the taxpayer which loans are guaranteed by the taxpayer, provided no amounts represented by any such loan shall be used for the purpose of obtaining any tax credit by any person making such loan against any tax levied by this state;
(8) "Income year" means (A) with respect to corporations subject to taxation under chapter 208, the income year as determined under said chapter, (B) with respect to insurance companies, hospital and medical services corporations subject to taxation under chapter 207, the income year as determined under said chapter, and (C) with respect to taxpayers subject to taxation under chapter 229, the taxable year determined under said chapter;
(9) "Taxpayer" means any person as defined in section 12-1, whether or not subject to any taxes levied by this state; and
(10) "Commissioner" means the Commissioner of Economic and Community Development.
(b) On or before July 1, 2000, the commissioner shall register managers of funds created for the purpose of investing in insurance businesses. Any manager registered under this subsection shall have its primary place of business in this state. Each applicant shall submit an application under oath to the commissioner to be registered and shall furnish evidence satisfactory to the commissioner of its financial responsibility, integrity, and professional competence to manage investments. Failure to maintain adequate fiduciary standards shall constitute cause for the commissioner to revoke, after hearing, any registration granted under this section. The fund manager shall make a report on or before the first day of March in each year, under oath, to the Commissioner of Revenue Services specifying the name, address and Social Security number or employer identification number of each investor, the year during which each investment was made by each investor, the amount of each investment and a description of the fund's investment objectives and relative performance.
(c) There shall be allowed as a credit against the tax imposed under chapter 207, 208 or 229 or section 38a-743 an amount equal to the following percentage of the moneys of the taxpayer invested through a fund manager in an insurance business with respect to the following income years of the taxpayer: (1) With respect to the income year in which the investment in the subject insurance business was made and the two next succeeding income years, zero per cent; (2) with respect to the third full income year succeeding the year in which the investment in the subject insurance business was made and the three next succeeding income years, ten per cent; (3) with respect to the seventh full income year succeeding the year in which the investment in the subject insurance business was made and the two next succeeding income years, twenty per cent. The sum of all tax credit granted pursuant to the provisions of this section shall not exceed fifteen million dollars with respect to investments made by a fund or funds in any single insurance business, and with respect to all investments made by a fund shall not exceed the total amount originally invested in such fund. Any fund manager may apply to the Commissioner of Economic and Community Development for a credit that exceeds the limitations established by this subsection. The commissioner shall evaluate the benefits of such application and make recommendations to the General Assembly if he determines that the proposal would be of economic benefit to the state.
(d) The credit allowed by this section may be claimed only by a taxpayer who has invested in an insurance business through a fund (1) which has a total asset value of not less than thirty million dollars for the income year for which the initial credit is taken; (2) has not less than three investors who are not related persons with respect to each other or to any insurance business in which any investment is made other than through the fund at the date the investment is made and (3) which invests only in insurance businesses that are not related persons with respect to each other.
(e) The credit allowed by this section may be claimed only with respect to a subject insurance business which (1) occupies the new facility for which an eligibility certificate has been issued by the commissioner and with respect to which the certification required under subsection (g) of this section has been issued as its home office, and (2) employs not less than twenty-five per cent of its total work force in new jobs.
(f) The credit allowed by this section may be claimed only with respect to an income year for which a certification of continued eligibility required under subsection (g) of this section has been issued. If, with respect to any year for which a tax credit is claimed, any subject insurance business ceases at any time to employ at least twenty-five per cent of its total work force in new jobs, then, except as provided in subsection (g) of this section, the entitlement to the credit allowed by this section shall not be allowed for the taxable year in which such employment ceases, and there shall not be a pro rata application of the credit to such taxable year; provided, if the reason for such cessation is the dissolution, liquidation or reorganization of such insurance business in a bankruptcy or delinquency proceeding, as defined in section 38a-905, the credit shall be allowed.
(g) The commissioner, upon application, shall issue an eligibility certificate for an insurance business occupying a new facility in this state and employing new employees, after it has been established, to his satisfaction, that subject insurance business has complied with the provisions of this section. If the commissioner determines that such requirements have been met as a result of transactions with a related person for other than bona fide business purposes, he shall deny such application. The commissioner shall require the subject insurance business to submit annually such information as may be necessary to determine whether the appropriate occupancy and employment requirements have been met at all times during an income year. If the commissioner determines that such requirements have been so met, he shall issue a certification of continued eligibility to that effect to the subject insurance business on or before the first day of the third month following the close of the subject insurance business's income year.
(h) The commissioner shall, upon request, provide a copy of the eligibility certificate and the certification required under subsection (g) of this section to the Commissioner of Revenue Services.
(i) (1) If (A) the number of new employees on account of which a taxpayer claimed the credit allowed by this section decreases to less than twenty-five per cent of its total work force for more than sixty days during any of the taxable years for which a credit is claimed, (B) those employees are not replaced by other employees who have not been shifted from an existing location of the subject insurance business in this state and (C) the subject insurance business has relocated operations conducted in the new facility to a location outside this state, the taxpayer shall be required to recapture a percentage, as determined under the provisions of subdivision (2) of this subsection, of the credit allowed under this section on its tax return and no subsequent credit shall be allowed. If the credit claimed by the taxpayer under this section is attributable to investments made in more than one insurance business, the credit recaptured and disallowed under this subsection shall be that portion of the credit attributable to the investment in the insurance business as described in subparagraphs (A) to (C), inclusive, of subdivision (1) of this subsection. (2) If the taxpayer is required under the provisions of subdivision (1) of this subsection to recapture a portion of the credit during (A) the first year such credit was claimed, then ninety per cent of the credit allowed shall be recaptured on the tax return required to be filed for such year, (B) the second of such years, then sixty-five per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (C) the third of such years, then fifty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (D) the fourth of such years, then thirty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (E) the fifth of such years, then twenty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, and (F) the sixth or subsequent of such years, then ten per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year. Any credit recaptured pursuant to this subsection shall not be in excess of the credit that would be allowed for the applicable investment. The Commissioner of Revenue Services may recapture such credits from the taxpayer who has claimed such credits. If the commissioner is unable to recapture all or part of such credits from such taxpayer, the commissioner may seek to recapture such credits from any taxpayer who has assigned such credits to another taxpayer. If the commissioner is unable to recapture all or part of such credits from any such taxpayer, the commissioner may recapture such credits from the fund. (3) The recapture provisions of this subsection shall not apply and tax credits may continue to be claimed under this section if, for the entire period that the credit is applicable, such decrease in the percentage of total work force employed in this state does not result in an actual decrease in the number of persons employed by the subject insurance business in this state on a regular, full-time, or equivalent thereof, and permanent basis as compared to the number of new employees on account of which the taxpayer claimed the credit allowed by this section.
(j) The tax credit allowed by this section shall only be available for investments in funds that are not open to additional investments or investors beyond the amount subscribed at the formation of the fund. No credits shall be allowed under this section for investments in any fund created on or after July 1, 2000. No credit shall be allowed under this section for investments made in an insurance business through such fund after December 31, 2015.
(k) (1) The Commissioner of Revenue Services may treat one or more corporations that are properly included in a combined corporation business tax return under section 12-223 as one taxpayer in determining whether the appropriate requirements under this section are met. Where corporations are treated as one taxpayer for purposes of this subsection, then the credit shall be allowed only against the amount of the combined tax for all corporations properly included in a combined return that, under the provisions of subdivision (2) of this subsection, is attributable to the corporations treated as one taxpayer. (2) The amount of the combined tax for all corporations properly included in a combined corporation business tax return that is attributable to the corporations that are treated as one taxpayer under the provisions of this subsection shall be in the same ratio to such combined tax that the net income apportioned to this state of each corporation treated as one taxpayer bears to the net income apportioned to this state, in the aggregate, of all corporations included in such combined return. Solely for the purpose of computing such ratio, any net loss apportioned to this state by a corporation treated as one taxpayer or by a corporation included in such combined return shall be disregarded.
(l) Any taxpayer allowed a credit under this section may assign such credit to another person, provided such person may claim such credit only with respect to a calendar year for which the assigning taxpayer would have been eligible to claim such credit. The fund manager shall include in the report filed with the Commissioner of Revenue Services in accordance with subsection (b) of this section information requested by the commissioner regarding such assignments including the current holders of credits as of the end of the preceding calendar year.
(m) No taxpayer shall be eligible for a credit under this section and either section 12-217e or section 12-217m for the same investment. No two taxpayers shall be eligible for any tax credit with respect to the same investment, employee or facility.
(n) Any tax credit not used in the income year for which it was allowed may be carried forward for the five immediately succeeding income years until the full credit has been allowed.
(o) The commissioner, with the approval of the Commissioner of Revenue Services and the Secretary of the Office of Policy and Management, may adopt regulations in accordance with chapter 54 to carry out the purposes of this section.
(P.A. 94-214, S. 1, 4; P.A. 95-79, S. 139, 189; 95-303, S. 2, 3; P.A. 97-292, S. 1, 4; P.A. 98-214, S. 31; P.A. 00-170, S. 30, 31, 42; P.A. 01-139, S. 3; June Sp. Sess. P.A. 01-6, S. 39, 72, 80, 85; P.A. 02-24, S. 1; P.A. 06-159, S. 21; P.A. 08-82, S. 1.)
History: P.A. 94-214, effective June 7, 1994, and applicable (1) to income years of corporations under chapter 208 commencing on or after January 1, 1994, (2) to income years of insurance companies, hospital and medical services corporations under chapter 207 commencing on or after January 1, 1994, or (3) taxable years of taxpayers under chapter 229 commencing on or after January 1, 1994, as the case may be; P.A. 95-79 redefined "related person" to include a limited liability company, effective May 31, 1995; P.A. 95-303 added Subsec. (a)(7) defining "moneys of the taxpayer" and (a)(8) defining "income year", amended Subsec. (c) to add reference to Sec. 38a-743 and to delete Subsec. (c)(1) and (2), and added new Subsec. (c)(1) to (3) re amount of credit, made technical changes to Subsec. (d), added proviso to Subsec. (f) re dissolution as the result of bankruptcy or delinquency proceeding, added provision to Subsec. (i) re credit claimed which is attributable to investments in more than one insurance business, deleted reference to Ch. 207 in Subsec. (l), and made technical changes to Subsec. (m), effective July 6, 1995, and applicable (1) to income years of corporations under Ch. 208 commencing on or after January 1, 1995, (2) to income years of insurance companies, hospital and medical services corporations under Ch. 207 commencing on or after January 1, 1995, or (3) to taxable years of taxpayers under Ch. 229 commencing on or after January 1, 1995, as the case may be; P.A. 97-292 added Subsec. (a)(9) and (10) defining "taxpayer" and "commissioner", amended Subsec. (b) to transfer from Insurance Commissioner to the Commissioner of Economic and Community Development responsibility for registration of fund managers and add application requirements, Subsec. (c) to add cap for sum of all tax credit granted and provision for application for credit to exceed cap, Subsec. (d) to prohibit investments by related persons, Subsec. (e) to delete requirement of incorporation in this state, Subsec. (i) to allow Commissioner of Revenue Services to recapture credits from any taxpayer who has assigned credits to another taxpayer or from the fund, Subsec. (j) to delete existing language and to provide that tax credit is only available for investments in fund not open to additional investments beyond the amount subscribed at formation of fund, Subsec. (l) to add requirement re reporting of assignments and made technical changes, effective July 8, 1997, and applicable to income years commencing on or after January 1, 1997; P.A. 98-214 amended Subsec. (f) to delete reference to "subsection (d)" of Sec. 38a-905; P.A. 00-170 amended Subsec. (b) to provide that registration of fund managers be accomplished prior to July 1, 2000, and amended Subsec. (j) to restrict the applicability of the tax credit under this section to funds created prior to July 1, 2000, effective May 26, 2000; P.A. 01-139 amended Subsec. (e) to substitute "commissioner" for "Insurance Commissioner"; June Sp. Sess. P.A. 01-6 amended Subsec. (f) to add liquidation and reorganization to provision for treatment of credits in certain bankruptcy or delinquency cases, amended Subsec. (i) to make a technical change and add new Subdiv. (3) re application of recapture provisions and amended Subsec. (j) to provide that no credit shall be allowed for investments made after December 31, 2015, effective July 1, 2001; P.A. 02-24 amended Subsec. (f) to substitute "a bankruptcy" for "bankruptcy"; P.A. 06-159 amended Subsec. (h) to require commissioner, rather than taxpayer, to provide a copy of eligibility certificate and certificaton, effective June 6, 2006; P.A. 08-82 amended Subsec. (a)(2) to redefine "insurance business" by adding provision re businesses with North American Industry Classification System codes of 524113 to 524298, inclusive, and made a technical change in Subsec. (a)(4), (5) and (7).
See Sec. 38a-88b re applicability of this section.
