In the bustling world of investment opportunities, there’s a gem hidden in plain sight: the Connecticut Angel Investor Tax Credit. This often-overlooked tax credit presents a compelling option for both budding entrepreneurs and seasoned investors alike, akin to the thrill of Shark Tank. If you’re a startup in need of seed capital or an individual seeking a lucrative investment avenue, pay heed, for this could be your golden ticket into the proverbial chocolate factory.
Here’s the lowdown:
For Investors
To qualify for this tax credit, individuals must meet Connecticut’s criteria for accredited investors and invest between $25,000 to $2,000,000 in a Qualified Connecticut Business (QCB). But before you dive headlong into any promising venture, there are crucial steps to follow:
- Verify that the business is listed as a Qualified Connecticut Company.
- Obtain a Tax Credit Reservation Number, which facilitates your investment process.
- Apply for an Angel Tax Credit Certificate, submitting all necessary documents. Once approved, you’ll receive a tax credit authorization document crucial for filing your Connecticut tax return.
For eligible investors, the tax credit amounts to 25% of the total investment. Imagine investing $1 million in a qualified Connecticut business—your tax credit claim could reach a staggering $250,000.
For Startups
According to ct.gov, businesses meeting the following criteria may qualify for these investments:
- Gross revenues of less than $1 million in the most recent income year.
- Fewer than 25 employees, with at least 75% residing in Connecticut.
- Operating in Connecticut for fewer than seven consecutive years.
- Receiving less than $2 million in eligible investments from angel investors.
If your business checks these boxes, submit an application to Connecticut Innovations, Inc., along with a non-refundable $250 application fee. The application delves into company details, activities, expected economic impact, investment sought, and security types. Once approved, your business joins the roster of Qualified Connecticut Companies, with yearly recertification required to maintain eligibility.
Additional Considerations
With an annual limit on credits issued, timeliness is crucial. Remember, this credit is reserved for individual investors—venture capitalists, banks, and others with controlling interests in the business do not qualify. While the Angel Investor Tax Credit presents an enticing opportunity, it’s wise to consult with a professional to explore other options and craft a strategic investment plan.
Get in Touch
For assistance navigating the application process, exploring investment avenues, or projecting financial outcomes, reach out to an Accavallo & Company Tax Professional at 203-925-9600 or via email at [email protected].
