You asked specific questions about the Connecticut Insurance Reinvestment Fund, which we state and answer below. We also attached an OLR report that analyzes the law governing the fund (2004-R-0197).

The Insurance Reinvestment Act (PA 94-214) did not establish a fund, per se. Rather, it authorized premium, corporate, and personal income tax credits for people and entities that invest in Connecticut-based insurers and insurance-related businesses through state-registered fund managers. Investors may claim a portion of the credits over a 10-year period according to a statutory schedule. To date, the investors have claimed $ 142,894 in corporate business tax credits, $ 7,717,406 in premium tax credits, and no personal income tax credits. Table 1 shows how much credit they claimed each year.

Table 1: Insurance Reinvestment Fund Tax Credits Claimed By Year

Source: Connecticut Department of Revenue Services

Before investors can claim the portion of credits allowed in any given year, the businesses benefiting from their investments must occupy a new facility and create and maintain a certain number of new jobs. That number must equal 25% of a company’s workforce at the time the economic and community development commissioner certified that the company occupied the facility. The commissioner must annually determine if the company is meeting these criteria and issue an eligibility certificate if it does so.

Deputy Commissioner Rita Zangari told the Commerce Committee that the minimum number of jobs required under the act is 156, which, if met, yields a minimum cost per job equal to $ 1,169,804 (Testimony before the Commerce Committee re: HB 5244 and SB 205, March 2, 2004). The deputy commissioner did not explain how she arrived at these numbers.

The Department of Economic and Community Development (DECD) has no data on the actual number of jobs created as a result of the tax credits.

Since the act took effect, fund managers have invested $ 182,489,466 in 22 businesses.

4. How many new businesses have been created under the act?

As a result of the act, fund managers have assisted six new start-up businesses and helped three businesses relocate to Connecticut from other states.

5. What companies have taken advantage of the act?

According to DECD, it cannot disclose the names of the companies that have received investments due to confidentiality requirements.

DECD has registered six fund managers to make investments under the act: Conning & Company; Dowling & Partners Securities, LLC; Northington Partners, Inc. ; Prospector Partners; Schupp & Grochmal, LLC; and Stamford Financial Group.

6. What is the amount of credits for which the state is still liable?

Investors may claim the credits over a 10-year period according to a statutory schedule. They may claim no credits during the first three years, 10% in each of the next four years, and 20% in the next three years. Total credits claimed cannot exceed the total amount invested.

Fund managers have invested $ 182,489,466 since the act took effect. Under the law, therefore, total credits for which the state could be liable cannot exceed $ 182,489,466. So far, investors have claimed $ 142,894 in corporate business tax credits, $ 7,717,406 in premium tax credits, and no personal income tax credits, for a total of $ 7,860,300 in credits.

According to DECD, an accurate forecast of who will claim credits, how much they will claim, and when they will do so is difficult to make due to the many variables permitted under the law (e. g. , investors may not claim credits because a business that received investments went bankrupt; investors might elect to carryover unused credits).

No credits will be allowed for investments: (1) in any fund created on or after July 1, 2000, and (2) made in an insurance business through a fund after December 31, 2015.

The Commissioner has no authority or discretion to turn down applicants if they meet the eligibility requirements under the act, as discussed below.

8. What are the eligibility requirements?

Fund managers and companies must meet specific eligibility requirements. The commissioner could register fund managers until July 1, 2000 that: (1) had Connecticut as their primary place of business; and (2) provided satisfactory evidence of financial responsibility, integrity, and professional competence to manage investments. If a fund manager does not maintain adeqaute fiduciary standards, the commissioner can revoke the registration.

A business qualifies for investments if it (1) provides insurance or insurance related services; (2) occupies a facility that it acquired, leased, or constructed on or after the date that the company applied to the commissioner for an eligibility certificate and that was not in service during the one-year period immediately before the application date; and (3) employs at least 25% of its total work force in the facility in new, permanent, full-time jobs.

The law permits the state to recapture credits if the insurance business fails to meet the required employment obligations or relocates out of Connecticut. To date, no credits have been recaptured.

Under state law, there is no limit on the amount of tax credits allowed per new job, but, according to DECD, the federal limit is $ 35,000 per job. State law limits the total amount of credits that investors can claim for investments in any single insurance business to $ 15 million.

JB: ts