Substitute House Bill No. 7042
          Substitute House Bill No. 7042

              PUBLIC ACT NO. 97-292


AN ACT CONCERNING THE INSURANCE REINVESTMENT FUND.


    Be  it  enacted  by  the  Senate  and House of
Representatives in General Assembly convened:
    Section  1. Section  38a-88a  of  the  general
statutes  is  repealed   and   the   following  is
substituted in lieu thereof:
    (a) As used in this section:
    (1)  "Facility"  means  an  insurance business
facility;
    (2)  "Insurance  business"  means  a  business
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    [Insurance
Commissioner]   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   [Insurance
Commissioner] 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
[Insurance Commissioner] 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  [Insurance  Commissioner] 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)    The    [Insurance   Commissioner   may]
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; [and] (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) [is incorporated in this state,
(2)]  occupies  the  new  facility  for  which  an
eligibility  certificate  has  been  issued by the
Insurance Commissioner and with respect  to  which
the certification required under subsection (g) of
this section has been issued as its  home  office,
and  [(3)]  (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 of such insurance  business  in
bankruptcy  or  delinquency proceeding, as defined
in subsection (d) of section 38a-905,  the  credit
shall be allowed.
    (g)      The      [Insurance     Commissioner]
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 [fourth] THIRD month following  the  close  of
the subject insurance business's income year.
    (h)  [Any]  EACH  taxpayer claiming the credit
allowed under this section  shall  submit  to  the
Commissioner  of  Revenue  Services  a copy of the
eligibility  certificate  and  the   certification
required under subsection (g) of this section with
its tax return for each taxable year for  which  a
credit is claimed.
    (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.
    (j)  [At a date ten years from the date of the
initial investment made by any fund manager of any
fund, the Insurance Commissioner shall cause to be
taken an accounting  of  such  fund  and,  if  the
commissioner  determines  that  there  has been no
loss of the original amount invested in such  fund
as  of  the  date of the accounting, no subsequent
credit  shall  be  allowed  with  respect  to  any
investments  made  by  such  fund.] 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.
    (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      [Insurance     Commissioner]
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.
    Sec.  2.  The  Commissioner  of  Economic  and
Community Development, in  consultation  with  the
Connecticut  Development Authority and Connecticut
Innovations, Inc. shall  study  and  evaluate  the
potential  benefits  to the economy of Connecticut
from expanding the tax credit program  established
pursuant   to   section  38a-88a  of  the  general
statutes, as amended by section 1 of this act,  to
industries     other     than     insurance    and
insurance-related  businesses.  The   commissioner
shall  report  his findings and recommendations to
the General Assembly not  later  than  January  1,
1998.
    Sec.  3. (a) The provisions of section 38a-88a
of the general statutes, revision of 1958, revised
to  January  1,  1997,  shall  apply  to  any fund
established prior to June 1, 1997, or to any  fund
which  is  formed  on  or  after  June 1, 1997, in
connection  with  a  memorandum  of  understanding
executed  by  and  among  the  fund  manager,  the
investors, the Commissioner  of  Revenue  Services
and  the  Insurance  Commissioner prior to June 1,
1997.
    (b)  The  provisions of section 38a-88a of the
general statutes, as amended by section 1 of  this
act,  shall  only  apply  to  any fund established
under section 38a-88a  of  the  general  statutes,
revision  of  1958, revised to January 1, 1997, to
investments made by such a  fund  and  to  credits
earned  by such a fund if the fund manager of such
fund notifies the  Commissioner  of  Economic  and
Community  Development that such fund wishes to be
designated as  a  fund  subject  to  said  section
38a-88a, as amended by section 1 of this act.
    (c)    Notwithstanding   the   provisions   of
subsection (a) of this section, the provisions  of
subsections  (b) and (l) of section 38a-88a of the
general statutes, as amended by section 1 of  this
act, shall be applicable to all funds.
    Sec.  4.  This  act shall take effect from its
passage and shall be applicable to income years of
taxpayers commencing on or after January 1, 1997.

Approved July 8, 1997