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statutes is repealed and the following is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