Location:
ECONOMIC DEVELOPMENT; FEDERAL ASSISTANCE PROGRAMS; MUNICIPALITIES; STATE AID;

OLR Research Report


RESOURCES AVAILABLE TO BUSINESSES AND MUNICIPALITIES FOR ECONOMIC DEVELOPMENT

By: Heather Poole, Legislative Analyst I


QUESTIONS

What are the:

1. state and federal agencies and programs that provide economic development assistance to businesses and municipalities and

2. state and federal tax incentives for economic development?

FINANCIAL ASSISTANCE

Connecticut offers economic development assistance to businesses and municipalities through four agencies: Connecticut Innovations, Inc. (quasi-public), Department of Economic and Community Development (DECD), Department of Labor (DOL), and Office of Policy and Management (OPM). It also provides assistance to business through the nonprofit, state-chartered Community Economic Development Fund (CDEF). Table 1 summarizes the financial assistance programs provided by these organizations. For more details, use the link under the “program” column.

Most federal economic development assistance is provided by the Economic Development Administration (EDA), Small Business Administration (SBA), and Department of Housing and Urban Development (HUD). Their loan and grant programs are geared primarily toward small businesses and economically distressed communities. Table 2 summarizes these programs. For more details, use the link under the “program” column.

The tables list only the programs traditionally associated with economic development, but there are a number of other resources available to businesses from state agencies and private and nonprofit organizations. More information on these resources is available through the Connecticut Economic Resource Center's program finder.

TAX INCENTIVES

Connecticut's economic development tax incentives range from creating new jobs to improving property in economically distressed areas. Most credits apply to one or more types of business taxes, and some apply to personal income and property taxes. Table 3 summarizes these incentives, organized by purpose. For more information, including eligibility and application requirements, use the link under the “program” column. Connecticut also provides business tax credits that are not geared specifically to economic development, such as those for donating equipment to educational institutions and open space land to municipalities. For a description of these credits, including those that sunsetted, see OLR Report 2013-R-0292, Guide to Connecticut's Business Tax Credits.

Like Connecticut, the federal government offers tax incentives for many different purposes. Table 4 describes those for economic development. Information about the other federal tax deductions and credits is available at the Internal Revenue Service's website at general business tax credits guide and tax credits and deductions guide.

Table 1: State Financial Assistance For Businesses and Municipalities

Program

Type of Assistance

Recipient

Connecticut Innovations, Inc.

Commercial Real Estate Loans

Loans (CI acts as a “gap” lender)

Connecticut-based businesses that have been in existence for at least 3 years and will create or retain jobs

Equipment Loans

Loans

Loans for Permanent Working Capital

Loans

Eli Whitney Equity Fund

Investments

Connecticut-based (or willing to relocate) businesses that are technology-based

Pre-Seed Fund

Investments

Connecticut-based businesses that have been in operation less than 7 years, have fewer than 25 employees, and are developing a technology

Seed Fund

Investments

Connecticut-based businesses working to commercialize technology in bioscience, information technology, clean tech, or advanced materials

Small Business Innovation and Diversification Program

Grants

Connecticut manufacturers with fewer than 500 employees that agree to remain in Connecticut for ten years

Technology Talent Bridge

Grants to businesses to compensate interns

Connecticut-based businesses with fewer than 500 employees that have been in operation for at least a year

URBANK

Loan guarantees

Small and entrepreneurial Connecticut businesses

Venture/Mezzanine Debt Fund

Mezzanine capital (structured as subordinated debt or preferred equity)

Connecticut-based businesses with a product that has been available in the marketplace for over a year and are looking to expand

Community Economic Development Fund

Grow Your Business Loan Program

Loans

Businesses in operation for at least three years that are located in a targeted community or owned by an individual with an annual income lower than $85,700

Small Business Administration Microloan Program

Loans

Standard Loan Program

Loans

Connecticut Inner City Business Loan Guarantee Program

30% loan guarantee

Small businesses in targeted industry clusters in Waterbury, Hartford, New Britain, Bridgeport, and New Haven

Microloan Guarantee Program for Women and Minority Business Owners

30% loan guarantee

Businesses that are minority- or women- owned

Microloan Guarantee Program for Hartford, Stamford, and West Haven Business Owners

30% loan guarantee

Businesses in Harford, Stamford, or West Haven

Department of Economic and Community Development

Brownfield Remediation and Development Programs

Grants and loans

Municipalities with projects that are complicated by brownfields (grants)

Businesses that remediate and develop brownfield sites (loans)

Economic and Manufacturing Assistance Act (MAA)

Direct loans or grants)

Businesses creating or retaining jobs, exporting goods or services outside the state, encouraging innovation, adding value to products and services, or otherwise supporting or enhancing the state's economic bases (loans or grants)

Municipalities with infrastructure projects (grants)

First Five Program

Combination of grants, loans, and tax incentives

Businesses that create 200 new jobs in two or five years, depending on size of their investment

Department of Economic and Community Development (cont'd)

Small Business Express Program

Loans and Grants

Small businesses (less than 100 employees)

Small Business Revolving Loan Program

Loans

Small Manufacturers Competitiveness Fund

Loans

Businesses in manufacturing, bioscience, medical devices, aerospace & defense, and research & development sectors

Special Contaminated Property Remediation and Insurance Fund

Loans

Businesses or municipalities that are investigating environmental conditions of a development site

Department of Labor

Subsidized Training and Employment Program (Step Up)

Wage and training subsidies

Small businesses with fewer than 100 employees that hire and/or train unemployed workers

Unemployed Armed Forces Member Subsidized Training and Employment Program

Wage and training subsidies

Small businesses with fewer than 100 employees that hire and/or train unemployed veterans

Office of Policy and Management

Small Town Economic Assistance Program (STEAP)

Grants

Municipalities that are not designated as “distressed” and do not have a “regional center” under the State Plan of Conservation and Development

Urban Action Bond Assistance

Grants

Municipalities with economic or community development projects

Table 2: Federal Financial Assistance for Businesses And Municipalities

Program

Type of Assistance

Recipient

Economic Development Administration, U.S. Department of Commerce

Public Works Assistance Program

Grants and loans

Distressed communities (municipalities) developing infrastructure and facilities to advance economic development goals

Economic Adjustment Assistance Program

Grants and loans

State and local governments affected by plant closings and other structural economic changes

Small Business Administration, U.S. Department of Commerce

General Small Business Loans: 7(a)

Loans

Businesses who meet specified criteria

Microloan Program

Loans

Real Estate and Equipment Loans: CDC/504

Loans

Small Business Innovation Research Program (SBIR)

Competitive grants

Small businesses that participate in federal research and research and development projects

Small Business Technology Transfer

Competitive grants

Small businesses that engage with a research institution in research and development

U.S. Department of Housing and Urban Development (HUD)

Community Development Block Grant Program—Entitlement Communities Grants

Block grants

Larger cities and urban counties with over 50,0000 people for different types of economic or community development projects

Community Development Block Grant Program—State Administered (DECD)

Block grants

Municipalities with fewer than 50,000 people for different types of economic and community development projects (administered by DECD)

Section 108 Loan Guarantee Program

Loans

States and municipalities for financing different types of economic and community development projects

Table 3: State Economic Development Tax Incentives

Program & Agency

Incentive Amount

Eligible Taxpayers

Fixed Capital Investments

Machinery and Equipment

(CGS 12-217o), Department of Revenue Services (DRS)

Credit amount depends on the number of employees:

10% for businesses with 250 or fewer employees

5% for businesses with between 251 and 799 employees

Corporations

Electronic Data Processing Equipment (CGS 12-217t), DRS

Credit equals 100% of property tax paid on electronic data processing equipment

Corporations

Air Carriers

Railroad Companies

Community Antenna and Satellite TV Companies

Utility Companies

Insurance Companies, Hospitals, and Medical Services Corporations

Fixed Capital Investments

(CGS 12-217w), DRS

5% of fixed capital costs incurred during income year

Corporations

Air Carriers

Railroad Companies

Community Antenna and Satellite TV Companies

Utility Companies

Insurance Companies, Hospitals, and Medical Services Corporations

Human Capital Investment

Apprenticeship Training (CGS 12-217g), Department of Labor (DOL)

● For manufacturing or plastics trade apprenticeship, credit equals maximum $4,800 or 50% of actual wages paid during the first half of a two-year term apprenticeship or first three-quarters of a four-year apprenticeship, whichever is less

● Effective July 1, 2015, manufacturing trade apprenticeship credit equals maximum $7,500 or 50% of such wages, whichever is less

For construction trade apprentices, maximum $4,000 or 50% of actual wages paid over first four income years, whichever is less

Corporations

Human Capital Investments (CGS 12-217x), DRS

● Credit equals 5% of investment

● Unused credits carried forward for up to five years.

Corporations

Neighborhood Assistance Act, Energy Conservation (CGS 12-635), DRS

● Credit equals 60% credit for contributions to:

daycare facilities used primarily by business' employees (capped at $50,000 per year per business) or

specified job training programs

● Credits subject to carry back and cap provisions applicable to other Neighborhood Assistance Act projects

Insurance Companies, Hospitals, and Medical Services Corporations

Corporations

Air Carriers

Railroad Companies

Community Antenna and Satellite TV Companies

Utility Companies

Businesses subject to Business Entity Tax

Real Estate Development

Rehabilitating Historic Business Property for Mixed Residential and Commercial Use (CGS 10-416b), Department of Economic and Community Development (DECD)

Total credits capped at $50 million per three-year cycle, beginning with FY 09-12

Credit equals 25% of qualified rehabilitation expenditures; 30% if project includes units affordable to low- and moderate-income people

No project can receive more than 10% of credits ($5 million) available for the three-year cycle

Unused credits may be carried forward up to five years

Insurance Companies, Hospitals, and Medical Services Corporations

Corporations

Air Carriers

Railroad Companies

Community Antenna and Satellite TV Companies

Utility Companies

Urban and Industrial Sites Reinvestment (CGS 32-9t), DECD

● Total credits available for all projects capped at $650 million

● Credit equals 100% of investment up to $100 million, spread out over 10 years:

0% in first three years after investment was made

10% per year in the next four years

and 20% in the remaining three years

Insurance Companies, Hospitals, and Medical Services Corporations

Corporations

Air Carriers

Railroad Companies

Community Antennas

Utility Companies and Satellite TV Companies

Research and Development

Incremental Research and Development Expenditures (CGS 12-217j), DRS

Credit equals 20% of the amount spent on R&D over and above the amount spent during prior year

Unused credits may be carried forward for up to 15 years

Corporations

Research and Development Expenditures (CGS 12-217n), DRS

Credit determined according to statutory formula:

● Amounts range from 1% for expenditures $50 million or less to 6% for expenditures over $200 million

● Only one-third of credit can be taken per year

● Unused credits may be carried forward until fully used

Corporations

Targeted Area Development

Developing Manufacturing and Specified Service Facilities in Enterprise Zones , Enterprise Corridor Zones, Targeted Investment Communities, Railroad Depot Zones, Qualified Manufacturing Plants, Airport Development Zones, and Bioscience Enterprise Corridor Zones (CGS 12-217e(a)), DECD

10-year credit against tax allocable to facility:

25% or

50% if at least 150 of the new jobs or at least 30% of them go to zone or municipal residents who qualify for federal job training assistance

5-year, state-reimbursed 80% abatement of local property taxes on real and personal property that are new to the town's grand list as a result of business relocation or expansion

Exemption from real estate conveyance tax

Corporations

Developing Service Facilities in Targeted Investment Communities (CGS 12-217e (b), 1996), DECD

10-year credit based on the number of jobs created:

15%, 300-599 jobs

20%, 600-899 jobs

25%, 900-1,189 jobs

30%, 1,200-1,499 jobs

40%, 1,500-1,999 jobs

50%, 2,000 or more jobs

5-year local property tax abatement on a sliding scale from 40%-80%. Minimum investment is $20 million. Abatement is for real and personal property new to the town's Grand List as a result of business relocation or expansion

Corporations

Developing Entertainment Facilities in Municipalities with Entertainment Districts (CGS 12-217e(a)), DECD

Same as enterprise zone credits for manufacturers, but entertainment facility qualifies for property tax exemption and business credits regardless of whether it is located in the entertainment district

Corporations

Targeted Area Development (cont'd)

Research and Development by Businesses Located in Enterprise Zones (CGS 12-217n(c)), DECD

Greater of 3.5% of total R&D expenditure or the amount derived from the statutory two-step formula used by big businesses located outside enterprise zones

Corporations

Starting Corporations in Enterprise Zones (CGS 12-217v), DECD

10-year credit:

100% for the first three years

50% of the next seven years

Corporations

Targeted Industries Development

Film Production (CGS 12-217jj), DECD

Three-tiered credits:

10% for eligible expenditures between $100,000-$500,000

15% for eligible expenditures between $500,000 and $1 million

30% for eligible expenditures over $1 million

Credit certification for relocated television production companies is good for 10 years

Credits are not refundable, but may be sold, transferred, or assigned up to three times

Unused credits may be carried forward for up to three years

Insurance Companies, Hospitals, and Medical Services Corporations

Corporations

Film Production Infrastructure (CGS 12-217kk), DECD

20% credit

Infrastructure must be 100% completed before credit can be claimed

Credits are not refundable, but may be sold, transferred, or assigned up to three times

Unused credits may be carried forward for up to three years

Insurance Companies, Hospitals, and Medical Services Corporations

Corporations

Targeted Industries Development (cont'd)

Digital Animation Production (CGS 12-217ll), DECD

Total annual credits capped at $15 million

Three-tiered credit:

10% for expenditures between $100,000-$500,000

15% for expenditures between $500,000 and $1 million

30% for expenditures over $1 million

Credits are not refundable, but may be sold, transferred, or assigned up to three times

Unused credits may be carried forward for up to three years

Insurance Companies, Hospitals, and Medical Services Corporations

Corporations

Venture Capital Investments

Insurance Reinvestment (CGS 38a-88a), DECD

100% of cash investment claimed over 10 years, beginning in the fourth year after investment was made:

10% per year in years four through seven

20% per year in last eight through 10

Unused credits may be carried forward up to five years

Insurance Companies, Hospitals, and Medical Services Corporations investing in eligible Connecticut-based businesses

Angel Investment (CGS 12-704d), Connecticut Innovations, Inc.

Total annual credits capped at $6 million per year in FY 11-13 and $3 million in FY 14

Credit equals 25% of cash investment up to $250,000

Individuals (personal income tax) investing in start-up technology-based businesses operating in Connecticut

Table 4: Federal Economic Development Tax Incentives

Program & Agency

Incentive Amount

Eligible Taxpayers

Section 179 Tax Deduction for qualifying purchases of property, Internal Revenue Service (IRS)

Deduction equal to the cost of qualifying property, subject to dollar and business income limits determined by the type of property

● Corporations

● Individuals

Section 199 Domestic Production Activities Tax Deduction (DPAD), IRS

Generally, 9% of the smaller of:

● Qualified production activities income or

● Adjusted gross income for an individual, estate, or trust figured without the DPAD

● Corporations

● Individuals

Empowerment Zones, IRS

● Wage credits of up to $3,000 for qualifying employees

● Increased Section 179 deductions

● Increased WOTC credits

Corporations

New Market Tax Credit, Department of the Treasury

Credit equals 39% of original investment amount and is claimed over a 7-year period

Corporations and individuals investing in eligible “Community Development Entities”

Work Opportunity Tax Credits, IRS

Tax credit amount varies from 20-40% of an individual's first year wages, depending which “target group” the individual belongs to

Corporations

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