Connecticut Seal

General Assembly

File No. 634

    February Session, 2018

Substitute Senate Bill No. 541

Senate, April 23, 2018

The Committee on Finance, Revenue and Bonding reported through SEN. FONFARA of the 1st Dist. and SEN. FRANTZ, L. of the 36th Dist., Chairpersons of the Committee on the part of the Senate, that the substitute bill ought to pass.

AN ACT PROMOTING INNOVATION, ENTREPRENEURSHIP AND INTRAPRENEURSHIP IN THE STATE.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 32-39f of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):

(a) On or after June 2, 2016, Connecticut Innovations, Incorporated shall establish a subsidiary, to be known as CTNext. On and after July 1, 2018, CTNext shall be a body politic and corporate to be known as "CTNext". Such corporation is constituted a public instrumentality and political subdivision of the state and the exercise by the corporation of the powers conferred in this chapter shall be deemed and held to be the performance of an essential public and governmental function. CTNext shall not be deemed to be a department, institution or agency of the state.

(1) The [purposes] primary purpose of CTNext shall be to foster [innovation, start-up and growth stage businesses and entrepreneur community building; to serve as a catalyst to protect and enhance the innovation ecosystem;] and oversee the growth and continuous improvement of a state-wide entrepreneurial ecosystem that is supportive of Connecticut innovators and entrepreneurs and to initiate changes to practices that the CTNext board of directors deems to be outdated to improve such ecosystem; to maintain an active and conspicuous presence at all nodes of such ecosystem and continuously increase connections between such nodes; and to regularly reassess the health of such ecosystem, identify its changing needs, adopt initiatives or adapt existing initiatives to meet such needs and regularly inform the General Assembly of such needs by proposing recommended legislation deemed necessary or desirable by the CTNext board of directors.

(2) The further purposes of CTNext shall be to support the growth of start-up and growth stage businesses; to promote entrepreneur community-building; to connect start-up and growth stage entrepreneurs with other start-up and growth stage entrepreneurs and with state, federal and private resources; to facilitate the establishment of innovation places and the development, growth and evolution of innovation places individually and in mutually supportive connections to other innovation places; to facilitate mentorship for start-up and growth stage entrepreneurs; to provide technical training and resources to start-up and growth stage businesses and entrepreneurs; [and] to facilitate innovation and entrepreneurship at institutions of higher education; and to identify areas in which current practices and policies at such institutions are not realizing their full potential.

(3) CTNext shall do all things necessary and proper to carry out the purposes set forth in subdivisions (1) and (2) of this subsection.

(4) CTNext shall not be an employer, as defined in section 5-270. Connecticut Innovations, Incorporated shall establish CTNext pursuant to the provisions of section 32-11e, except that at least half of the members of the CTNext board of directors shall not be required to be members of the board of directors of Connecticut Innovations, Incorporated or their designees or officers or employees of the corporation. No further action is required for the establishment of the subsidiary, except the adoption of a resolution for the subsidiary. CTNext shall constitute a successor authority to Connecticut Innovations, Incorporated in accordance with the provisions of sections 4-38d, 4-38e and 4-39, for the purposes of the powers in subdivisions (22), (28) and (40) of section 32-39 transferred from Connecticut Innovations, Incorporated to CTNext pursuant to section 32-39.

(b) CTNext shall be overseen by a board of directors, which shall be known as the CTNext board of directors or the CTNext board. The CTNext board of directors shall consist of eleven members, a majority of whom shall be serial entrepreneurs representing a diverse range of growth sectors of the Connecticut economy. By education or experience, such members shall be qualified in one or more of the following: Start-up business development, growth stage business development, investment, innovation place development, urban planning and technology commercialization in higher education. The CTNext board shall consist of the following members: (1) One appointed by the Governor for an initial term of two years; (2) one appointed by the speaker of the House of Representatives for an initial term of two years; (3) one appointed by the president pro tempore of the Senate for an initial term of two years; (4) one appointed by the majority leader of the House of Representatives for an initial term of one year; (5) one appointed by the majority leader of the Senate for an initial term of one year; (6) one appointed by the minority leader of the House of Representatives for an initial term of one year; (7) one appointed by the minority leader of the Senate for an initial term of one year; (8) two jointly appointed by the chairpersons of the joint standing committee of the General Assembly having cognizance of matters relating to finance, revenue and bonding for an initial term of two years; and (9) the executive director of Connecticut Innovations, Incorporated and the Commissioner of Economic and Community Development, both of whom shall serve ex officio. Thereafter, all members shall be appointed by the original appointing authority for two-year terms. Any member of the board shall be eligible for reappointment. Any vacancy occurring other than by expiration of term shall be filled in the same manner as the original appointment for the balance of the unexpired term. The appointing authority for any member may remove such member for misfeasance, malfeasance, wilful neglect of duty or failure to attend three consecutive board meetings. For the purposes of this section, "serial entrepreneur" means an entrepreneur having brought one or more start-up businesses to venture capital funding by an institutional investor and "growth stage business" means a business (A) that has been incorporated for ten years or less, (B) that has raised private capital, and (C) whose annual gross revenue has increased by twenty per cent for each of the three previous income years of such business.

(c) All initial appointments to the board of directors shall be made not later than September 1, 2016. [The chief executive officer of Connecticut Innovations, Incorporated shall schedule the first meeting of the board, which shall be held not later than October 15, 2016.] The chief executive officer of Connecticut Innovations, Incorporated shall be the chairperson of the board. The CTNext board shall meet at least quarterly, and at such other times as the chairperson deems necessary.

(d) Members of the CTNext board of directors may not designate a representative to perform in their absence their respective duties under this section or section 32-39g, as amended by this act.

(e) The [chairperson shall, with the approval of the] members of the CTNext board of directors [, appoint] shall approve the appointment of an executive director of CTNext who shall be an employee of CTNext and paid a salary prescribed by the members. The executive director shall supervise the administrative affairs and technical activities of CTNext in accordance with the directives of the board.

(f) Each member of the CTNext board of directors shall serve without compensation but shall be entitled to reimbursement for such member's actual and necessary expenses incurred in the performance of such member's official duties.

(g) Members may engage in private employment, or in a profession or business, subject to any applicable laws, rules and regulations of the state regarding official ethics or conflict of interest.

(h) A majority of the directors of the CTNext board then seated shall constitute a quorum for the transaction of any business or the exercise of any power of CTNext. For the transaction of any business or the exercise of any power of the authority, and except as otherwise provided in this section or section 32-39g, as amended by this act, the CTNext board may act by a majority of the members present at any meeting at which a quorum is in attendance.

(i) CTNext shall continue as long as it has obligations outstanding and until its existence is terminated by law, provided no such termination shall affect any outstanding contractual obligation of CTNext and the state shall succeed to the obligations of CTNext under any contract. Upon the termination of the existence of CTNext, all its rights and properties shall pass to and be vested in Connecticut Innovations, Incorporated.

(j) [It] Notwithstanding any provision of the general statutes, it shall not constitute a conflict of interest for a trustee, director, partner or officer of any person, firm or corporation, or any individual having a financial interest in a person, firm or corporation, to serve as a member of the CTNext board of directors, provided such trustee, director, partner, officer or individual [complies with all applicable provisions of chapter 10, except as provided in this subsection] shall abstain from deliberation, action or vote by the board in specific respect to such person, firm or corporation. All members shall be deemed public officials and shall otherwise adhere to the code of ethics for public officials set forth in chapter 10, except that no member shall be required to file a statement of financial interest as described in section 1-83.

Sec. 2. Section 32-39g of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):

(a) For the purposes enumerated in subsection (a) of section 32-39f, as amended by this act, CTNext is authorized and empowered to:

(1) (A) Employ such assistants, agents and other employees as may be necessary or desirable who shall not be employees, as defined in subsection (b) of section 5-270; (B) establish all necessary or appropriate personnel practices and policies, including personnel practices and policies relating to hiring, promotion, compensation, retirement and collective bargaining, which need not be in accordance with chapter 68 but may be in accordance with the personnel practices and policies of Connecticut Innovations, Incorporated; and (C) engage consultants, attorneys and appraisers as may be necessary or desirable to carry out its purposes in accordance with this section;

(2) Receive and accept grants or contributions from any source of money, property, labor or other things of value, to be held, used and applied to carry out the purposes of this section subject to such conditions upon which such grants and contributions may be made, including, but not limited to, grants or contributions from any department, agency or instrumentality of the United States or this state for any purpose consistent with this section;

(3) Make and enter into all contracts and agreements necessary or incidental to the performance of its duties and the execution of its powers under this section, including contracts and agreements for such professional services as CTNext deems necessary, including, but not limited to, financial consultant and technical specialists;

(4) Procure insurance against any liability or loss in connection with its property and other assets, in such amounts and from such insurers as it deems desirable, and procure insurance for employees;

(5) Account for and audit funds of CTNext and funds of any recipients of funds from CTNext;

(6) Establish advisory committees to assist in accomplishing its duties under this section, which may include one or more members of the CTNext board of directors and persons other than members;

(7) Serve as a resource to start-up and growth stage entrepreneurs in this state by (A) providing counseling and technical assistance in the areas of entrepreneurial business planning and management, financing and marketing for start-up and growth stage businesses; and (B) conducting business workshops, seminars and conferences with local partners, including, but not limited to, in-state public and independent institutions of higher education, municipal governments, regional economic development districts, private industry, chambers of commerce, small business development organizations and economic development organizations;

(8) Facilitate partnerships between innovative start-up and growth stage businesses, research institutions and venture capitalists or financial institutions;

(9) Increase the quantity and availability of capital for start-up and growth stage businesses and entrepreneurs including, but not limited to, angel investors and venture capitalists;

(10) Promote technology-based development in the state;

(11) Encourage and promote the establishment of and, within available resources, provide financial aid to advanced technology centers;

(12) Maintain an inventory of data and information concerning state and federal programs that are related to the purposes of this section and serve as a clearinghouse and referral service for such data and information;

(13) Promote and encourage and, within available resources, provide financial aid for the establishment, maintenance and operation of incubator facilities;

(14) Promote and encourage the coordination of public and private resources and activities within the state in order to assist technology-based business entrepreneurs and business enterprises;

(15) Promote science, engineering, mathematics and other disciplines that are essential to the development and application of technology;

(16) Coordinate its efforts with existing business outreach centers, as described in section 32-9qq;

(17) Provide financial aid to persons developing smart buildings, as defined in section 32-23d, incubator facilities or other information technology intensive office and laboratory space;

(18) Coordinate the development and implementation of strategies regarding technology-based talent and innovation among state and quasi-public agencies, including the creation and administration of the Connecticut Small Business Innovation Research Office to act as a centralized clearinghouse and provide technical assistance to applicants in developing small business innovation research programs in conformity with the federal program established pursuant to the Small Business Research and Development Enhancement Act of 1992, P.L. 102-564, as amended from time to time, and other proposals;

(19) Encourage the retention of younger generation start-up entrepreneurs in the state;

(20) Promote entrepreneurship among students, faculty and alumni of institutions of higher education;

(21) Make planning grants to entities seeking to apply for innovation place designation pursuant to section 32-39l, provided each such entity demonstrates that its proposed innovation place meets the purposes set forth in section 32-39k;

(22) Encourage and promote the establishment of business accelerators, including, but not limited to, a satellite of a major national business accelerator;

(23) Make higher education entrepreneurship grants-in-aid recommended by the Higher Education Entrepreneurship Advisory Committee pursuant to section 32-39t; and

(24) Do all acts and things necessary or convenient to carry out the purposes of this section and the powers expressly granted by this section.

(b) CTNext shall:

(1) Develop a plan to facilitate stronger relationships between Connecticut businesses and institutions of higher education in order to support entrepreneurial research and entrepreneurial talent development;

(2) Create an informational Internet web site that (A) lists services, programs or events offered to entrepreneurs; (B) serves as an online community for entrepreneurs; (C) lists current research projects related to entrepreneurship and innovation being conducted by professors at institutions of higher education; (D) provides information concerning innovation and entrepreneurial programming available at institutions of higher education, including, but not limited to, engineering, computer science and bioscience; and (E) connects businesses seeking to buy Connecticut made products for their business inputs;

(3) Publicize such informational Internet web site and any workshops, seminars and conferences facilitated by CTNext;

(4) Advise the Governor, the General Assembly, the Commissioner of Economic and Community Development, the president of The University of Connecticut and the president of the Connecticut State Colleges and Universities on matters relating to science, engineering and technology that may have an impact on state policies, programs, employers and residents, and on job creation and retention;

(5) Designate innovation places pursuant to sections 32-39j to 32-39m, inclusive;

(6) Annually develop, update and implement a strategic state-wide innovation and entrepreneurship marketing plan for the promotion of Connecticut as an innovation and entrepreneurship hub. The executive director shall report, in accordance with the provisions of section 11-4a, to the joint standing committees of the General Assembly having cognizance of matters relating to commerce and finance, revenue and bonding, on or before February 1, 2017, and annually thereafter, concerning the content of such plan;

(7) Establish a program to provide growth grants-in-aid to businesses in this state for the purposes of facilitating the growth of start-up businesses that have transitioned to growth stage businesses. CTNext shall establish an application process for such grants-in-aid and shall prioritize such grants-in-aid for uses most likely to facilitate the growth of such businesses, including, but not limited to, sales assistance, marketing, strategy, organizational development, technology assistance, bid assistance, beta testing of products for new purchasers and prototype development. Such grants-in-aid shall not exceed twenty-five thousand dollars per applicant and shall be conditioned upon a one-third match from the applicant;

(8) Connect entrepreneurs in innovation places designated pursuant to section 32-39m with existing municipal and state resources to assist such entrepreneurs with regulatory compliance; [and]

(9) Adopt a comprehensive program evaluation and measurement process to ensure that CTNext's programs are administered appropriately and efficiently, comply with statutory requirements, are cost effective and are achieving the purposes set forth in section 32-39f, as amended by this act; [.]

(10) Develop and operate a state-wide service hub to deliver entrepreneurial support services to facilitate the implementation of any recommendations included in a report by the grant recipient under section 32-39q; and

(11) Implement the provisions of sections 3 and 4 of this act.

(c) On or after July 1, 2018, the executive director of CTNext shall hire five employees in addition to the employees employed prior to July 1, 2018. Each such new employee shall have experience as an entrepreneur and shall be responsible for CTNext outreach efforts to entrepreneurs and individuals. Such outreach shall aim to increase the level of communication between nodes within the innovation ecosystem and the number of such nodes, connect entrepreneurs and individuals who may be of assistance to entrepreneurs to the CTNext network, act as liaisons between the CTNext board of directors and institutions of higher education in the state, attend business or other events featuring entrepreneurs on behalf of CTNext and perform other responsibilities and duties as assigned by the executive director of CTNext or the CTNext board of directors. Any such new employee may serve as an entrepreneur-in-residence under section 3 of this act.

Sec. 3. (NEW) (Effective July 1, 2018) The executive director of CTNext shall establish and operate an Entrepreneurs-in-Residence program that shall replace and incorporate any similar program run by CTNext or Connecticut Innovations, Incorporated prior to July 1, 2018. Such program shall identify highly experienced entrepreneurs who have been involved in the successful creation of innovation-based start-up companies and early-state venture deals and shall retain their services to match them with entrepreneurs and companies in the CTNext network to provide advice and assistance. Such retention may be on a paid or volunteer basis, as agreed to by the entrepreneur-in-residence and the CTNext board of directors, except that an employee of CTNext serving as an entrepreneur-in-residence shall serve on a voluntary basis.

Sec. 4. (NEW) (Effective July 1, 2018) The executive director of CTNext shall establish:

(1) A proof of concept fund to provide grants of up to fifty thousand dollars to support commercialization activities that are relevant to key industries in the state and are based on research conducted at institutions of higher education in the state. Such grants shall be awarded on a competitive basis and any applicant for such grant shall demonstrate, in a form and manner prescribed by the executive director, such applicant's intent to commercialize aspects of such research. Such grants may be awarded directly to the applicant or to a company involved in such research or commercialization efforts; and

(2) A program to incentivize the formation of at least five new venture capital funds in the state. CTNext may invest up to eight million dollars per fund only if private investors invest at least one and one-half times the amount CTNext pledges to invest in the new fund. Any such fund shall be subject to the following requirements:

(A) All such amounts invested shall be invested in start-up companies located in the state and an investor shall have an office located in the state; and

(B) Any partner in a fund established under this subdivision may buy, after five years from the date of the establishment of the fund, CTNext's equity stake in the fund plus interest at an annual rate agreed upon by the partner and the executive director.

Sec. 5. Section 32-35 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):

(a) [There] On and after October 1, 1989, but prior to July 1, 2018, there is hereby created a body politic and corporate to be known as "Connecticut Innovations, Incorporated". Such corporation is constituted a public instrumentality and political subdivision of the state and the exercise by the corporation of the powers conferred in this chapter shall be deemed and held to be the performance of an essential public and governmental function. Connecticut Innovations, Incorporated shall not be construed to be a department, institution or agency of the state. On and after July 1, 2018, Connecticut Innovations, Incorporated shall be established as a subsidiary corporation of CTNext, established pursuant to section 32-39f, as amended by this act.

(b) The subsidiary corporation shall be governed by a board of seventeen directors. Nine members shall be appointed by the Governor, six of whom shall be knowledgeable, and have favorable reputations for skill, knowledge and experience, in the development of innovative start-up businesses, including, but not limited to, expertise in academic research, technology transfer and application, the development of technological invention and new enterprise development and three of whom shall be knowledgeable, and have favorable reputations for skill, knowledge and experience, in the field of financial lending or the development of commerce, trade and business. Four members shall be the Commissioner of Economic and Community Development, the president of the Connecticut State Colleges and Universities, the Treasurer and the Secretary of the Office of Policy and Management, who shall serve ex officio and shall have all of the powers and privileges of a member of the board of directors. Each ex-officio member may designate his deputy or any member of his staff to represent him at meetings of the corporation with full power to act and vote in his behalf. Four members shall be appointed as follows: One by the president pro tempore of the Senate, one by the minority leader of the Senate, one by the speaker of the House of Representatives and one by the minority leader of the House of Representatives. Each member appointed by the Governor shall serve at the pleasure of the Governor but no longer than the term of office of the Governor or until the member's successor is appointed and qualified, whichever is longer. Each member appointed by a member of the General Assembly shall serve in accordance with the provisions of section 4-1a. A director shall be eligible for reappointment. The Governor shall fill any vacancy for the unexpired term of a member appointed by the Governor. The appropriate legislative appointing authority shall fill any vacancy for the unexpired term of a member appointed by such authority.

(c) The Governor shall appoint a chairperson from among the board members. The directors shall annually elect one of their number as secretary. The board may elect such other officers of the board as it deems proper. Members shall receive no compensation for the performance of their duties hereunder but shall be reimbursed for necessary expenses incurred in the performance thereof.

(d) Each director of the subsidiary corporation before entering upon his duties shall take and subscribe the oath or affirmation required by article eleventh, section 1, of the Constitution. A record of each such oath or affirmation shall be filed in the office of the Secretary of the State. The board of directors of the subsidiary corporation shall adopt written procedures, in accordance with the provisions of section 1-121, for: (1) Adopting an annual budget and plan of operations, including a requirement of board approval before the budget or plan may take effect; (2) hiring, dismissing, promoting and compensating employees of the corporation including an affirmative action policy and a requirement of board approval before a position may be created or a vacancy filled; (3) purchasing, leasing or acquiring real and personal property and personal services, including a requirement of board approval for any nonbudgeted expenditure in excess of five thousand dollars; (4) contracting for financial, legal, bond underwriting and other professional services, including a requirement that the subsidiary corporation solicit proposals at least once every three years for each such service which it uses; (5) awarding loans, grants and other financial assistance, including eligibility criteria, the application process and the role played by the subsidiary corporation's staff and board of directors and the Department of Economic and Community Development and including deadlines for the approval or disapproval of applications for such assistance by the subsidiary corporation on and after July 1, 1996; and (6) the use of surplus funds to the extent authorized under this chapter, or other provisions of the general statutes.

(e) Notwithstanding the provisions of any other law to the contrary, it shall not constitute a conflict of interest for a trustee, director, partner or officer of any person, firm or corporation, or any individual having a financial interest in a person, firm or corporation, to serve as a member of the board of directors of Connecticut Innovations, Incorporated, provided such trustee, director, partner, officer or individual shall abstain from deliberation, action or vote by Connecticut Innovations, Incorporated in specific respect to such person, firm or corporation.

(f) The subsidiary corporation shall have the authority to contract with the Department of Economic and Community Development for administrative or other services.

(g) As of October 1, 1989, all powers, duties and personnel of the Connecticut Product Development Corporation shall be transferred to Connecticut Innovations, Incorporated, in accordance with the provisions of section 4-38d. As of October 1, 1989, all cash, notes, receivables, liabilities, appropriations, authorizations, allocations, and all other assets and properties of the Connecticut Product Development Corporation shall be transferred to Connecticut Innovations, Incorporated. Such transfer shall not affect the validity, enforceability or binding nature of any contract or agreement for financial aid made by the Connecticut Product Development Corporation under the authorization of this chapter prior to October 1, 1989.

(h) The subsidiary corporation shall provide funding for the operation of the Connecticut Small Business Innovation Research Office in accordance with subdivision (18) of subsection (a) of section 32-39g, as amended by this act.

Sec. 6. Section 12-217bbb of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):

(a) As used in this section, (1) "accumulated credits" means credits allowed under sections 12-217j and 12-217n that have not been taken through the last income year completed prior to the date of an auction under this section, (2) "commissioner" means the Commissioner of Economic and Community Development, and (3) "chief executive officer" means the chief executive officer of Connecticut Innovations, Incorporated.

(b) (1) The commissioner, in consultation with the Commissioner of Revenue Services and the chief executive officer, shall hold an innovation investment fund tax credit auction, at such time and as frequently as the commissioner deems appropriate and effective, to allow taxpayers with accumulated credits to utilize such credits in exchange for making an investment as provided under subsection (c) of this section.

(2) For each tax credit auction, the commissioner shall specify, in consultation with the chief executive officer, the deadline for submitting a bid, the minimum number of cents for each dollar of accumulated credit that may be bid and the information required to be included with such bid. Each bidder shall submit a sealed bid and the commissioner shall select, in consultation with the chief executive officer, the winning bid or bids based upon the amounts of accumulated credits the bidder proposes to exchange, the amounts the bidder proposes to invest for such exchange and any other criteria the commissioner and the chief executive officer deem appropriate to evaluate the bids.

(c) The commissioner shall invest the amounts received from the winning bidder or bidders in the winning bidder's corporate venture fund, subject to the following requirements:

(1) All investments shall be made under the advisement of a representative of Connecticut Innovations, Incorporated, who is a member of the corporate venture fund's investment committee;

(2) The amount invested in a corporate venture fund pursuant to this subsection shall be not less than five million dollars and not more than ten million dollars;

(3) All such amounts invested shall be invested in (A) start-up businesses located in the state, or (B) spin-off companies located in the state from the bidder's research and development department;

(4) The portion of profits attributable to such investments shall be divided equally between the state and the bidder and the state's share shall be deposited in the General Fund; and

(5) The bidder agrees to reinvest the bidder's profits attributable to such investments in the bidder's corporate venture fund.

(d) In lieu of holding a tax credit auction under subsection (b) of this section, the commissioner, in consultation with the chief executive officer, may: [enter]

(1) Enter into an agreement with a taxpayer with accumulated credits to allow such taxpayer to utilize such credits in exchange for making an investment as provided under subsection (c) of this section. The requirements applicable to investments under said subsection (c) shall apply to investments made pursuant to an agreement under this subsection, except that the number of cents for each dollar of accumulated credit may be negotiated by the commissioner, in consultation with the Commissioner of Revenue Services, and the taxpayer; and

(2) Enter into an agreement with a taxpayer without accumulated credits to make an investment as provided under subsection (c) of this section.

(e) The commissioner shall continue to hold tax credit auctions pursuant to subsection (b) of this section or proactively seek agreements under subsection (d) of this section, or both, until a minimum of two deals with different corporate venture funds are reached, provided nothing in this subsection shall be construed to prohibit the commissioner from continuing to hold such auctions or enter into such agreements after two deals have been reached.

(f) The total amount of investments made under this section and the accumulated credits used under section 12-217aaa, at full value, shall not exceed fifty million dollars in the aggregate.

(g) (1) On and after July 1, 2020, the credits allowed under this section may be claimed against the tax imposed under chapter 219 or, notwithstanding the limits imposed under section 12-217zz, this chapter, with respect to the following income years of the taxpayer: (A) With respect to the income year in which the taxpayer made the investment required under this section and the next succeeding income year, zero per cent; and (B) with respect to the second full income year succeeding the year in which the taxpayer made the investment required under this section, an amount and on a schedule for such second full income year and next succeeding income years as agreed to by the commissioner, in consultation with the Commissioner of Revenue Services, and the taxpayer that made the investment.

(2) Credits allowed under this section may be sold, assigned or otherwise transferred, in whole or in part.

(h) Tax credit auctions and agreements under this section may be held or entered into for five years after the date the first such auction or agreement is held or entered into, whichever is earlier.

Sec. 7. Section 32-235 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):

(a) For the purposes described in subsection (b) of this section, the State Bond Commission shall have the power, from time to time to authorize the issuance of bonds of the state in one or more series and in principal amounts not exceeding in the aggregate one billion seven hundred fifty-five million three hundred thousand dollars, provided (1) one hundred forty million dollars of said authorization shall be effective July 1, 2011, and twenty million dollars of said authorization shall be made available for small business development; (2) two hundred eighty million dollars of said authorization shall be effective July 1, 2012, and forty million dollars of said authorization shall be made available for the Small Business Express program established pursuant to section 32-7g and not more than twenty million dollars of said authorization may be made available for businesses that commit to relocating one hundred or more jobs that are outside of the United States to the state; and (3) seventy-five million dollars of said authorization shall be effective July 1, 2018. Any amount of said authorizations that are made available for small business development or businesses that commit to relocating one hundred or more jobs that are outside of the United States to the state, but are not exhausted for such purpose by the first day of the fiscal year subsequent to the fiscal year in which such amount was made available, shall be used for the purposes described in subsection (b) of this section. For purposes of this subsection, a "small business" is one employing not more than one hundred employees.

(b) The proceeds of the sale of said bonds, to the extent of the amount stated in subsection (a) of this section, shall be used by the Department of Economic and Community Development:

(1) [for] For the purposes of sections 32-220 to 32-234, inclusive, including economic cluster-related programs and activities, and for the Connecticut job training finance demonstration program pursuant to sections 32-23uu and 32-23vv, provided:

(A) [three] Three million dollars shall be used by said department solely for the purposes of section 32-23uu and not more than five million two hundred fifty thousand dollars of the amount stated in said subsection (a) may be used by said department for the purposes of section 31-3u; [,]

(B) [not] Not less than one million dollars shall be used for an educational technology grant to the deployment center program and the nonprofit business consortium deployment center approved pursuant to section 32-41l; [,]

(C) [not] Not less than two million dollars shall be used by said department for the establishment of a pilot program to make grants to businesses in designated areas of the state for construction, renovation or improvement of small manufacturing facilities, provided such grants are matched by the business, a municipality or another financing entity. The Commissioner of Economic and Community Development shall designate areas of the state where manufacturing is a substantial part of the local economy and shall make grants under such pilot program which are likely to produce a significant economic development benefit for the designated area; [,]

(D) [five] Five million dollars may be used by said department for the manufacturing competitiveness grants program; [,]

(E) [one] One million dollars shall be used by said department for the purpose of a grant to the Connecticut Center for Advanced Technology, for the purposes of subdivision (5) of subsection (a) of section 32-7f; [,]

(F) [fifty] Fifty million dollars shall be used by said department for the purpose of grants to the United States Department of the Navy, the United States Department of Defense or eligible applicants for projects related to the enhancement of infrastructure for long-term, on-going naval operations at the United States Naval Submarine Base-New London, located in Groton, which will increase the military value of said base. Such projects shall not be subject to the provisions of sections 4a-60 and 4a-60a; [,]

(G) [two] Two million dollars shall be used by said department for the purpose of a grant to the Connecticut Center for Advanced Technology, Inc., for manufacturing initiatives, including aerospace and defense; [, and]

(H) [four] Four million dollars shall be used by said department for the purpose of a grant to companies adversely impacted by the construction at the Quinnipiac Bridge, where such grant may be used to offset the increase in costs of commercial overland transportation of goods or materials brought to the port of New Haven by ship or vessel; [,] and

(2) [for] For the purposes of the small business assistance program established pursuant to section 32-9yy, provided fifteen million dollars shall be deposited in the small business assistance account established pursuant to said section 32-9yy; [,]

(3) [to] To deposit twenty million dollars in the small business express assistance account established pursuant to section 32-7h; [,]

(4) [to] To deposit four million nine hundred thousand dollars per year in each of the fiscal years ending June 30, 2017, to June 30, 2019, inclusive, and June 30, 2021, and nine million nine hundred thousand dollars in the fiscal year ending June 30, 2020, in the CTNext Fund established pursuant to section 32-39i, which shall be used by CTNext to provide grants-in-aid to designated innovation places, as defined in section 32-39j, planning grants-in-aid pursuant to section 32-39l, and grants-in-aid for projects that network innovation places pursuant to subsection (b) of section 32-39m, provided not more than three million dollars be used for grants-in-aid for such projects; [,]

(5) [to] To deposit two million dollars per year in each of the fiscal years ending June 30, 2019, to June 30, 2021, inclusive, in the CTNext Fund established pursuant to section 32-39i, which shall be used by CTNext for the purpose of providing higher education entrepreneurship grants-in-aid pursuant to section 32-39g, as amended by this act;

(6) [for] For the purpose of funding the costs of the Technology Talent Advisory Committee established pursuant to section 32-7p, provided two million dollars per year in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive, shall be used for such purpose; [,]

(7) [to] To provide (A) a grant-in-aid to the Connecticut Supplier Connection in an amount equal to two hundred fifty thousand dollars in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive, and (B) a grant-in-aid to the Connecticut Procurement Technical Assistance Program in an amount equal to three hundred thousand dollars in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive; [,]

(8) [to] To deposit four hundred fifty thousand dollars per year, in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive, in the CTNext Fund established pursuant to section 32-39i, which shall be used by CTNext to provide four hundred fifty thousand dollars in each of the fiscal years ending June 30, 2017, to June 30, 2021, inclusive, for the purposes of growth grants-in-aid pursuant to section 32-39g;

(9) To deposit five million dollars in the CTNext Fund established pursuant to section 32-39i, which shall be used by CTNext to hire five additional employees over the next five years commencing July 1, 2018, and for other personnel expenses. Each such new employee shall have experience as an entrepreneur and to be responsible for CTNext outreach to entrepreneurs and individuals in accordance with the provisions of subsection (c) of section 32-39g, as amended by this act.

(c) All provisions of section 3-20, or the exercise of any right or power granted thereby which are not inconsistent with the provisions of this section are hereby adopted and shall apply to all bonds authorized by the State Bond Commission pursuant to this section, and temporary notes in anticipation of the money to be derived from the sale of any such bonds so authorized may be issued in accordance with said section 3-20 and from time to time renewed. Such bonds shall mature at such time or times not exceeding twenty years from their respective dates as may be provided in or pursuant to the resolution or resolutions of the State Bond Commission authorizing such bonds. None of said bonds shall be authorized except upon a finding by the State Bond Commission that there has been filed with it a request for such authorization, which is signed by or on behalf of the Secretary of the Office of Policy and Management and states such terms and conditions as said commission, in its discretion, may require. Said bonds issued pursuant to this section shall be general obligations of the state and the full faith and credit of the state of Connecticut are pledged for the payment of the principal of and interest on said bonds as the same become due, and accordingly and as part of the contract of the state with the holders of said bonds, appropriation of all amounts necessary for punctual payment of such principal and interest is hereby made, and the Treasurer shall pay such principal and interest as the same become due.

Sec. 8. (Effective July 1, 2018) (a) For the purposes described in subsection (b) of this section, the State Bond Commission shall have the power from time to time to authorize the issuance of bonds of the state in one or more series and in principal amounts not exceeding in the aggregate fifty-five million dollars.

(b) The proceeds of the sale of such bonds, to the extent of the amount stated in subsection (a) of this section, shall be used by CTNext for the purposes of section 4 of this act as follows: (1) Fifteen million dollars for the proof of concept fund established pursuant to subdivision (1) of said section; and (2) forty million dollars for the venture capital fund program established pursuant to subdivision (2) of said section.

(c) All provisions of section 3-20 of the general statutes, or the exercise of any right or power granted thereby, that are not inconsistent with the provisions of this section are hereby adopted and shall apply to all bonds authorized by the State Bond Commission pursuant to this section. Temporary notes in anticipation of the money to be derived from the sale of any such bonds so authorized may be issued in accordance with section 3-20 of the general statutes and from time to time renewed. Such bonds shall mature at such time or times not exceeding twenty years from their respective dates as may be provided in or pursuant to the resolution or resolutions of the State Bond Commission authorizing such bonds. None of such bonds shall be authorized except upon a finding by the State Bond Commission that there has been filed with it a request for such authorization that is signed by or on behalf of the Secretary of the Office of Policy and Management and states such terms and conditions as said commission, in its discretion, may require. Such bonds issued pursuant to this section shall be general obligations of the state and the full faith and credit of the state of Connecticut are pledged for the payment of the principal of and interest on such bonds as the same become due, and accordingly and as part of the contract of the state with the holders of such bonds, appropriation of all amounts necessary for punctual payment of such principal and interest is hereby made, and the State Treasurer shall pay such principal and interest as the same become due.

Sec. 9. (NEW) (Effective July 1, 2018) (a) Notwithstanding any provision of the general statutes, the Insurance Commissioner, in consultation with the CTNext board of directors, shall establish an Insurtech Regulatory Sandbox initiative to facilitate the development of new technologies and types of insurance for start-up insurance companies that do not have the capital or labor resources to comply with the insurance requirements of the state. Such initiative shall begin to be implemented not later than January 1, 2019. Such initiative shall:

(1) Establish conditions for participating in the Sandbox and provide for an application process for new companies to be accepted into the Sandbox. The commissioner shall accept all applicants that meet such conditions, except that the commissioner may limit in the first two years of the initiative the number of companies allowed to participate in the Sandbox;

(2) Provide that the commissioner shall waive the requirement to be licensed in the state for participating companies;

(3) Establish a light regulatory framework of only the requirements the commissioner deems crucial to impose on participating companies to protect consumers;

(4) Designate an employee or employees to exclusively oversee and manage the administration of the Sandbox;

(5) Permit consumers in the state to purchase products offered by participating companies while ensuring that such consumers are aware that such products are offered under reduced regulatory oversight;

(6) Establish the maximum number of policyholders or named insureds or customers and the maximum amount of risk exposure each participating company may have. The commissioner may specify the demographics that each such company may serve, so as to protect consumers who are least able to make informed choices about insurance products and understand the relevant risks of a product offered by such company;

(7) Ensure the Sandbox is structured to match the pace of product offerings and the growth of participating companies, including allowing for more rapid product testing and product adjustments on a weekly or more frequent basis;

(8) Allow participating companies to remain in the Sandbox for an initial period of twelve months. The commissioner may establish conditions to allow for an extension of such period;

(9) Establish clear steps participating companies shall meet to demonstrate such company's product or service is viable and can be made available to the wider market; and

(10) Establish reporting requirements for participating companies.

(b) The commissioner may remove a participating company from the Sandbox at any time if the commissioner determines there is an unreasonable risk to policyholders or customers of such company.

(c) Not later than July first annually, the commissioner shall submit a report in accordance with the provisions of section 11-4a of the general statutes, to the joint standing committees of the General Assembly having cognizance of matters relating to insurance, commerce and finance, revenue and bonding, summarizing the number of participating companies in the initiative, any products or services such companies offer, any products or services that have been deemed to be viable or offered to the wider market, any participating companies that have established themselves in the state and become licensed insurance companies and any other information the commissioner deems relevant.

Sec. 10. (Effective July 1, 2018) (a) Not later than January 1, 2019, the executive director of CTNext shall submit legislative recommendations to the General Assembly for the establishment of a program or programs to incentivize the formation of state-based seed and preseed funds and ensure access to follow-on venture capital funding for start-up businesses in the state. Such program or programs shall seek to capitalize a fund of funds model with strong ties to the state employees retirement fund, other institutional investors or the state's large presence of hedge fund investors, and such recommendations shall include recommended levels of funding for each program.

(b) The CTNext board of directors and the chief executive officer of Connecticut Innovations, Incorporated shall conduct a study of the credit established pursuant to section 12-704d of the general statutes. The study shall include, but not be limited to, (1) an analysis of (A) the efficacy of the angel investor program in promoting the formation of new business ventures in the state, particularly with respect to the scale and magnitude of the number of such ventures created in proportion to the overall economy of the state, (B) the structure of the program and its impact on the state's entrepreneurial ecosystem, and (C) the economic value created per tax credit dollar expended, and (2) policy or legislative changes recommended by the board or the chief executive officer. Not later than January 1, 2019, such report shall be submitted in accordance with the provisions of section 11-4a of the general statutes to the joint standing committees of the General Assembly having cognizance of matters relating to commerce and finance, revenue and bonding.

(c) Not later than January 1, 2019, the CTNext board of directors, in consultation with the chief executive officer of Connecticut Innovations, Incorporated, shall make recommendations to the General Assembly for the establishment of an intrapreneurship program or programs to promote innovative activity within established companies in the state, such activity to be aimed at solving problems or addressing market opportunities identified by such companies and leading to the formation of new spin-off start-up businesses supported by such parent company.

(d) Not later than January 1, 2019, the Connecticut Technology Council, in consultation with the CTNext board of directors, a leading business association in the state selected by the council, the Commissioner of Economic and Community Development and the president of The University of Connecticut, shall submit a report, in accordance with the provisions of section 11-4a of the general statutes, to the General Assembly that makes recommendations for:

(1) Procedures to be implemented to identify emerging industries and emerging transitions in established industries that have the potential to produce economic growth in the state, such as the microbiome industry and the application of cyber-physical systems and dynamic data processing to manufacturing; and

(2) Procedures to be implemented to develop and implement strategies for the growth of the emerging industries identified pursuant to subdivision (1) of this subsection, ensure the success of established industries in the state to adapt to emerging transitions identified pursuant to subdivision (1) of this subsection and align state resources to support such efforts.

This act shall take effect as follows and shall amend the following sections:

Section 1

July 1, 2018

32-39f

Sec. 2

July 1, 2018

32-39g

Sec. 3

July 1, 2018

New section

Sec. 4

July 1, 2018

New section

Sec. 5

July 1, 2018

32-35

Sec. 6

July 1, 2018

12-217bbb

Sec. 7

July 1, 2018

32-235

Sec. 8

July 1, 2018

New section

Sec. 9

July 1, 2018

New section

Sec. 10

July 1, 2018

New section

Statement of Legislative Commissioners:

In Sections 4(2) and 9(a)(6), a technical change was made for consistency with standard drafting conventions and accuracy, respectively; and in Section 7(b)(9), "commencing July 1, 2018," was inserted for clarity.

FIN

Joint Favorable Subst. -LCO

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 19 $

FY 20 $

Out Years

Resources of the General Fund

GF - Uncertain

See Below

See Below

See Below

Treasurer, Debt Serv.

GF - Potential Cost

See Below

See Below

79.5 million total

Insurance Dept.1

IF - Cost

84,712

169,423

See Below

Note: GF=General Fund; IF=Insurance Fund

Municipal Impact: None

Explanation

Sections 1 – 5 have no fiscal impact to the state by changing the organizational relationship between Connecticut Innovations (CI) and CTNext. The bill shifts CTNext to be the parent agency of CI, and CI the subsidiary of CTNext. The bill does require CTNext to hire five employees and implement new programs using General Obligation (GO) bond funds, the costs of which are described in sections 7 and 8, but otherwise makes no changes to the underlying programs in CTNext and CI.

Section 6 results in an uncertain revenue impact because: 1) it is uncertain how many, if any, additional businesses would choose to participate in the program, and 2) it is unclear how tax credits held by any such business would be impacted by such participation.

Section 7 obligates $5 million of funds previously authorized for the Manufacturing Assistance Act to hire five additional CTNext employees. This may change the rate of expenditure of the authorized GO bonds, with a commensurate change in future debt service payments.

Section 8 authorizes $55 million in GO bonding for additional programs within CTNext. To the extent that the authorized bonds are allocated by the State Bond Commission, the state would need to repay the principal amount of the bond plus associated fees and interest. If bonds were approved for use and issued in FY 19, the state could begin repayment of up to $2.75 million in FY 20. A later issuance date would not result in repayment cost in the biennium.

Section 9 of the bill requires the Insurance Commissioner, in consultation with the CTNext board of directors, to establish an Insurtech Regulatory Sandbox initiative by January 1, 2019, designate an employee to exclusively oversee and manage the administration of the Sandbox, and submit a report summarizing the results of the initiative annually. The Insurance Department will likely need to hire an Insurance Program Manager with a full year cost to the Insurance Fund of $169,423 for salary and fringe benefits. The FY 19 costs reflect a half year of salary and fringe benefits ($84,712).

The Out Years

Under current market conditions, the state would repay a $55 million bond over 20 years at an approximate total cost of $79.5 million (for principal and interest, including the initial $2.75 million payment described above), or approximately $3.98 million per year on average.

The ongoing fiscal impacts identified in the Insurance Fund above would continue into the future subject to inflation.

OLR Bill Analysis

sSB 541

AN ACT PROMOTING INNOVATION, ENTREPRENEURSHIP AND INTRAPRENEURSHIP IN THE STATE.

SUMMARY

This bill makes organizational changes in Connecticut Innovations (CI), the state's quasi-public venture capital agency, and creates new programs to stimulate and sustain commercial innovation and the formation and growth of new businesses.

The organizational changes affect the relationship of CI and its subsidiary, CTNext. Under current law, CI mainly provides venture capital to new businesses bringing innovative new products and services to the market. CTNext focuses mainly on developing and maintaining the wider “ecosystem” that nurtures these activities, often connecting innovators with entrepreneurs and supporting their endeavors.

The bill reverses the relationship between these entities, making CTNext the parent corporation and CI the subsidiary. In doing so, it requires CTNext to hire five outreach staff and do more to develop and maintain the state's ecosystem. It also creates programs to (1) place experienced entrepreneurs in new businesses, (2) provide grants for determining a research project's commercial potential, and (3) capitalize Connecticut-based venture capital funds.

The bill also requires CTNext and several other entities, by January 1, 2019, to submit recommendations and studies to the legislature on various innovation and entrepreneurial issues, including the angel investor tax credit program's effectiveness and innovation and entrepreneurship in established companies.

Additionally, the bill authorizes a new program to stimulate innovation in the insurance industry. It requires the insurance commissioner to create a framework that reduces the regulatory requirements on new startup insurance companies that develop new insurance related products and services, but lack the means to comply with the state's insurance laws.

The bill also extends the stranded tax credit program to businesses that do not have unused research and development credits. Under current law, businesses may exchange unused credits for investments in their own corporate venture capital fund.

Lastly, the bill makes technical changes.

EFFECTIVE DATE: July 1, 2018

1, 2, 5, & 7 — ORGANIZATIONAL CHANGES

CI-CTNext Relationship ( 1& 5)

The bill reverses the relationship between CI and CTNext. Under current law, CI is the state's quasi-public venture capital agency that the legislature established in 1989 to, among other things, stimulate and encourage the research and development of new technologies and the growth of new technology-based businesses (CGS 32-39). CTNext was established in 2016 as a CI subsidiary to foster innovation, support start-up and growth-stage businesses, and build entrepreneur communities.

The bill makes CTNext the parent agency and CI its subsidiary. In doing so, it makes CTNext a quasi-public state agency, transferring to it CI's status as a body politic and corporate and a public instrumentality and a state political subdivision created to perform an essential public function.

Expanded CTNext Mission ( 1 & 2)

The bill revamps and expands CTNext's statutory mission. Among other things, CTNext's current mission includes fostering innovation, start-up, and growth-stage businesses and building entrepreneurial communities. The bill instead requires CTNext to focus on the broader, macro-level ecosystem that supports innovation and entrepreneurial community building. It specifically requires CTNext to:

The bill aligns CTNext's specific duties with these new, ecosystem-level purposes. It requires CTNext to develop and operate a state-wide hub to deliver entrepreneurial support services to help implement the recommendations of the statutorily required study assessing the state of innovation and entrepreneurship in Connecticut (CGS 32-39q).

The bill also requires CTNext to address micro-level needs. Specifically, it must:

Lastly, the bill authorizes CTNext to do all things necessary and proper to fulfill its statutory mission.

Expanded CTNext Staffing Capacity ( 2 & 7)

The bill requires CTNext's executive director to hire, on or after July 1, 2018, five employees, who must be in addition to those CTNext employed before that date. Each new employee must be an experienced entrepreneur and conduct outreach to entrepreneurs and individuals.

The bill specifies the new employees' outreach objectives. They must:

The new employees may serve as entrepreneurs-in-residence (see below).

The bill funds the new employees' positions by using $5 million of an existing bond authorization for the Department of Economic and Community Development's (DECD) Manufacturing Assistance Act Program. It requires DECD to deposit $5 million in the CTNext fund for this purpose.

CTNext Executive Director Appointment ( 1)

The bill requires the board to approve the appointment of CTNext's executive director, but does not specify who makes the appointment. Under current law, the board's chairperson, with the board's approval, appoints the executive director.

Board Members' Conflict of Interest ( 1)

The bill specifies that CTNext's board members must (1) abstain from deliberating, acting, or voting with respect to a person, firm, or corporation in which they have a financial interest or serve as a trustee, director, partner, or officer and (2) comply with the State Code of Ethics, as they must under current law. Current law allows members with these types of associations or financial interests to serve as long as they comply with the code, which includes abstaining from taking an official position on a matter if they have a substantial conflict of interest.

2-4, 6, 8, & 9 — PROGRAMMATIC INITIATIVES AND CHANGES

The bill establishes three new CTNext programs, authorizes bonds to fund two of them, and adds their implementation to CTNext's statutory duties ( 2). The bill also (1) expands the existing stranded tax credit program and (2) creates a new program to support start-up insurance businesses.

Entrepreneurs-in-Residence ( 3)

The bill requires CTNext's executive director to establish and operate an Entrepreneurs-in-Residence program, which must replace and incorporate any similar CTNext or CI program that existed before July 1, 2018. The program must match highly experienced entrepreneurs with entrepreneurs and businesses in CTNext's network to provide advice and assistance.

An entrepreneur satisfies this criterion if he or she has been involved in successfully creating innovation-based startups and early-state venture deals. The entrepreneur may serve on a paid or volunteer basis, as the entrepreneur-in-residence and the CTNext board agree. A CTNext employee may also serve as an entrepreneur-in-residence, but only on a volunteer basis.

Proof of Concept Fund ( 4 & 8)

The bill requires CTNext's executive director to establish a fund to support activities intended to evaluate commercial applications for academic-based research (i.e., proof of concept) that is relevant to the state's key industries. She must do this by providing grants of up to $50,000 to applicants who demonstrate their intent, in a form and manner she prescribes, to find commercial applications for the research. She must award the grants on a competitive basis to the applicant or a company involved in the applicant's research. The bill authorizes up to $15 million in general obligation (GO) bonds for the grants.

Venture Capital Fund Formation ( 4 & 7)

The bill also requires CTNext's executive director to encourage the formation of at least five new Connecticut-based venture capital funds and authorizes up to $40 million in GO bonds for this purpose. It allows CTNext to invest up to $8 million per fund if private investors also invest an amount that equals at least 150% of the CTNext's investment.

Any fund receiving a CTNext investment must:

Stranded Tax Credit Program Extended ( 6)

The bill extends the stranded tax credit program to businesses with research and development corporation business tax credits they can otherwise use to reduce their taxes. Under current law, the program allows a business with credits it earned but cannot claim (usually because the credits' value exceeds the business's tax liability) to exchange them for making certain capital improvements or investments. The business must first enter into an agreement with the DECD commissioner to make this exchange.

The bill allows a business without accumulated credits to also enter into an agreement with the DECD commissioner to make investments in its corporate venture fund.

Insurtech Regulatory Sandbox Initiative ( 9)

By January 1, 2019, the bill requires the insurance commissioner, in consultation with CTNext's board of directors, to establish and implement an initiative to help develop new technologies and types of insurance for start-up insurance companies that lack the capital and labor resources to comply with the state's insurance laws and regulations (i.e., Insurtech Regulatory Sandbox Initiative or Sandbox).

The initiative must have several components. It must:

The bill allows the commissioner to remove a start-up from the Sandbox whenever she determines there is an unreasonable risk to the start-up's customers or policyholders.

Starting July 1, 2019, the commissioner must annually report to the Insurance; Commerce; and Finance, Revenue and Bonding committees on the Sandbox, summarizing:

10 — POLICY RECOMMENDATIONS AND REPORTS

The bill requires CTNext, CI, and several other entities to submit recommendations and reports to the legislature on several innovation and entrepreneurship issues.

State-based Seed and Preseed Funds

By January 1, 2019, the bill requires CTNext's executive director to recommend to the legislature how the state can:

The recommendations must include proposed funding levels for each program.

Angel Investor Tax Credit Program

The bill requires CTNext's board of directors and CI's chief executive officer to study the angel investor tax credit program and report the results to the Commerce and Finance, Revenue and Bonding committees by January 1, 2019. The program provides a 25% personal income tax credit, up to $250,000, for people who invest at least $25,000 in a CI-approved business.

The study must analyze the program's effectiveness, recommend policy or legislative changes, and analyze:

Intrapreneurship Programs

By January 1, 2019, CTNext's board, in consultation with CI's chief executive officer, must submit recommendations to the legislature to establish programs for promoting innovative activity within established businesses (i.e., intrapreneurship). The programs must (1) help these businesses solve problems or address market opportunities they identify and (2) support the formation of new spin-off businesses.

Emerging Industries and Transitions

By January 1, 2019, the bill also requires several entities to submit recommendations to the legislature pertaining to emerging industries and transitions. The recommendations must be prepared by the nonprofit Connecticut Technology Council in consultation with CTNext's board of directors, a leading Connecticut business association the council selects, DECD commissioner, and UConn president.

The recommendations must identify procedures for:

The recommendations must also address how the state can align its resources to develop and implement these strategies.

COMMITTEE ACTION

Finance, Revenue and Bonding Committee

Joint Favorable

Yea

36

Nay

11

(04/05/2018)

TOP

1 The fringe benefit costs for employees funded out of other appropriated funds are budgeted within the fringe benefit account of those funds, as opposed to the fringe benefit accounts within the Office of the State Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes for other appropriated fund employees is 87.66% of payroll in FY 19 and FY 20.