A Chester CT based company which won the Connecticut Technology Council’s 2011 “Connecticut Innovation Award” announced at a press conference a couple of weeks ago that it raised $500,000 in capital from angel investors, and I spoke with Mary Anne Rooke, president of the CT Angel Investor Forum, based in East Hartford, about what affect the new Connecticut angel tax credit law had on this round of funding for the company, Autotether.
Ms. Rooke, who is on the Autotether board of directors, told me in a phone interview that a few CT angel investors had initially thought of contributing in the $10,000 range, but then upped their contribution to $25,000 upon learning that they would be eligible for the tax credit upon meeting the $25,000 threshold. The threshold used to be $10,000, but pursuant to the recent change in Connecticut law, it is now $25,000. Getting angel investors to invest in Autotether will now enable the company to meet certain of its goals to sell its product nationwide.
The Connecticut Angel Investor Tax Credit now provides that an investments of at least $25,000 will be subject to an income tax credit equal to 25% of the cash investment, up to a maximum credit of $250,000.
Speaking on behalf of the Connecticut Angel Investors Forum, Ms. Rooke advised me that the new lower threshold should bring more angels into investing in Connecticut companies, and that it’s now important to get the word out in the investing community regarding the tax credit. The two section clusters of the Connecticut Angel Investors are in New Haven and Stamford.
Only certain Connecticut businesses may qualify to participate in the Angel Investor Tax Credit Program. Criteria include: 1) principal place of business in Connecticut, 2) business area of bioscience; advanced materials; photonics; information technology or clean technology; 3) gross revenues under $1 million in its most recent income year; 4) fewer than 25 employees, at least 75% of whom are Connecticut residents; 5) operated in Connecticut for less than seven consecutive years; and 6) received less than $2 million in eligible investments from angel investors.
Additional information about these qualifying requirements is available on the Qualified Connecticut Business Application, a link to which is provided at http://www.ctangeltaxcredit.com
Also, under the CT law, all angel investors must be “accredited investors” or a network of such investors. Further, angel investors do not include:
- an individual who controls 50% or more of the qualified business receiving the investment;
- a venture capital company; or
- any bank, savings and loan association, trust, insurance company, or similar entity whose normal business activities include venture capital investments.