On the heels of Gov. Dannel P. Malloy”™s jobs bill this past fall focused on freeing up funding and support for entrepreneurs, the U.S. Senate is considering a proposed Startup Act that would among other benefits allow new companies to claim a full tax credit on initial profits.
Startups could claim a credit covering 100 percent of the earnings they generate in their first year of profitability and half of their earnings in the two succeeding years. The tax credit would be capped at $5 million of income for all three years.
The Startup Act would also make permanent the 100 percent exemption on capital gains taxes for investments held for at least five years in qualified small businesses, defined as those having less than $50 million in total assets. It would allow immigrants working in the U.S. under an H-1B visa to stay an additional three years if they launch their own business here. And it directs the Department of Commerce to compile a biennial report that analyzes state laws that affect the formation and growth of startups in each state, ranking them on new business creation and economic growth.
New York led all states on a similar index published last summer by researchers at the University of Nebraska, with Massachusetts third, New Jersey fourth and Connecticut dropping four rungs to 17th.
Still, only last month the Connecticut Innovations Inc. venture capital fund lured a Massachusetts company to Putnam in eastern Connecticut with a $1 million investment. RemoteReality Corp. designs cameras that can produce video and thermal imaging across 360 degrees, with military and commercial applications; the company”™s technology was originally developed at Columbia University in New York City.
Even as Connecticut assesses the early returns on Malloy”™s jobs bill and Congress considers the Startup Act, in early December, the U.S. Small Business Administration indicated it is moving ahead with a $1 billion early-stage innovation fund in conjunction with Startup America. Connecticut became one of the earliest states to link up with Startup America, whose founder is a former executive with Norwalk-based Priceline.com Inc. The SBA funding will be augmented in another $1 billion in support from more than 50 private-sector institutions, including free software, consulting and legal services. The White House hopes more than 100,000 startups will get help under the program.
Among other new programs, the White House wants to increase the use of so-called mini-offerings that exempt small businesses seeking capital from a variety of regulations. President Obama has called for raising that limit to $50 million from $5 million, and to allow entrepreneurs to chase “crowdfunding” by soliciting small amounts of financing online from many small-dollar investors.
Obama also wants to phase in regulations over time for companies that hold initial public offerings of stock, with U.S. Rep. Jim Himes of Greenwich co-sponsoring a bill to that end in December.
