State expands tax credit

Even as a state agency reportedly recommended ending several tax credit programs, Connecticut moved ahead with a plan to expand an existing program to free up financing for a wide range of small businesses.

A venture capital group has raised $72 million for investments in more than 25 small businesses in Connecticut, under an updated state law that certifies fund managers to invest private capital furnished by insurance companies.

Advantage Capital Partners became the first venture capital and small business finance firm to be certified as a fund manager under the newly revised insurance reinvestment tax credit program, a 1994 program expanded as part of the state”™s jobs bill passed last year.

As of 2006, the insurance reinvestment tax credit program had spurred 21 investments for a total of $184 million, with another $118 million approved for investment and $604 million in additional capacity idle at that point in time. According to the Connecticut Office of Legislative Research, as of 2006 the program had led to the creation of less than 100 new jobs, though applications promised that number would swell by nearly 1,100 more in time.

According to East Hartford Sen. Gary LeBeau, the tax credit program was costing more than $400,000 a job as previously structured. Last year Connecticut legislators had considered ending the program but instead expanded it after hearing the amount of investment it has spurred and the fact that investment managers cannot claim the tax credit for a 10-year period.

Testifying in support of the tax credit last year, New Milford”™s economic development supervisor said that a company in that town is using the program to create several dozen high-tech insurance jobs there.

According to a report by The Associated Press, the Connecticut Department of Economic and Community Development has proposed ending several tax credit programs in Connecticut, with few details available at deadline.

The revamped insurance reinvestment tax credit program now allows fund managers to invest in any Connecticut-based business, not just insurance-related companies. A quarter of available funds must be committed to green technology efforts, while at least 3 percent must go toward startups at the earliest stages of organization.

“As I have traveled the state, one of the top concerns I have heard ”“ especially as the economy has struggled ”“ has been the lack of access to capital, especially risk capital for new ventures with considerable start-up costs but high growth potential,” said Gov. M. Jodi Rell, in a prepared statement on the eve of leaving office. “With the changes that we made to the insurance reinvestment tax credit program, there will be a much-needed infusion of investment dollars into our state to support business formation and growth, as well as strengthen our high-tech work force. I expect that this program will be paying important economic dividends for years to come.”

For the Connecticut fund, Advantage Capital partnered with Ironwood Capital, an Avon-based investment management firm whose partners include Victor Budnick, the former head of Connecticut Innovations, a state sponsored venture capital organization. Ironwood Capital will identify, underwrite and manage investments under the new program; the firm”™s lone Fairfield County portfolio company at present is Genesis Solutions Holdings Inc., a Ridgefield-based consulting company focused on manufacturing maintenance systems.

Advantage Capital”™s closest office is in Glens Falls, N.Y.; it has coordinated investments in multiple companies in Westchester County, N.Y.