DRS: Urban and Industrial Site Reinvestment 25JAN2017

Urban and Industrial Site Reinvestment Tax Credit

Conn. Gen. Stat. §32-9t
 

Description and Applicable Taxes

A tax credit is available for investments in eligible industrial site investment projects or eligible urban reinvestment projects. This tax credit is administered by the Department of Economic and Community Development (DECD).

 

DECD may register managers of funds and community development entities created for the purpose of investing in eligible urban reinvestment projects and eligible industrial site investment projects. Any fund manager or community development entity will have its primary place of business in Connecticut. Any fund manager registered under the Insurance Reinvestment Fund tax credit on or before July 1, 2000, will be eligible to serve as a fund manager for purposes of this tax credit.

 

No taxpayer will be eligible for this tax credit and the tax credit for manufacturing and service facilities or the Insurance Reinvestment Fund tax credit for the same investment. No two taxpayers will be eligible for any tax credit with respect to the same investment or the same project costs.

 

This tax credit may be applied against the taxes imposed under:

  • Chapter 207 (Insurance Companies and Health Care Centers Taxes);
  • Chapter 208 (Corporation Business Tax);
  • Chapter 208a (Unrelated Business Income of Nonprofit Corporations Tax);
  • Chapter 209 (Air Carriers Tax);
  • Chapter 210 (Railroad Companies Tax);
  • Chapter 211 (Community Antenna Television Systems and One-Way Satellite Transmission Business Tax);
  • Chapter 211a (Hospitals Tax)
  • Chapter 211b (Dry Cleaning Tax)
  • Chapter 212 (Utility Companies Tax)
  • Chapter 212a (Public Service Companies Tax); and
  • Section 38a-743 (Surplus Lines Brokers Tax).

 

Definitions

Investment means all amounts invested in an eligible project by or on behalf of a taxpayer whether directly, through a fund, or through a community development entity or a contractually bound community development entity, including but not limited to equity investments made by the taxpayer and loans.

 

Project means the acquisition, leasing, demolition, remediation, construction, renovation, expansion or other development, or redevelopment of real property and improvements within Connecticut, including furniture, fixtures, equipment, associated interest and financing costs, relocation costs, start-up costs, architectural, engineering, legal and other professional services, plans, specifications, surveys, permits, and studies necessary to the project. For a contractually-bound community development entity, a project shall not include any activities, costs, or services not included in the allocation agreement with the community development financial institutions.

 

Contractually-bound community development entity means a community development entity that has entered into an allocation agreement with the community development financial institutions fund under IRC §45D and whose service area includes this state.

 

Eligible industrial site investment project means a project located in Connecticut for the development or redevelopment of real property:

 

  • That has been subject to a spill, as defined in Conn. Gen. Stat. §22a-452c, is an establishment, as defined in Conn. Gen. Stat. §22a-134(3), as amended, or is a facility, as defined in 42 USC §9601(9); 
  • That, if remediated, renovated, or demolished in accordance with applicable law and regulations and that standards of remediation of the Department of Energy and Environmental Protection and used for business purposes will add significant new economic activity and employment in the municipality in which the investment is to be made and will generate additional tax revenues to Connecticut;  
  • For which the use of the urban and industrial site reinvestment program will be necessary to attract private investment to the project;
  • The business use of which would be economically viable and would generate direct and indirect economic benefits to Connecticut that exceed the amount of the investment during the period for which the tax credits are granted; and
  • That is, in the judgment of DECD, consistent with the strategic economic development priorities of the state and the municipality.

 

Eligible urban reinvestment project means a project:

  • That would add significant new economic activity and new jobs in a new facility in the eligible municipality in which the project is located and will generate significant additional tax revenues to the state or the municipality;
  • For which the use of the urban and industrial site reinvestment program will be necessary to attract private investment to an eligible municipality;
  • That is economically viable;
  • For which the direct and indirect economic benefits to the state outweigh the costs of the project; and
  • That is, in the judgment of DECD, consistent with the strategic economic development priorities of the state and the municipality.

 

Tax Credit Amount

The tax credit is allowable over ten years as follows:

 

  • The income year in which the investment was made and the two succeeding income years, 0%;
  • The third full income year following the year in which the investment was made and the three succeeding income years, 10%; and
  • The seventh full income year following the year in which the investment was made and the two succeeding income years, 20%.

 

Carryforward and Carryback Limitations

The tax credit may be carried forward for the five immediately succeeding income years until the full tax credit has been taken. No carryback is allowed. An assignee is entitled to carry forward any unused tax credit as provided in the statute.

 

 

How to Apply

Any taxpayer, fund manager, or community development entity wishing to make an investment may call DECD at 860-270-8110 and request the Urban and Industrial Site Reinvestment Program pre-application.  Upon review of the completed pre-application, a DECD staff representative will contact the taxpayer, fund manager, or community development entity to discuss the program further and to explain the formal application process. The completion of the pre-application does not constitute a formal application for the tax credit.

 

Once a formal application is approved, DECD will issue a certificate of eligibility certifying that the applicant has complied with the provision of this tax credit.

 

The tax credit may be claimed by a taxpayer who has made an investment:

 

  • Directly of at least $5 million in a qualified urban or industrial site project;
  • Directly of at least $2 million in a project that preserves a historic facility and redevelops the facility for mixed uses that includes at least four housing units;
  • Directly of at least $50 million in a municipality approved by DECD;
  • Through a DECD approved fund manager with a fund that has a total asset value of at least $60 million for the income year in which the initial tax credit is taken and not less than three investors who are not related persons; or
  • Through a DECD approved community development entity.

 

Assignment and Transfer

Any taxpayer allowed an urban and industrial reinvestment tax credit (assignor) may assign the tax credit to another taxpayer or taxpayers (assignees). The tax credit allowed for each income year during the ten year period discussed in the Tax Credit Amount section may be separately assigned for that income year.

Assignees of the tax credit must claim the tax credit in the same tax year that the assignor would have been eligible to claim the tax credit.

 

Insurance Companies and Health Care Centers: In addition to the assignments that are permitted under the specific provisions of this tax credit statute, this credit may also be assigned by an insurance company or health care center to an affiliate provided that the affiliate may only apply the assigned credit against its tax liability under Chapter 207 (Insurance Companies and Health Care Centers Taxes).

 

 

How to Claim the Tax Credit

Complete Form CT-UISR, Urban and Industrial Site Reinvestment Tax Credit, and attach it to Form CT-1120K, Business Tax Credit Summary, and/or Form CT-207K, Insurance/Health Care Tax Credit Schedule.

 

A taxpayer claiming this tax credit may claim all or part of the tax credit in the first income year that the tax credit is available to be claimed (the “First Year”) or in any of the five immediately succeeding income years. The amount of the tax credit earned but not claimed in the First Year shall be available to be claimed during the five immediately succeeding income years.

 

 

Recapture

No later than July 1 in each year that tax credits are claimed, DECD may conduct a study to estimate the state revenue generated by the eligible project in which the investment is made. If the sum of all state revenue actually generated by the project is less than the amount of the total sum of tax credits claimed on the date of the analysis, DECD may determine an applicable recapture amount and may revoke the certificate of eligibility.

 

Any taxpayer that has claimed tax credits related to a project for which DECD has revoked the certificate of eligibility will be required to recapture its pro-rata share of the recapture amount, and no subsequent tax credit will be allowed unless the certificate of eligibility is reinstated. The amount of the tax credit that the taxpayer is required to recapture varies depending upon the year in which the tax credit is required to be recaptured as follows:

Year

Percentage

Year 4

90%

Year 5

65%

Year 6

50%

Year 7

30%

Year 8

20%

Year 9-10

10%


The Department of Revenue Services (DRS) may recapture the tax credit first from any taxpayer who claimed the tax credit, then from any taxpayer who assigned the tax credit, and finally, from any fund through which the investment was made.

 

For a contractually-bound development entity, tax credit recapture shall be determined under the terms of the allocation agreement with the community development financial institutions fund under IRC §45D.

 

 

Where to Get Additional Information

Direct inquiries to:


Connecticut Department of Economic and Community Development

505 Hudson Street

Hartford CT 06106-7107

860-270-8110

www.ct.gov/ecd

 

 

Statutory and Regulatory References

Conn. Gen. Stat. §32-9t  

 

 

Last updated January 25, 2017