Connecticut legislation creates a personal income tax deduction for general partners who receive income from a venture capital fund established on or after January 1, 2018. The deduction applies to tax years beginning on or after January 1, 2018.
Who Qualifies as A General Partner?
General partners qualifying for the deduction include partners of funds organized as a:
– general partnership;
– limited partnership; or
– limited liability partnership.
It also includes members or member-managers of limited liability companies treated as a partnership for federal income tax purposes.
What Venture Investments Qualify?
The deduction applies only to investment income received from Connecticut-based bioscience businesses that:
– manufacture pharmaceuticals, medicines, medical equipment, medical devices, and analytical laboratory instruments;
– operate medical or diagnostic testing laboratories; or
– conduct pure research and development in the life sciences.
How Does A General Partner Compute The Deduction?
The deduction equals the income a general partner receives:
– from the fund’s sale, transfer, exchange, or other disposition of equity interests in a Connecticut bioscience business and
– for management of the fund.
A general partner must determine his or her management income using an investment ratio. This ratio represents the total amount of money invested by the venture capital fund in a bioscience business divided by the total amount of capital raised by the fund.
Act 18-147 (S.B. 266), Laws 2018, July 1, 2018 and applicable as noted