Startup program waives government fees, red tape [HartfordBusiness.com]

Article as it appeared on HartfordBusiness.com

As the General Assembly heads into the second half of its 2015 legislative session, lawmakers are pushing a $34 million program that would enable startups to forgo filing state and local government paperwork, along with all associated fees.

The Entrepreneur Learner’s Permit program allows owners and executives of qualifying small businesses for two years to waive any state or municipal filing, licensing, or permitting and the fees associated with starting a new company. The bill, originally authored by State Sen. Scott Frantz (R-Greenwich), has unanimously been approved by the legislature’s Commerce and the General Administrations & Elections committees.

“The overall approach is that you want to help small businesses overcome obstacles when they are really starting up,” said State Rep. Chris Perone (D-Norwalk), co-chair of the Commerce Committee. “If you allow a business to get up on their feet, you will get more in economic impact than you would in fees at the beginning.”

The state of New York has a similar program called Start-Up New York where fledgling companies pay no state taxes for 10 years, provided they locate in one of the tax-free zones around New York colleges and universities. Not only does that program enable startups to avoid paying sales, use, corporate, property, and mobility taxes — along with waiving all state and local fees — the startups’ employees don’t have to pay personal income taxes either.

“We had a number of proposals to include tax credits in [Connecticut’s program],” said State Sen. Joan Hartley (D-Waterbury), co-chair of the Commerce Committee. “Because New York is a neighboring state, we monitor these programs.”

The Commerce Committee ultimately decided the Learner’s Permit program should waive only filings and fees — not taxes — because it is a first-year program. Committee members want to see how it works initially and possibly add tax incentives in the future, Hartley said.

“You have to crawl before you can walk or run,” she said.

Frantz introduced the Learner’s Permit bill two years ago, but it never gained traction, he said. Now, with the unanimous vote of two legislative committees and support from both Republicans and Democrats, he is encouraged about its approval chances this year.

“I run into people all the time who say, ‘It is really hard to start a company in Connecticut,'” Frantz said. “I hope [the Learner’s Permit program] gets some traction around the country and people think Connecticut is a good place to start a business.”

Finding the money

The Office of Fiscal Analysis (OFA) estimates the program will cost the state $27 million annually in lost fee revenue; other agencies like transportation and banking will lose $7 million annually. Because the Department of Economic & Community Development will be implementing the program it would have to spend $153,516 to hire two new workers.

“The Achilles’ heel will be the cost of doing this in a tough budget year,” Hartley said. “Because it’s a new program, it’s going to have a steep hill to climb.” The legislature is facing billion-dollar deficits in each of the next two fiscal years so finding money for new programs will be difficult, Hartley said.

The OFA report assumes 25,000 startups launch in Connecticut every year, which Frantz believes is overinflated. Convincing the rest of the legislature of that, though, will create problems in getting the program approved, he said.
Waiving filings and fees will increase startups’ survival

chances because they will be able to spend more of their limited time and capital on developing their business, said Andrew Markowski, Connecticut director for the National Federation of Independent Business.

“This is exactly the type of discussion the legislature should be having,” said Markowski, who supports the Learner’s Permit initiative. “Entrepreneurs are encouraged when they see a bill like this.”

Under the program, DECD will reimburse municipalities for their lost fees, so the cost will be entirely borne by the state. DECD’s Office of Small Business Affairs will approve the two-year permits to entrepreneurs, allowing one permit per person. Possible filings that could be avoided include occupational or trade licenses from the Department of Consumer Protection, environmental use permits from the Department of Energy & Environmental Protection, and annual reports with the Secretary of the State.

Frantz said details of the program are still being worked out and there will still probably be limited paperwork required. Startups, for example, would have to apply for their learner’s permit and potentially register their company with the Secretary of the State’s office.

“It will be something you can fill out in three minutes or less, instead of weeks or months,” Frantz said.

By freeing up their cash and time, the legislature wants startups to concentrate more on making their businesses successful, including doing research and development, marketing, and hiring, Perone said.

“As a state, we really want to target small businesses in a bigger way,” Perone said.