CONNECTICUT R&D TAX CREDIT SUMMARY
Connecticut State R&D Expenses Tax Credit
- A credit against the corporation business tax is allowed for research and development expenditures deductible under IRC § 174 and for basic research payments deductible under IRC § 41
- Expenditures funded by a grant, contract, or otherwise by a person or governmental entity other than another corporation included in a combined return do not qualify for the credit
- A corporation must reduce this credit by the amount of any incremental credits taken under Conn. Gen. Stat. §12-217j or any credits for grants to higher education institutions taken under Conn. Gen. Stat. §12-217l
- A qualified small business that cannot take the credit in a particular year because no tax is owed can either carry the credit forward or can apply to the Commissioner to exchange the credit for a credit refund equal to 65% of the value of the credit*
The amount of the credit is based on the amount of qualified research and development expenditures in Connecticut, as follows:
- $50 million or under, 1%
- Over $50 million but not over $100 million, $500,000 plus 2% of the excess over $50 million
- Over $100 million but not over $200 million, $1.5 million-plus 4% of the excess over $100 million
- Over $200 million, $5.5 million-plus 6% of the excess over $200 million
An exception is made for a qualified small business, which is allowed a tentative credit equal to 6% of research and development expenses. For such purposes, a qualified small business is a company with a gross income for the previous income year that does not exceed $100 million and that has not met the gross income test through transactions with a related person.
How to Obtain the Credit?
Form CT-1120 RDC must be completed and attached to Form CT-1120K. In addition, the following must be attached to Form CT-1120 RDC:
- A full and complete description of the nature of the research projects conducted by the company during the income year and the locations where conducted
- A description of the methods used to obtain the total expenditures and payments for research and experimentation and basic research conducted in Connecticut
- A description of each source of information used to compute the credit, including the methods and calculations of expense allocation if any and the job title
- Description of each employee whose wages are included in the research expenditures
Refundable/Transferable Tax Credit – Yes*