Connecticut Research and Development Tax Credit Summary

Connecticut allows C corporations to claim both an incremental AND non-incremental research and development tax credit for R&D expenses paid or incurred by the corporation within the state. The definition of qualified research expenses for both credits are expenses that may be deducted under IRC § 174 and basic research payments defined under IRC § 41.

Here is a summary of the two credits:

Incremental R&D Credit

  • The tax credit is equal to 20% of the incremental increase in R&D expenses that are conducted in Connecticut.
  • This tax credit may be carried forward for up to 15 years.
  • Partially refundable for taxpayers whose gross income does not exceed $70 million AND have no tax liability.

Non-incremental R&D Credit

  • The tax credit is equal to up to 6% of the current year's R&D expenses dependent on gross receipts.
  • The credit is 5% for companies employing between 251 and 800 employees within the state.
  • This credit may be carried forward indefinitely.

Connecticut R&D Tax Credit Case Study

A Stanford company designs and manufactures components for the aerospace industry. The company claims R&D credits each year for the development activities of its engineers. This project involved a multi-year study covering the tax years 2011 - 2014. The Company qualified for the federal R&D Tax Credit of $327,833 and an additional $184,000 of state R&D Tax Credit in Connecticut.

  
FEDERAL
 
CONNECTICUT
Year
Total QREs
Credit
Total QREs
Credit
2014
$1,300,000
$135,333
$1,300,000
$72,000
2013
900,000
91,000
900,000
52,000
2012
650,000
63,000
650,000
36,000
2011
450,000
38,500
450,000
24,000
     
Total $3,300,000$327,833 $3,300,000$184,000