Connecticut Research and Development Tax Credit Summary
Connecticut allows C corporations to claim both 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.
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.
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FEDERAL
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CONNECTICUT
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|
Year
|
Total QREs
|
Credit
|
Total QREs
|
Credit
|
||
|
Year 4
|
$1,300,000
|
$135,333
|
$1,300,000
|
$72,000
|
||
|
Year 3
|
900,000
|
91,000
|
900,000
|
52,000
|
||
|
Year 2
|
650,000
|
63,000
|
650,000
|
36,000
|
||
|
Year 1
|
450,000
|
38,500
|
450,000
|
24,000
|
||
| Total | $3,300,000 | $327,833 | $3,300,000 | $184,000 | ||