Are R&D Tax Credits Available in Connecticut?

Are R&D Tax Credits Available in Connecticut?

The state of Connecticut provides the Research and Development (R&D) Tax Credit which 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 is 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.
• Depending on the tax year, the credit can reduce up to 70% of the corporate business tax liability.
• 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

• A qualified small business can claim a tax credit equal to up to 6% of the current year's R&D expenses, dependent on gross receipts.
• For tax years beginning on or after January 1, 2021, any unused credits can be carried forward up to 15 years. Prior years can carry forward for an unlimited period of time.
• Depending on the tax year, the credit can reduce up to 70% of the corporate business tax liability.
• Partially refundable for taxpayers whose gross income does not exceed $70 million AND have no tax liability.