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. Summary of Credits:

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

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