Connecticut Research and Experimental Expenditures Credit

Program overview

Connecticut is unusual in offering both an incremental research credit and a non-incremental credit computed on gross research and development expenditures. The non-incremental credit uses a graduated rate scale that rises with spending, reaching a top tier for the largest research programs, and small businesses may exchange unused credits with the state for a cash refund at a discounted rate. This exchange provision makes Connecticut particularly attractive to loss-making biotechnology and advanced manufacturing companies.

Eligibility

C corporations subject to Connecticut corporation business tax with research expenses conducted in Connecticut. The credit exchange is limited to qualified small businesses meeting gross-income thresholds.

Benefits

Reduces Connecticut corporation business tax; qualified small businesses may exchange unused credits for a cash refund equal to 65% of the credit value.

Connecticut IDR questions

What an examiner is likely to ask about this credit. S1–S7 apply to every state claim; the rest come from this program's own rules.

1. S1Confirm the research was physically performed within Connecticut.
2. S2Provide the Connecticut qualified research expense calculation and base amount.
3. S3Reconcile Connecticut expenses to the federal Form 6765.
4. S4Show how wages and supplies were apportioned between Connecticut and other locations.
5. S5Provide the Connecticut return and credit schedule for each year claimed.
6. S6Show the carryforward schedule for unused Connecticut credits.
7. S7Confirm the entity claiming the credit is the entity subject to Connecticut tax.
8. CT-1Show the Connecticut refund eligibility tests (such as small business status) were met in each year refunded.

Draft questions for illustration, reviewed by a specialist before any engagement.