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Service and Manufacturing Facilities Tax Credit

Conn. Gen. Stat. §12-217e


Description and Applicable Taxes

A tax credit may be applied against the portion of the tax imposed under Chapter 208 of the Connecticut General Statutes that is allocable to a Manufacturing Facility or Service Facility that meets certain employment criteria. The amount of the tax credit varies depending on the location of the facility and the number of employees. For income years beginning on or after January 1, 2012, the tax credit available to Manufacturing Facilities shall be available to Eligible Facilities under the same terms and conditions.

This tax credit is administered by the Department of Economic and Community Development (DECD). The tax credit period is ten years and begins with the first full income year of issuance of the eligibility certificate and continues for the following nine income years. If within the ten year period the facility ceases to qualify as a Manufacturing Facility or Service Facility or the taxpayer ceases to occupy the property, the entitlement to the tax credit terminates and there is no pro-rata application of the tax credit during the income year in which the entitlement or occupancy terminates.

Definitions

Manufacturing Facility, as fully defined in Conn. Agencies Regs. §32-9p-5, means any plant, building, or other real property improvement that is constructed, renovated, expanded, or acquired in a distressed municipality, a Targeted Investment Community, an Enterprise Zone, or an Airport Development Zone and that is used for one of the following purposes:

  • Manufacturing, processing, or assembling of raw materials, parts or manufactured products;
  • The significant servicing, overhauling, or rebuilding of machinery and equipment for industrial use;
  • If the facility is newly constructed, the warehousing and distribution in bulk of manufactured products on other than a retail basis; or
  • Research and development facilities directly related to manufacturing.
Manufacturing Facility also includes any plant, building, or other real property improvement that is located in an Enterprise Zone, that does not regularly conduct business with the general public, and that is engaged in, or is a:

·        Fishing, Hunting and Trapping;

·        Port and Harbor Operations and Marine Cargo Handling;

·        Packing and Crating;

·        Refrigerated, Farm Products, or Other Warehousing and Storage, but not
        General Warehousing and Storage;

·        Software Publishing;

·        Motion Picture and Video Production or Distribution, Teleproduction, and Other
        Postproduction Services;

·        Credit Card Issuing, International Trade Financing, Secondary Market Financing,
        Other Nondepository  Credit Intermediation, or Activities Related to Credit
        Intermediation;

·        Securities and Commodity Exchanges, Contracts, Intermediation, and Brokerage;

·        Miscellaneous Intermediations;

·        Insurance Carriers;

·        Third Party Administration of Insurance and Pension Funds;

·        Research and Development in the Physical, Engineering and Life Sciences;

·        Management of Companies and Enterprises;

·        Telemarketing Bureaus and Other Contract Centers;

·        Colleges, Universities, Professional Schools, Business Schools, Computer and
        Management Training, Apprenticeship Training, Other Technical and Trade Schools,
        or Educational Support Services;

·        Child Day Care Services;

·        Grouping of industries linked together through customer, supplier, or other relationships;

·        If in certain Enterprise Zones, supplying goods or services in the field of computer 
        hardware or software; computer networking, telecommunications, or communications;

·        If in an Entertainment District, the production of entertainment products; or

·        If in an Airport Development Zone, an Eligible Facility.

Service Facility means a plant, building, or other real property improvement that is located
in a Targeted Investment Community but is not located in an Enterprise Zone, that does
not regularly conduct business with the general public, and that is engaged in, or is a:

·        Fishing, Hunting and Trapping;

·        Port and Harbor Operations and Marine Cargo Handling;

·        Packing and Crating;

·        Refrigerated, Farm Product, or Other Warehousing and Storage, but not General
       Warehousing and Storage;

·        Software Publishing;

·        Motion Picture and Video Production or Distribution, Teleproduction and
        Other Postproduction Services;

·        Credit Card Issuing, International Trade Financing, Secondary Market Financing,
        Other Nondepository Credit Intermediation, or Activities Related to Credit Intermediation;

·        Securities and Commodity Exchanges, Contracts, Intermediation, and Brokerage;

·        Miscellaneous Intermediation;

·        Insurance Carriers;

·        Third Party Administration of Insurance and Pension Funds;

·        Research and Development in the Physical, Engineering and Life Sciences;

·        Management of Companies and Enterprises;

·        Telemarketing Bureaus and Other Contact Centers;

·        Colleges, Universities, Professional Schools, Business Schools, Computer and
        Management Training, Apprenticeship Training, Other Technical and Trade Schools,
        or Educational Support Services;

·        Child Day Care Services;

·        Grouping of industries linked together through customer, supplier, or other relationships;

·        If in certain Enterprise Zones, supplying goods or services in the field of computer
        hardware or software, computer networking, telecommunications, or communications;

·        If in an Entertainment District, the production of entertainment products; or

·        If in an Airport Development Zone, an Eligible Facility.

Eligible Facility means, for the income years beginning on or after January 1, 2012, a facility located in an Airport Development Zone that is used for the warehousing or distribution of goods transported to an airport or is otherwise directly related to such airport other than a facility used by an organization with a NAICS code of 441110 to 454390 inclusive, 532111, 532112, or 812930.

Targeted Investment Community means a municipality with an Enterprise Zone designated under Conn. Gen. Stat. §32-70, Enterprise Corridor Zone municipalities and those municipalities containing a Contiguous Municipality Zone, a Defense Plant Zone, or a Manufacturing Plant Zone are not considered to be Targeted Investment Communities.

 

Enterprise Zone means any area designated by DECD as an Enterprise Zone.  Areas that are currently designated as Enterprise Zones are situated within the following municipalities:

            Bridgeport                    Meriden                       Norwich

            Bristol                          Middletown                  Southington

            East Hartford                New Britain                  Stamford

            Groton                         New Haven                  Waterbury

            Hamden                       New London                Windham

            Hartford                       Norwalk

A targeted Investment Community may have only one Enterprise Zone. However, a Targeted  Investment Community may, with approval of DECD and if certain conditions are met, designate other areas within the municipality as having the equivalent of Enterprise Zone level benefits. These designations include:
  • Entertainment District. Once a municipality has been designated as having an entertainment district, projects within the Targeted Investment Community that are eligible for Enterprise Zone benefits include but are not limited to facilities producing live or recorded multimedia, and any support business needed to support such projects. The cities of Bridgeport, New Britain, Stamford, and Windham are communities that have this designation.
  • Qualified Manufacturing Plant. A qualified manufacturing plant is a manufacturing plant having an area of at least 500,000 square feet outside of an Enterprise Zone. The Town of Bristol and the City of New Britain are communities that have facilities with this designation.
  • Railroad Depot Zone. A Targeted Investment Community with an abandoned or underutilized  railroad depot area, outside of the Enterprise Zone, may qualify as a Railroad Depot Zone. A railroad depot is an area that abuts an active or inactive rail line and contains manufacturing or warehousing facilities that were originally dependent on railroad access to operate. East Hartford, Hamden, and Norwich contain Railroad Depot Zones.
In addition, the following are designated as having Enterprise Zone level benefits:
  • Bioscience Enterprise Corridor Zone. Businesses engaged in biotechnology, pharmaceutical or photonics research, development, or production, with not more than 300 employees, located in a municipality with a major research university with programs in biotechnology, pharmaceuticals, or photonics, and an Enterprise Zone, are entitled to Enterprise Zone level benefits.
  • Enterprise Corridor Zones. Enterprise Corridor Zones are located along Route 8 in the state’s Naugatuck Valley and Interstate 395 in the eastern region of the state. 

The municipalities designated by DECD as located within Enterprise Corridor Zones are:

                        Ansonia                        Lisbon                          Sprague

                        Beacon Falls                 Naugatuck                    Sterling

                        Derby                           Plainfield                       Thompson

                        Griswold                      Putnam                          Torrington

                        Killingly                        Seymour                       Winchester

  • Contiguous Municipality Zone. The Town of Plainville contains Connecticut’s  only designated Contiguous Municipality Zone.
  • Defense Plant Zone. The Town of Stratford and the Town of Cheshire contain Connecticut’s only Defense Plant Zones.
  • Manufacturing Plant Zone. The Town of Bloomfield contains Connecticut’s only designated Manufacturing Plant Zone.
  • Airport Development Zone. Enumerated census blocks of Windsor Locks, Suffield, East Granby, and Windsor contain an Airport Development Zone.  The Connecticut Airport Authority may establish additional Airport Development Zones.

New Employee means a person hired by the taxpayer to fill a position for a new job or a person  shifted from an existing location of the taxpayer outside Connecticut to a facility located in  Connecticut, provided the total number of new employees allowed for purposes of this tax credit will not exceed the total increase in the taxpayer’s employment in Connecticut. The increase in the taxpayer’s employment will be the difference  etween the number of employees  employed in Connecticut at the time of application for this tax credit and the highest number of  employees employed by the taxpayer in Connecticut in the year preceding the taxpayer’s  application for this tax credit. To be considered a new employee, the person’s duties in  connection with the operation of the facility must be on a regular, full-time, and permanent basis.


New job means a job that did not exist in the business of a taxpayer in Connecticut prior to the taxpayer’s application for this tax credit and that is filled by a new employee. A new job does not include a job created when an employee is shifted from an existing location within Connecticut.

Tax Credit Amount

To calculate the tax credit allowed, a Service Facility or Manufacturing Facility shall multiply the applicable tax credit percentage by: 1) the corporation business tax imposed on the taxpayer,  and 2) the arithmetical  mean of the property fraction and the wages fraction.

Property fraction numerator

Determine the average monthly net book value of the Connecticut Service Facility or Manufacturing Facility and the machinery and equipment acquired for and installed therein without reduction for any encumbrance. If the facility is rented, calculate the value of the rental by multiplying the annual gross rents payable during the income year by eight.

Property fraction denominator

Determine the average monthly net book value of all real property and machinery and  equipment located in Connecticut and the value of all real property and machinery and  equipment rented by the corporation in Connecticut.

Wages fraction numerator

Determine the wages, salaries, and compensation of employees whose positions are directly attributable to the facility if all of the following are true:

  • The work is performed or the base of operations is at the facility;
  • The position did not exist prior to the acquisition, construction, renovation, or expansion of the facility; and
  • If not for the acquisition, construction, renovation, or expansion of the facility, the position would not have existed.

Wages fraction denominator

Determine the wages, salaries, and compensation paid to all Connecticut employees.

Tax Credit Percentages

  • Service Facility
    For a Service Facility, there are six different tax credit percentages as provided in the chart below.  The percentage varies depending upon the number of new employees occupying the facility:            

Number of

New Employees

Working at the Facility

Tax

Credit

Percentage

300 – 599

15%

600 – 899

20%

900 – 1,199

25%

1,200 – 1,499

30%

1,500 – 1,999

40%

2,000 or more

50%

  • Manufacturing Facility
    For a Manufacturing Facility, the tax credit amount applied against the Connecticut corporation
    business tax is 50% of the tax allocable to the facility if it meets the employment criteria outlined below and is located within a designated Enterprise Zone, or other area designated as having Enterprise Zone level benefits. The tax credit for a Manufacturing Facility is 25% of the tax allocable to the facility if it does not meet the employment criteria or if it is located within a Targeted Investment Community but is not located in an Enterprise Zone.

To qualify for the 50% tax credit, the corporation must, during the last quarter of its income year, either:

  • Employ 150 or more full-time employees who at the time of employment were:
  1. Residents of the Enterprise Zone (or other area having Enterprise Zone level benefits); or
  2. Residents of the municipality who are eligible for training under the federal Workforce
                Investment Act (WIA);
    OR;
  • Have 30% or more of its full-time employment positions directly attributable to the
                Manufacturing Facility held by employees who at the time of employment were: 
  1. Residents of the Enterprise Zone (or other area having Enterprise Zone level benefits); or
  2. Residents of the municipality who are eligible for training under the federal WIA.

Carryforward and Carryback Limitations

No carryforward or carryback is allowed.

How to Apply

A taxpayer may call DECD at 860-270-8143 and request the Urban Jobs/Enterprise Zone Program questionnaire in order to determine whether its Manufacturing Facility or Service Facility qualifies for the tax credit. Upon review of the completed questionnaire, a DECD staff representative will contact the taxpayer to explain the program and the formal application process.

Once the formal application is approved, DECD will issue to the taxpayer Forms UT-4,  Eligibility Certificate  or Urban Jobs Benefits, and UT-9, Claim for Corporate Business Tax Credit Under the Provisions of the  Enterprise Zone Program.

How to Claim the Tax Credit

For a Service Facility, complete Form CT-1120SF, Service Facility Tax Credit, and attach it to Form CT-1120K, Business Tax Credit Summary.

For a Manufacturing Facility, complete Form CT-1120 TIC/EZ, Manufacturing Facility Tax Credit for Facilities Located in a Targeted Investment Community/Enterprise Zone, and attach it to Form CT-1120K.

Where to Get Additional Information

Direct inquiries to:

Connecticut Department of Economic and Community Development

450 Columbus Boulevard

Hartford CT 06103

860-500-2352

www.ct.gov/ecd

Statutory and Regulatory References

Conn. Gen. Stat. §§12-217e, 32-9p, and 32-70; Conn. Agencies Regs. §32-9p-5

Last updated March 1, 2012