Connecticut State Department of Revenue Services

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2025 Legislative Overview - Corporation Business Tax and Tax Credits

 

2025 Regular Session of the Connecticut General Assembly

Overview of Legislation

Corporation Business Tax and Tax Credit Provisions

 

Corporation Business Tax:

  • Modification to election made by certain combined groups relative to net operating losses: Legislation sunsets the election that certain combined groups made in income year 2015 relative to the utilization of net operating losses (NOLs).Under this legislation, any combined group that made such an election is required to recalculate any remaining carryover of the NOLs that were the subject of said election on said group’s return for the income year starting on or after January 1, 2025 as if said election had not been made and shall be required to utilize the recalculated amount of NOLs in the method and manner prescribed by statute. The legislation is effective from passage and applicable to income years commencing on or after January 1, 2025.
  • Elimination of cap on the amount of tax that would otherwise be due on a combined unitary basis: Legislation eliminates the cap on the amount of tax that would otherwise be due on a combined unitary basis. Prior to this amendment, a combined group’s tax, prior to the surtax and the application of credits, may not exceed its nexus combined base tax by more than $2.5 million. The cap is no longer effective starting with income years that commence on and after January 1, 2025. The legislation is effective upon passage.
  • Relief from Interest on Underpayment of Estimated Taxes: Any additional tax attributable to the sunset of the election made by certain combined groups relative to NOLs and the elimination of the cap on the amount of tax that would otherwise be due on a combined unitary basis shall not be included when calculating interest on the underpayment of estimated tax. The legislation is effective upon passage.
  • Surtax Extended: Under current law, the 10% surtax was set to expire with income years beginning on or after January 1, 2025. As a result of this legislation, the 10% surtax has been extended three additional years. More specifically, the surtax will remain in effect for the income year beginning on and after January 1, 2026 through and including the income year beginning on and after January 1, 2028.The legislation is effective upon passage.
  • Modification to the net deferred tax liability deduction: Legislation amended Conn. Gen. Stat. § 12-218h so that the “valuation allowance” provided for thereunder is computed based on the combined group’s financial statements for the 2015 income year, rather than 2016 income year. The legislation is effective from passage.

Tax Credit provisions:[1]

  • Amendment to Youth Organization Tax Credit: Legislation modified the definition of “youth organization” set forth in Conn. Gen. Stat. § 12-217rr so as to specify that only those cash contributions that are made to such organizations that are “in this state” qualify for said credit. This legislation is effective from passage and applicable to applications filed on or after said date.
  • Amendment to Research and Development Tax Credit: Legislation added a definition of “taxpayer” for purposes of Conn. Gen. Stat. § 12-217n through which the General Assembly expanded the types of entities that are eligible to earn a credit thereunder. The legislation is effective from passage and applicable to income and taxable years commencing on or after January 1, 2025.
  • Amendment to Research and Experimental Tax Credit: Legislation added a definition of “taxpayer” for purposes of Conn. Gen. Stat. § 12-217j through which the General Assembly expanded the types of entities that are eligible to earn a credit thereunder. The legislation is effective from passage and applicable to income and taxable years commencing on or after January 1, 2025.
  • Repeal of Digital Animation Tax Credit: Legislation repeals Conn. Gen. Stat. § 12-217ll.The legislation is effective from passage.
  • Amendment to Workforce Housing Opportunity Development Tax Credit: Legislation modifies the tax credit allowable under Conn. Gen. Stat. § 8-395a to fifty per cent (50%) of qualifying cash contributions. The legislation is effective from passage and applicable to income and taxable years commencing on or after January 1, 2025.
  • Amendment to the provision governing the exchange of Research and Development Tax Credits and Research and Experimental Tax Credits: Legislation modified the provisions of Conn. Gen. Stat. § 12-217ee, so as to allow qualifying biotechnology companies to exchange research and development tax credits or research and experimental tax credits that cannot be utilized in a taxable year for ninety per cent (90%) of the value of said credits. The legislation is effective July 1, 2025, and applicable to income years commencing on or after January 1, 2025.
  • Establishment of a Farm Investment Tax Credit: Legislation establishes a credit that is based on farmers’ investments in eligible machinery, equipment, and buildings.  The credit, which can be claimed against the tax imposed under chapter 208 or 229 (other than the liability imposed by Conn. Gen. Stat. § 12-707), is equal to twenty per cent (20%) of the amount paid or incurred during an income or a taxable year for farm investment property by a taxpayer that is an eligible farmer. Note: If this credit exceeds the farmer’s tax liability in a year, the excess amount is treated as an overpayment and is to be refunded without interest. The legislation is effective January 1, 2026, and applicable to income and taxable years commencing on or after January 1, 2026.
  • Establishment of a Connecticut Higher Education Trust (CHET) Contribution Tax Credit: Legislation establishes a credit for contributions employers make to a qualifying employee’s CHET account.  The credit, which can be claimed against the tax imposed under chapters 207, 208 or 229 (other than the liability imposed by Conn. Gen. Stat. § 12-707), is equal to twenty-five per cent (25%) of the employer’s contribution and is capped at $500 per employee per income or taxable year. The legislation is effective July 1, 2025, and applicable to income and taxable years commencing on or after January 1, 2025.
  • Establishment of a Tax Credit administered by the University of Connecticut (UConn): Legislation authorizes UConn to set up and administer a tax credit incentive program to promote and publicly recognize the university and its programs, services, and mission.  The credit is based upon payments made by a taxpayer in a taxable or an income year pursuant to a “qualified agreement.” The credit is equal to fifty per cent (50%) of the payments made under such an agreement and shall not exceed five hundred thousand dollars for any taxpayer for any taxable or income year. The aggregate amount of the credits allowed under this section shall not exceed five million dollars in any calendar year. The credit can be claimed against the tax imposed under chapters 207, 208, 209, 210, 211, 212, 228z or 229 (other than the liability imposed by Conn. Gen. Stat. § 12-707) and unused amounts may be carried forward for fifteen (15) years until they are fully taken. Note: This credit is not subject to provisions of Conn. Gen. Stat. § 12-217zz, which place limits on the use of tax credits.  The legislation is effective upon passage and applicable to income and taxable years commencing on or after January 1, 2025. 
  • Amendments to Film Production Tax Credit: Legislation amends Conn. Gen. Stat. § 12-217jj to modify the eligibility requirements that apply to eligible production companies that produce an interactive website for public distribution or exhibition from these requirements. The legislation also made other technical and conforming changes. The legislation is effective July 1, 2025, and applicable to applications open or filed on or after July 1, 2025.
  • Amendment to “JobsCT” Tax Credit: Legislation amended Conn. Gen. Stat. § 32-7t so as to allow the Commissioner of the Department of Economic and Community Development to give preference to applications submitted thereunder that make significant investments in environmentally sustainable practices, are in certain environment-related economic sectors, or are for farming operations that are climate sustainable. The legislation is effective July 1, 2025.

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[1] Each tax credit provision has its own rules and eligibility requirements.  In addition, each credit specifies the tax (or taxes) against which a credit allowable thereunder may be applied.  As such, please be mindful of the various tax types that are implicated by each said credit.