Machinery and Equipment Expenditure Tax Credit

Conn. Gen. Stat. §12-217o

Description and Applicable Taxes

A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes

for expenditures in machinery and equipment by corporations that have no more than 800 full-time, permanent employees in Connecticut. The tax credit is based on a percentage of the amount spent on machinery and equipment acquired for and installed in a facility in Connecticut that exceeds the amount spent for such machinery and equipment in the preceding income year.

Definitions

Machinery is the basic machine itself, including all of its component parts such as belts, pulleys, shafts, moving parts, operating structures, replacement and repair parts, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayer or another related party; and all equipment or devices used or required to control, regulate, or operate the machinery, including without limitation computers and data processing equipment. Furniture and fixtures, automobiles, software purchased separately from machinery, or other property used for transportation are not machinery.

The term also includes all replacement and repair parts, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayer or another related party. 

Equipment is a device separate from machinery but essential to the business. Repairs and replacement parts for equipment also qualify for the tax credit under the same terms as provided for parts purchased for machinery. Furniture and fixtures, automobiles, software purchased separately for equipment, construction equipment, or other property used for transportation are not equipment.

An employee is any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee.

A full-time employee is any employee whose wages, salaries, or other compensation is paid in Connecticut and whose employment requires an average of 35 hours or more of service each week for at least eight consecutive weeks.

Facility means any plant, building, or other real property improvement used by the corporation in its trade or business.

Tax Credit Amount

The incremental increase in machinery and equipment is calculated by including all the prior year’s expenditures on machinery and equipment without regard to whether or not the expenditures were claimed against this tax credit in the prior year.

The expenditure for machinery and equipment is the sum of the cash paid plus any consideration received for an asset that is traded in.

5% Tax Credit

A tax credit equal to 5% of the incremental increase in expenditure for machinery and equipment is available if the corporation employed between 251 and 800 full-time, permanent employees whose wages, salaries, or other compensation is paid in Connecticut.

10% Tax Credit

A tax credit equal to 10% of the incremental increase in expenditures for machinery and equipment  is available if the corporation employed not more than 250 full-time, permanent employees whose wages, salaries, or other compensation is paid in Connecticut.

Carryforward and Carryback Limitations

No carryforward or carryback is allowed.

How to Claim the Tax Credit

Complete Form CT-1120 MEC, Machinery and Equipment Tax Credit, and attached schedules listing machinery and equipment expenditures and verification of the number of full-time employees. Attach Form CT-1120 MEC to Form CT-1120K, Business Tax Credit Summary.

Where to Get Additional Information

Direct inquiries to:

Connecticut Department of Revenue Services

450 Columbus Boulevard

Hartford CT 06103

1-800-382-9463 (Connecticut calls outside the Greater Hartford calling area only), or

860-297-5962 (from anywhere)

Statutory and Regulatory References

Conn. Gen. Stat. §12-217o

Last updated March 1, 2012