IP 94(6) Overview of Connecticut Corporation Business Tax Credits

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IP 94(6)

Overview of Connecticut Corporation Business Tax Credits

INTRODUCTION: This publication is intended as a general guide to Connecticut corporation business tax credits. It provides a brief description and application information. More detailed descriptions of each credit are contained in IP 95(2), A Guide to Connecticut Corporation Business Tax Credits, available from the Department of Revenue Services.

AIR POLLUTION ABATEMENT FACILITY CREDIT: A 5% credit is available for expenditures paid or incurred for the construction, rebuilding, acquisition, expansion or planning of air pollution abatement facilities that have been approved by the Department of Environmental Protection.

Unused credit balances can be carried forward in any of nine successive income years. No carryback is allowed.

For additional information contact DRS, Forms Unit, 1-800-382-9463 (in-state) or 860-297-5962 and request PS 94(5), Tax Credits and Exemptions For Certain Air Pollution Equipment.

(Conn. Gen. Stat. §12-217c)

APPRENTICESHIP TRAINING CREDIT IN MACHINE TOOL AND METAL TRADES: A credit is available to corporations that employ apprentices who are receiving machine tool and metal trades skill training. The credit is limited to qualifying apprenticeship programs and is based, in part, upon the number of work hours accrued by the apprentices.

Compute the credit by multiplying the total number of apprentice work hours (but only during the first half of a two-year apprenticeship and the first three-quarters of a four-year apprenticeship) in the income year for which the claim is made by $4.00.

NOTE: The credit may not exceed 50% of actual wages paid to apprentices in the claim year or $4,800, whichever is less.

No carryforward or carryback is allowed.

Application information can be obtained by calling the Department of Labor at 203-566-2450 and requesting Form ATX-792-792.

(Conn. Gen. Stat. §12-217g, and Conn. Agencies Regs. §§12-217g-l through 12-217g-10)

CHILD DAY CARE SUBSIDY AND FACILITY CREDIT: A credit is available to corporations that provide subsidies to employees for child day care from registered or licensed providers, providers giving day care in the child's home, or a relative of the child giving day care in the relative's home. The credit is limited to 50% of the total amount invested during the income year in programs that have been approved by the Commissioner of Social Services.

A credit is also available to corporations that pay or incur expenditures for planning, site preparations, construction, renovation or acquisition of child day care facilities. The credit is limited to 40% of expenditures or $20,000, whichever is less. Expenditure for equipment that is on-site or adjacent to the center (e.g. playground equipment) may also qualify for credit.

Credits not used in the expenditure year must first be carried back to the five preceding income years before any unused balance can be carried forward to the five succeeding income years.

Subsidy and facility credit information can be obtained by calling the Department of Social Services at 203-424-5598.

(Conn. Gen. Stat. §17-613 through §17-615 and Conn. Agencies Regs. §§17-615-1 through 17-615-10)

10% CLEAN ALTERNATIVE FUEL CREDIT - VEHICLES, EQUIPMENT AND RELATED FILLING/RECHARGING STATIONS: A credit of 10% is available for expenses paid or incurred for the following alternative fuel vehicles and equipment:

the incremental cost of purchasing a vehicle which is exclusively powered by a clean alternative fuel;
the purchase of conversion equipment incorporated into or used in converting vehicles to use clean alternative fuels; and
the purchase and installation of equipment incorporated into or used in a compressed natural gas filling or electric recharging station for vehicles powered by clean alternative fuel.

Any credit not used in the income year may be carried forward in any of three succeeding income years. No carryback is allowed.

For additional information contact DRS, Taxpayer Services Division, at 1-800-382-9463 (in-state) or 860-297-5962.

(Conn. Gen. Stat. §12-217i and SN 93(15))

50% ALTERNATIVE FUEL CREDIT - VEHICLES, EQUIPMENT AND RELATED FILLING/RECHARGING STATIONS: A credit of 50% is available for the amount spent directly on either of the following:

the construction of any filling station or improvements to any existing filling station in order to provide compressed natural gas, liquefied petroleum gas or liquefied natural gas;

the conversion of motor vehicles so that they can use electricity, compressed natural gas, liquefied petroleum gas or liquefied natural gas.

No carryforward or carryback is allowed.

For additional information contact DRS, Taxpayer Services Division, at 1-800-382-9463 (in-state) or 860-297-5962.

(Conn. Gen. Stat. §12-217r)

CONNECTICUT INSURANCE REINVESTMENT CREDIT: A credit is available for investments in Connecticut insurance companies made through a fund manager registered by the Insurance Commissioner.

The credit may be claimed only with respect to an insurance company that is incorporated in Connecticut, occupies a new facility in Connecticut and employs not less than 25% of its total work force in new jobs. The credit is 10% of the amount invested beginning no sooner than 3 years from the date of the investment but not later than 7 years after the date of investment. For years 8 through 10, the credit increases to 20% of amounts invested.

Any tax credit not used in the income year for which it was allowed may be carried forward for the five immediately succeeding income years until the full credit has been allowed. No carryback is allowed.

Application procedures have not yet been determined. Information will be published by DRS as soon as it is available. Direct future inquiries to DRS, Taxpayer Services Division, at 1-800-382-9463 (in-state) or 860-297-5962.

(Conn. Gen. Stat. §38a-88a)

ELECTRONIC DATA PROCESSING EQUIPMENT PROPERTY TAX CREDIT: A credit is available for 100% of the property tax owed on the grand list of a Connecticut municipality as of October 1, 1994, or on any subsequent grand list of a Connecticut municipality, on account of electronic data processing (EDP) equipment. EDP equipment is defined as computers, printers, peripheral computer equipment, bundled software and any computer-based equipment acting as a computer as defined under §168(I) of the Internal Revenue Code of 1986. No carryforward or carryback is allowed.

(Conn. Gen. Stat. §12-217t)

EMPLOYEE TRAINING CREDIT: A credit is available for incremental increases in expenditures in Connecticut on the training of employees employed in this state. The credit percentage varies from 5% to 25%, depending upon the year in which the expenditure is made. The amount spent in training that exceeds what was spent in the previous year is multiplied by the percentage to arrive at the credit. No carryforward or carryback is allowed.

For additional information contact DRS, Taxpayer Services Division, 1-800-382-9463 (in-state) or 860-297-5962.

(Conn. Gen. Stat. §12-217k and SN 93(15))

EMPLOYER ASSISTED HOUSING TAX CREDIT: A credit is available for contributions made to revolving loan funds established to provide loans for housing located in Connecticut for employees whose household income does not exceed 140% of the area median income adjusted for family size.

The credit is equal to the amount paid into a qualified revolving loan fund. The credit shall not exceed $100,000 annually. Any tax credit not used in the period during which the investment was made may be carried forward or backward for the five immediately succeeding or preceding income years until the full credit has been used.

Applications can be obtained by calling the Tax Credit Unit of the Connecticut Housing Finance Authority at 203-721-9501, ext. 377. Applications should be submitted on or before November 1 annually.

(Conn. Gen. Stat. §12-217p and SN 93(15))

FINANCIAL INSTITUTIONS CREDIT: A credit is available for financial institutions that build and occupy a facility of at least 900,000 sq. ft. and create and maintain new jobs in Connecticut. A qualifying financial institution may claim credits against their corporation business tax for up to 15 years, 50% for years one through ten and 25% for years eleven through fifteen. No carryforward or carryback is allowed.

To apply for the credit, financial institutions must submit a proposal to the Commissioner of Economic Development. Eligibility will be determined in consultation with the Commissioners of Banking and Revenue Services.

For additional information contact the Connecticut Economic Resource Center at 1-800-392-2122.

(Conn. Gen. Stat. §§12-217u and 36-2)

INDUSTRIAL WASTE FACILITY CREDIT: A 5% credit is available for expenditures paid or incurred in the income year for the construction, rebuilding, acquisition, expansion or planning of industrial waste treatment facilities, approved as such by the Department of Environmental Protection (DEP).

The credit may be carried forward in any of four successive income years. No carryback is allowed.

Application information can be obtained by calling DEP, Bureau of Water Management, at 203-424-3018.

(Conn. Gen. Stat. §12-217d)

LOW AND MODERATE INCOME HOUSING CREDIT: A credit is available for the incremental increase in contributions to housing programs sponsored, developed or managed by a nonprofit organization as defined by Conn. Agencies Regs. §8-395-1(h), having as one of its purposes the construction, rehabilitation, ownership, or operation of housing for low and moderate income families. A tax credit voucher may be granted in an amount equal to 100% of the value of the contribution made; however, the maximum credit allowed to any corporation is $50,000 annually.

The amount of tax credit which is not used in the income year for which the credit is issued must first be carried back to the five preceding income years beginning with the earliest income year before any unused balance can be carried forward to the five succeeding income years (beginning with the earliest income year).

Application information can be obtained by calling the Department of Housing at 203-566-4900 or 203-566-1994. Applications must be submitted on or after October 15 but before November 15 annually and are approved on a first-come, first-served basis.

(Conn. Gen. Stat. §8-395 and Conn. Agencies Regs. §§8-395-1 through 8-395-10)

MACHINERY AND EQUIPMENT EXPENDITURE CREDIT: A credit is available that is based upon a percentage of the incremental increase in expenditures for machinery and equipment acquired for and installed in a Connecticut facility. A 5% credit applies if the corporation employs between 251 and 800 full time employees. A 10% credit applies if the number of full-time employees is 250 or less. No carryforward or carryback is allowed.

Application procedures have not yet been determined. Information will be published by the Department of Revenue Services as soon as it is available. Direct future inquiries to DRS, Taxpayer Services Division, at 1-800-382-9463 (in-state) or 860-297-5962.

(Conn. Gen. Stat. §12-217o and SN 93(15))

MANUFACTURING FACILITY CREDIT IN AN ENTERPRISE ZONE OR ENTERTAINMENT DISTRICT: A credit is available that is equivalent to 50% of tax allocable to a qualifying manufacturing facility located in an a designated enterprise zone or entertainment district located in a distressed municipality, certified as such by the Department of Economic Development (DED). The credit period is ten years. It starts with the first full income year following the year of issuance and continues for the following nine years. No carryforward or carryback is allowed.

Application information can be obtained by calling DED at 203-336-8700 and requesting the Urban Jobs/Enterprise Zone Program questionnaire.

(Conn. Gen. Stat. §§12-217e, 32-9p and 32-70)

MANUFACTURING FACILITY CREDIT FOR FACILITIES LOCATED IN A DISTRESSED MUNICIPALITY: A credit is available that is equivalent to 25% of tax allocable to a manufacturing facility that has been certified by the Department of Economic Development (DED) and is located in a distressed municipality. The credit period is ten years. It begins with the first full income year following the year of issuance and continues for the following nine years. No carryforward or carryback is allowed.

Application information can be obtained by calling DED at 203-336-8700 and requesting the Urban Jobs/Enterprise Zone Program questionnaire.

(Conn. Gen. Stat. §§12-217e, 32-9p and 32-70)

NEIGHBORHOOD ASSISTANCE TAX CREDIT: A tax credit is available for up to 60% (depending on the type of program) of a firm's contribution to community programs that have received both municipal and state approval. Corporations that contribute at least $250 to one or more approved programs are qualified for the credit. Examples of approved programs include neighborhood assistance, job-training, education services, crime prevention, energy conservation and substance abuse.

Any tax credit which is not used in the income year must first be carried back to the five preceding income years before any unused balance can be carried forward to the five succeeding income years.

Application information may be obtained from the Department of Social Services at 203-424-5852. Applications, in the form of pledges, are accepted annually between October 3 and December 1.

(Conn. Gen. Stat. §§12-631 through 12-638, and Conn. Agencies Regs. §§12-638-1 through 12-638-8)

NEW FACILITIES CREDIT: A credit of between 10% and 25% of tax allocable is available for occupying new facilities and creating new jobs in Connecticut. The credit period is seven years, beginning with the first full income year following the year of issuance of the eligibility certificate from the Department of Economic Development (DED) and continuing for six years. No carryforward or carryback is allowed.

The credit percentage depends upon square footage occupied and the number of new employees occupying the new facility. The percentages are:

Class 1 -	10% of allocable tax for 250,000 sq. ft. with 1,000 new employees;
Class 2 -	15% of allocable tax for 500,000 sq. ft. with 2,000 new employees;
Class 3 -	21.5% of allocable tax for 750,000 sq. ft. with 3,000 new employees;
Class 4 -	25% of allocable tax for 1,000,000 sq. ft. with 4,000 new employees.

Application information can be obtained by calling DED at 203-336-8700 and requesting the Urban Jobs/Enterprise Zone Program questionnaire.

(Conn. Gen. Stat. §12-217m)

RESEARCH AND DEVELOPMENT GRANTS TO INSTITUTIONS OF HIGHER EDUCATION: A credit is available for a portion of the incremental increase in amounts spent by any corporation for any grant or combinations of grants to an institution of higher education in Connecticut. The grant or grants must be made for the purposes of research and development related to advancements in technology.

The credit is equal to 25% of the amount by which qualifying grants made in the current income year exceed the average qualifying grants made during the three preceding income years. No carryforward or carryback is allowed.

For additional information contact DRS, Taxpayer Services Division, at 1-800-382-9463 (in-state) or 860-297-5962.

(Conn. Gen. Stat. §12-217l)

RESEARCH AND DEVELOPMENT NONINCREMENTAL EXPENDITURES CREDIT: A credit is available for research and development expenditures conducted in Connecticut that are paid or incurred for years beginning on or after January 1, 1993. The credit allowed for 1993 and 1994 expenditures may not be claimed until income years commencing on or after January 1, 1995. Research and experimental costs are those that may be deducted under §174 of the Internal Revenue Code of 1986 and are conducted in Connecticut. Credit percentages depend upon expenses paid or incurred:

Expense Amounts:	Credit Percentage
$50 million or less	1%
more than $50 million but not more than $100 million	$500,000 + 2% over $50,000,000
more than $100 million but not more than $200 million	$1,500,000 + 4% over $100,000,000
over $200 million	$5,500,000 + 6% over $200,000,000

NOTE: Special rules apply for taxpayers with expenses over $200 million, aerospace companies, and combined return filers.

Credits that are allowed but that exceed the limitation amounts may be carried forward to each successive income year until such credits are fully taken. Credits must be taken in the order in which they were allowed. No carryback is allowed.

(Conn. Gen. Stat. §12-217n and SN 93(21))

RESEARCH AND EXPERIMENTAL EXPENDITURE CREDIT: A credit is available equivalent to 20% of the incremental increase in research and experimental expenditures conducted in Connecticut. Research and experimental expenditures are those that may be deducted under Internal Revenue Code §174. No carryforward or carryback is allowed.

For additional information contact DRS, Taxpayer Services Division, at 1-800-382-9463 (in-state) or 860-297-5962.

(Conn. Gen. Stat. §12-217j, SN 93(15) and SN 93(21))

TRANSPORTATION MANAGEMENT PROGRAMS CREDIT: A credit for transportation management (commuting) expenses related to the attainment of federal Clean Air Act standards is available to corporations employing 100 or more people. The credit is equal to 50% of the amount spent for direct costs of transportation management programs and services instituted in response to the provisions of Conn. Gen. Stat. §§13b-38o through 13b-38y. The credit may not exceed $250 per employee participating in alternative means of commuting in the income year. No carryforward or carryback is allowed.

(Conn. Gen. Stat. §12-217s)

WORK EDUCATION CREDITS FOR HIGH SCHOOL STUDENTS: A credit is available for employers that hire public high school students who are enrolled in state-approved Cooperative Work Education-Diversified Occupational (CWE/DO) programs. The credit is equivalent to 10% of wages paid to such students. No carryforward or carryback is allowed.

Application information can be obtained by calling the local high school CWE program coordinator or the Department of Education at 203-638-4054.

(Conn. Gen. Stat. §12-217f and Conn. Agencies Regs. §§12-217f-1 through 12-217f-4)

EFFECT OF THIS DOCUMENT: An Informational Publication is a document that addresses issues frequently raised by taxpayers, usually in a question-and-answer format. It is less technical in nature than a Policy Statement, but may be referred to by individual taxpayers for guidance.

RELATED FORMS AND PUBLICATIONS: For related publications, please request:

SN 93(15), 1993 Legislative Changes Affecting The Corporation Business Tax
SN 93(21), Corporation Business Tax Credit for Research and Development Expenses
IP 95(2), A Guide to Connecticut Corporation Business Tax Credits
Form CT-1120, Connecticut Corporation Business Tax Return and Instructions
Form CT-1120S, Connecticut S Corporation Business Tax Return and Instructions

FOR FURTHER INFORMATION: If you have questions about Connecticut taxes, please call the Department of Revenue Services during business hours, Monday through Friday:

860-297-5962 (Hartford calling area or from out-of-state); or
1-800-382-9463 (toll-free from within Connecticut)

Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.

IP 94(6)
Corporation Business Tax
Issued: 3/16/95

Connecticut State Department of Revenue Services

IP 94(6)

Overview of Connecticut Corporation Business Tax Credits