SN 2000(15)
Connecticut Corporation Business Tax Credits
1999 - 2000 Update
This Special Notice has been cited in IP 2001(14)
A Message from the Commissioner:
Corporation business tax credits are one way that the State of Connecticut encourages and supports businesses in all sectors. Once again this year, the General Assembly and Governor John G. Rowland approved additional tax credits that can encourage the state’s economic success and enhance the quality of life for its citizens, while reducing the total tax liability of a business.
The Department of Revenue Services (DRS) is pleased to provide you with this Special Notice 2000(15), Connecticut Corporation Business Tax Credits, 1999 – 2000 Update, which describes the tax credits enacted during the 1999 and 2000 sessions of the General Assembly. It also includes new summaries of existing credits that have been updated because of law or policy changes. Please review them to see how you may benefit.
All current tax credits are described in Informational Publication 95(2.1), Guide to Connecticut Corporation Business Tax Credits, which is available on the DRS Web site, or by mail. If you would like further information about any of Connecticut’s tax credits, please call our Taxpayer Services Division, 1-800-382-9463, from within Connecticut, or 860-297-5962 from anywhere.
I am always interested in your suggestions about the way DRS does business or state tax policy in general. Please do not hesitate to write or phone me with your comments.
Sincerely,
Gene Gavin
Commissioner
Effect on Other Documents: This document supersedes in part and supplements Informational Publication 95(2.1), Guide to Connecticut Corporation Business Tax Credits.
Effect of This Document: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department’s informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners.
For Further Information
Please call the DRS during business hours, Monday through Friday:
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1-800-382-9463 (toll-free within Connecticut); or
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860-297-5962 (from anywhere)
TTY, TDD, and Text Telephone users only may transmit inquiries 24 hours a day by calling 860-297-4911.
Where to get additional Corporation Business Tax Credit information
Special Notice 2000(15), Connecticut Corporation Business Tax Credits, 1999 – 2000 Update explains tax credits which are new or have been changed in 1999 or 2000. It does not cover previously available credits which have not been modified.
For information on other available Corporation Business Tax Credits see Connecticut Corporation Business Tax Credit Directory.
For further information on those credits listed in the directory and not included in this special notice, see Informational Publication 95(2.1), Guide to Connecticut Corporation Business Tax Credits.
Legislative Changes
1999 – 2000
Computer Donation Credit (NEW)
A credit may be applied against the Connecticut corporation business tax for the donation of new or used computers to a local or regional board of education or a public school. The used computers may not be more than two years old at the time of donation.
In order to obtain the credit, the corporation must submit an application to the DRS. With the application, the corporation must provide a copy of the written agreement between the corporation and the local or regional board of education or public school. The written agreement shall provide for the acceptance of the computers by the board of education or public school, an acknowledgment that the computers are in good working condition and a requirement that the corporation install, set up, and provide training to school staff on such computers.
The Commissioner of Revenue Services shall review each application and within 30 days following its receipt, approve or disapprove the application in writing.
The amount of the credit granted to any business firm shall not exceed $75,000 annually. The total amount of business credits allowed to all business firms shall not exceed $1 million in any one fiscal year.
Credit Percentage
The amount of the credit shall not exceed 50% of the fair market value of the new or used computers at the time of donation.
How to Compute the Credit
Report the credit amount on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
The credit may be applied to any of the following taxes:
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Insurance companies, hospital and medical services corporation taxes (Chapter 207);
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Health care centers tax (Chapter 207);
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Corporation business tax (Chapter 208);
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Air carriers tax (Chapter 209);
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Railroad companies tax (Chapter 210);
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Express telegraph or cable and community antenna television system companies tax (Chapter 211); or
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Utility companies tax (Chapter 212).
Carryforward/Carryback Limitations
The tax credit may only be used to reduce the taxpayer’s tax liability for the year in which the donation is made and shall not be used to reduce such liability to less than zero.
How to Apply
Applications may be submitted on an on-going basis to:
Department of Revenue Services
Research Unit
25 Sigourney Street
Hartford CT 06106
Attachments Required to the Connecticut Corporation Business Tax Return
A copy of the letter approving the credit application shall be attached to the tax return of the business firm.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Revenue Services
Research Unit
25 Sigourney Street
Hartford CT 06106
860-297-5689
REFERENCES: 2000 Conn. Pub. Acts 170, §20.
Donation of Open Space Land Credit (NEW)
Description
A credit against the Connecticut corporation business tax credit is available in an amount equal to 50% of any donation of open space land.
In order to qualify for the credit, the donated land must be permanently preserved as protected open space.
For purposes of calculating the credit, the amount of the donation shall be based on the use value of the donated open space land.
Definitions
Open space land means the value of any land conveyed without financial consideration, or the value of any discount of the sale price in any sale of land or any interest in land to the state, a political subdivision of the state, or a nonprofit land conservation organization, where the land is to be permanently preserved as protected open space.
Use value is defined as the fair market value of land at its highest and best use, as determined by a certified real estate appraiser.
Carryforward/Carryback Limitations
For income years beginning on or after January 1, 2000, any unused credit may be carried forward to each of the successive income years until such credit is fully taken. In no case shall a credit that is not used be carried forward for a period of more than ten years.
How to Apply
No application form is required. Credits may be claimed by entering the amount of the credit on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Attachments Required to the Connecticut Corporation Business Tax Return:
Documentation substantiating the value of the credit claimed must be attached to the Connecticut Corporation Business Tax Return.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Revenue Services
Taxpayer Services Division
25 Sigourney Street
Hartford CT 06106
860-297-5962 or 1-800-382-9463 (in-state)
REFERENCES: 1999 Conn. Pub. Acts 173, §47, as amended by 2000 Conn. Pub. Acts 203, §§6 and 8.
Historic Homes Rehabilitation Credit (NEW)
Description
A tax credit voucher system, which is administered by the Connecticut Historical Commission (commission), provides tax credits for owners rehabilitating historic homes or taxpayers making contributions to qualified rehabilitation expenditures.
Definitions
Qualified rehabilitation expenditures means any costs incurred for the physical construction involved in the rehabilitation of an historic home, but excludes:
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The owner’s personal labor;
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The cost of site improvements, unless to provide building access to persons with disabilities;
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The cost of a new addition, except as may be required to comply with any provision of the State Building Code or the State Fire Safety Code;
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Any cost associated with the rehabilitation of an outbuilding, unless such building contributes to the historical significance of the historic home; and
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Any nonconstruction cost such as architectural fees, legal fees, and financing fees.
Historic home means a building that:
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Will contain one-to-four dwelling units of which at least one unit will be occupied as the principal residence of the owner for not less than five years following the completion of rehabilitation work;
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Is located in a targeted area; and
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Is listed individually on the National or State Register of Historic Places, or located in a district listed on the National or State Register of Historic Places, and has been certified by the commission as contributing to the historic character of such district.
Targeted area means:
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A federally designated "qualified census tract" in which 70% or more of the families have a median income of 80% or less of the state-wide median family income; or
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A state designated and federally approved area of chronic economic distress; or
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An urban and regional center as identified in the Connecticut Conservation and Development Policies Plan.
Qualifying for the Credit
Prior to beginning any rehabilitation work on an historic home, the owner shall submit a rehabilitation plan to the commission for a determination of whether such rehabilitation work meets the standards required and shall also submit to the commission an estimate of the qualified rehabilitation expenditures.
If the commission certifies that the rehabilitation plan conforms to the standards for the approval of the rehabilitation, the commission shall reserve for the benefit of the owner an allocation for a tax credit equivalent to 30% of the projected qualified rehabilitation expenditures.
Following the completion of the rehabilitation of an historic home, the owner shall notify the commission. The owner shall provide the commission with documentation of work performed on the historic home and shall certify the cost incurred in rehabilitating the home. The commission shall review such rehabilitation and verify its compliance with the rehabilitation plan. Following such verification, the commission shall issue a tax credit voucher to either the owner rehabilitating the historic home or to the taxpayer named by the owner as contributing to the rehabilitation.
The owner is not eligible for a tax credit voucher unless the owner incurs qualified rehabilitation expenditures exceeding $25,000. The owner must verify that he or she will occupy the historic home as his or her primary residence for at least five years or that the owner will convey the home to a new owner who will occupy the home as his or her primary residence for at least five years or record an encumbrance in favor of the funding source that will require the owner or owner’s successors to occupy the home for five years.
The aggregate amount of tax credits reserved in any fiscal year may not exceed $3 million.
Credit Percentage
The credit is equal to the lesser of 30% of the projected qualified rehabilitation expenditures or 30% of the actual rehabilitation expenditures.
Carryforward/Carryback Limitations
The credit may be carried forward for four years following the year in which the voucher was issued.
How to Apply
Applications for the tax credit voucher must be made with the Connecticut Historical Commission.
How to Compute the Credit
The amount listed on the tax credit voucher must be entered on Form CT-1120K, Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
The credit may be applied to any of the following taxes:
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Insurance companies, hospital and medical services corporation taxes (Chapter 207);
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Health care centers tax (Chapter 207);
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Corporation business tax (Chapter 208);
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Air carriers tax (Chapter 209);
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Railroad companies tax (Chapter 210);
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Express telegraph or cable and community antenna television system companies tax (Chapter 211); or
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Utility companies tax (Chapter 212).
Attachments Required to the Connecticut Corporation Business Tax Return
A copy of the tax credit voucher issued by the Connecticut Historical Commission must be attached to the tax return.
Where to Obtain Additional Information
Please direct inquiries to:
Connecticut Historical Commission
59 South Prospect Street
Hartford CT 06106
860-566-3005 Ext. 317
REFERENCES: 1999 Conn. Pub. Acts 173, §§34 through 37; Conn. Agencies Reg. §§10-320j-1 through 10-320j-9.
Small Business Guaranty Fee Tax Credit (NEW)
Description
A tax credit is allowed against the corporation business tax in an amount equal to the amount paid during the income year by a small business to the federal Small Business Administration as a guaranty fee to obtain guaranteed financing.
Definitions
Small business means any business entity qualifying as a small business under 13 CFR Part 121 which has gross receipts of not more than $5 million for the income year in which the credit is first allowed.
Credit Amount
The credit is equal to the amount paid during the income year as a guaranty fee to the federal Small Business Administration.
The credit shall not be used to reduce the tax below the minimum tax.
Carryforward/Carryback Limitations
Any excess amount of the credit allowable may be taken in any of the four succeeding income years.
How to Compute the Credit
The amount of the credit must be entered on Form CT-1120K, Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Attachments Required to the Connecticut Corporation Business Tax Return
Attach documentation to support the amount of the credit claimed.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Revenue Services
Taxpayer Services Division
25 Sigourney Street
Hartford CT 06106
860-297-5962 or 1-800-382-9463 (in-state)
REFERENCES: 1999 Conn. Pub. Acts 173, §42.
Urban or Industrial Site Reinvestment Credit (NEW)
A credit administered by the Department of Economic and Community Development (DECD) may be applied against various business taxes for investments in eligible industrial site investment projects or eligible urban reinvestment projects.
Definitions:
Eligible industrial site investment project means an investment made in real property, or in improvements to real property, located within Connecticut:
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That has been subject to a spill, as defined in Conn. Gen. Stat. 22a-452c, is an establishment, as defined in Conn. Gen. Stat. 22a-134(3), as amended, or is a facility, as defined in 42 USC 9601(9);
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That, if remediated, renovated, or demolished in accordance with applicable law and regulations and the standards of remediation of the Department of Environmental Protection and used for business purposes, will add significant new economic activity and employment in the municipality in which the investment is to be made, and will generate additional tax revenues to the state;
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For which the use of the urban and industrial site reinvestment program will be necessary to attract private investment to the project;
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The business use of which would be economically viable and would generate direct and indirect economic benefits to the state that exceed the amount of the investment during the period for which the tax credits are granted; and
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That is, in the judgment of the Commissioner of DECD, consistent with the strategic economic development priorities of the state and the municipality.
Eligible urban reinvestment project means an investment:
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That would add significant new economic activity and new jobs in a new facility in the eligible municipality in which the investment is to be made, and will generate significant additional tax revenues to the state or the municipality;
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For which the use of the urban and industrial site reinvestment program will be necessary to attract private investment to an eligible municipality;
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That is economically viable;
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For which the direct and indirect economic benefits to the state outweigh the costs of the investment; and
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That is, in the judgment of the Commissioner of DECD, consistent with the strategic economic development priorities of the state and the municipality.
The Commissioner of DECD may register managers of funds created for the purpose of investing in eligible urban reinvestment projects and eligible industrial site investment projects. Any fund manager shall have its primary place of business in this state. Any fund manager registered under Conn. Gen. Stat. §38a-88a (Insurance Reinvestment Fund Tax Credit) on or before July 1, 2000, shall be eligible to serve as a fund manager.
A written application must be made to the Commissioner of DECD containing information concerning the type of investment proposed to be made, its location, the number of jobs to be created or retained, the physical infrastructure that might be created or preserved, feasibility studies or business plans for the investment, projected revenue the state might derive as a result of the investment and other information necessary to demonstrate the financial viability of the investment and to demonstrate that the investment will provide net benefits to the economy of, and employment for citizens of, the municipality and the state. The amount of the investment approved shall not exceed the amount of state revenue that will be generated according to the revenue impact assessment prepared by the Commissioner of DECD.
Upon approving an investment, the Commissioner of DECD shall issue a certificate of eligibility certifying that the applicant has complied with the provisions of this credit.
The credit may be claimed by a taxpayer who has made an investment directly of at least $20 million or made an investment through a fund if such fund has a total asset value of at least $60 million for the income year in which the initial credit is taken and not less than 3 investors who are not related persons.
The credit may be assigned but must be claimed in the same year that it could have been claimed by the taxpayer.
NOTE: No taxpayer shall be eligible for this credit and the tax credits under Conn. Gen. Stat. §§12-217e or 38a-88a, for the same investment. No two taxpayers shall be eligible for any tax credit with respect to the same investment, employee, or facility.
The sum of all tax credits granted pursuant to this section shall not exceed $100 million with respect to a single project. The sum of all tax credits granted shall not exceed $500 million. However, the taxpayer may apply for a tax credit that exceeds the limit, and the Commissioner of DECD shall make a recommendation to the General Assembly as to whether or not the credit should be granted.
Credit Percentage
The credit is allowable over ten years as follows:
Years 1-3: The credit amount is zero (0%).
Years 4-7: The credit amount is 10% of the taxpayer’s investment with respect to the third full income year succeeding the year in which the investment was made and the three next succeeding income years.
Years 8-10: The credit amount is 20% of the taxpayer’s investment with respect to the seventh full income year succeeding the year in which the investment was made and the two next succeeding income years.
Carryforward/Carryback Limitations
The tax credit may be carried forward for the five immediately succeeding income years until the full credit has been allowed.
Recapture Provision
Any taxpayer which has claimed credits related to an investment concerning which the Commissioner of DECD has revoked the certificate of eligibility issued shall be required to recapture its pro-rata share of the recapture amount and no subsequent credit shall be allowed unless such certificate of eligibility is reinstated. The amount of the credit that the taxpayer is required to recapture varies depending upon the year in which the tax credit is required to be recaptured as follows:
|
Year |
Percent |
| Year 4 | 90% |
| Year 5 | 65% |
| Year 6 | 50% |
| Year 7 | 30% |
| Year 8 | 20% |
| Year 9-10 | 10% |
The Commissioner of Revenue Services may recapture the credit first from any taxpayer who claimed the credit, then from any taxpayer who assigned the credit, and finally, from any fund through which the investment was made.
How to Apply
Applications and registration information can be obtained by contacting the Department of Economic and Community Development (DECD).
Attachments Required to the Connecticut Corporation Business Tax Return
Investors claiming the credit must submit a copy of the eligibility certificate issued by DECD to the Department of Revenue Services along with the completed tax return. Report the credit amount on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
How to Compute the Credit
The credit may be applied to any of the following taxes:
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Insurance companies, hospital and medical services corporation taxes (Chapter 207);
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Health care centers tax (Chapter 207);
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Corporation business tax (Chapter 208);
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Unrelated business income of nonprofit corporations tax (Chapter 208a);
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Air carriers tax (Chapter 209);
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Railroad companies tax (Chapter 210);
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Express telegraph or cable and community antenna television system companies tax (Chapter 211);
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Utility companies tax (Chapter 212);
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Public service companies tax (Chapter 212a); or
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Surplus lines brokers’ tax (Conn. Gen. Stat. §38a-743).
Please direct inquiries to:
Department of Economic and Community Development
505 Hudson Street
Hartford CT 06106-7107
860-270-8128
REFERENCES: 2000 Conn. Pub. Acts 170, §38.
REVISED CREDITS
Changes
1999 – 2000
Apprenticeship Training Credit in Manufacturing, Plastics, and Construction Trades Credit (REVISED)
Description
A credit against the Connecticut corporation business tax is available to corporations that employ apprentices who are receiving training in the manufacturing, plastic, or construction trades. This credit is designed to encourage the development of skilled workers through apprentice training programs in order to counter the current and projected shortage of skilled workers in the manufacturing, plastics, and construction trades which exist in Connecticut.
Manufacturing and Plastics Trades
Some examples of trades eligible for this credit include:
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Machinist;
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Tool and Diemaker;
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Printing;
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Tool and Machine Setter; or
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Plastic and Injection Molding Technician
NOTE: Moldmaker or similar occupations which involve multiple work processes such as metal shaping must meet criteria for manufacturing as established by the Standard Industrial Classification (SIC) manual and Conn. Agencies Reg. §§31-51d-1 through 31-51d-12.
Construction Trades
Corporations claiming this credit must have a qualified apprenticeship program which is:
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Jointly administered by labor and management trustees, which include union and management trainees;
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Administered pursuant to labor laws, 29 USC Section 186(c);
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Certified in accordance with regulations adopted by the Labor Commissioner; or
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Registered with the Connecticut State Apprenticeship Council.
Definitions
As defined in Conn. Agencies Regs. §12-217g-2, an apprenticeship means the establishment and continuance, under a qualified program, of one or more full-time apprentice training positions within a pool of skilled workers, whereby unskilled or semi-skilled apprentices are employed full-time as apprentices under a written agreement. A qualifying apprenticeship training program must meet all of these requirements:
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The apprenticeship period must be at least 4,000 hours (two years) but not more than 8,000 hours (four years); and
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Each apprentice must be employed on a full-time basis, which is defined as working a minimum of 120 hours per month.
IMPORTANT: Wages of pre-apprentices are not eligible for this tax credit.
Credit Percentage
Manufacturing and Plastics Trades
For manufacturing and plastics trades, the credit against the Connecticut corporation business tax is computed by multiplying the total number of apprentice work hours by $4. This credit may only be taken during the first half of a two-year apprenticeship and the first three-quarters of a four-year apprenticeship.
The credit may not exceed 50% of actual wages paid to apprentices in the claim year or $4,800, whichever is less.
Construction Trades
For construction trades, the credit is computed by multiplying the total number of apprentice work hours by $2. This credit may only be taken during the first half of a two-year apprenticeship and the first three-quarters of a four-year apprenticeship.
The credit may not exceed 50% of actual wages paid to apprentices in the claim year or $1,000, whichever is less.
Carryforward/Carryback Limitations
No carryforward or carryback is allowed.
How to Apply
For additional information about applying for the Apprenticeship Tax Credit, contact the Connecticut Department of Labor (CTDOL) Apprenticeship Division at 860-263-6585 or your local Connecticut Department of Labor Office, Business Services Unit.
How to Compute Credit
To compute the credit, an Apprenticeship Tax Credit Worksheet should be completed for each registered apprentice who worked in the claim year. Completed worksheets with verification of hours worked for each apprentice should be submitted to:
Department of Labor
Apprenticeship Training Unit
200 Folly Brook Blvd.
Wethersfield CT 06109
The CTDOL will compute the tax credit and issue a Tax Credit Certification Letter to the taxpayer. The amount listed on the Tax Credit Certification Letter should also be entered on Form CT-1120K, Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Attachments Required to the Connecticut Corporation Business Tax Return
A copy of the Tax Credit Certification Letter must be attached to the Connecticut Corporation Business Tax Return.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Labor
200 Folly Brook Road
Wethersfield CT 06109
860-263-6585
REFERENCES: Conn. Gen. Stat. §12-217g; Conn. Agencies Regs. §§12-217g-1 through 12-217g-10, inclusive.
Hiring Incentive Credit (Formerly Opportunity Certificate Tax Credit Program) (REVISED)
Description
A credit may be applied against the Connecticut corporation business tax based on a portion of the wages paid by Connecticut businesses that hire recipients of the Temporary Family Assistance (TFA) program.
A qualifying employee is any employee who:
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During and after income year 2000, is employed not less than 30 hours per week; and
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At the time of employment, has been receiving benefits from the TFA for more than nine months and meets other requirements that the Labor Commissioner may establish in regulations adopted in accordance with Chapter 54.
Eligibility Requirements
In order to qualify for this program, a corporation must:
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Submit an application to the Labor Commissioner on or after July 1 but not later than December 31;
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Receive approval to hire an eligible TFA recipient by December 31 of each year; and
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Employ a TFA recipient for a minimum of 30 hours per week.
Credit Percentage
A corporation may claim a tax credit on its tax return for the income year during which a qualifying employee was employed in the amount of $125 for each full month that such employee is employed.
The maximum credit allowed to all business firms in any one fiscal year is $ 1 million.
Carryforward/Carryback Limitations
Any unused credit balance can be carried forward and applied to five successive income years.
How to Apply
Employers interested in using this tax credit program must request a tax credit reservation by submitting the HITC Application For Tax Credit form to the Program Support Unit of the Labor Department between July 1 and December 31 of each year. Applications will be approved or denied in the order in which they are received.
How to Compute Credit
Complete Form CT-1120 HIC, Hiring Incentive Tax Credit. This form may be obtained from the DRS Forms Unit by calling 860-297-5962 or 1-800-382-9463 (in-state). Forms may also be obtained 24 hours a day either by calling DRS Tax-Fax, 860-297-5698, or from our Web site.
Calculate the credit on Form CT-1120 HIC by multiplying the number of complete calendar months worked by qualified employees during the income year by $125. The calculation reported on Form CT-1120 HIC must be entered on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Attachments Required to the Connecticut Corporation Business Tax Return
An approval letter issued by the Labor Commissioner and Form CT-1120 HIC, with requested documentation, must be attached to the Connecticut Corporation Business Tax Return.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Labor
Program Support Unit
200 Folly Brook Blvd.
Wethersfield CT 06109-1114
860-263-6030
REFERENCES:
Conn. Gen. Stat. §12-217y, as amended by 1999 Conn. Pub. Acts 203, §1 and 2000 Conn. Pub. Acts 174, §25.
Housing Program Contribution Credit (REVISED)
Description
A credit may be applied against various Connecticut business taxes for cash contributions made to housing programs sponsored, developed, or managed by nonprofit corporations which benefit low and moderate income individuals and families.
The Housing Program Contribution Credit (HPCC) was created to encourage cooperation between non-profit and for-profit firms, by developing affordable housing that otherwise would not be built. The contributions provided by business firms can reduce the amount of financing a project needs. Such reduction can result in an insufficiently funded project becoming a financially feasible one, or, in the case of a financially feasible project, can reduce the cost to families who will occupy the housing units.
Credit Percentage
Tax credits are allotted to business firms by the Connecticut Housing Finance Authority (CHFA). A tax credit voucher may be granted in an amount equal to 100% of the value of the contribution made. The annual minimum credit allowed to any business firm is $250, but there is no annual maximum credit that may be granted to any business firm. The maximum credit allowed in the aggregate to all corporations is $5 million. In addition, no organization conducting an eligible housing program may receive contributions in excess of $400,000 in any fiscal year.
Carryforward/Carryback Limitations
The amount of tax credit which is not used in the income year for which such credit is issued may be carried forward or backward for the five immediately succeeding or preceding income years until the full credit has been allowed.
How to Apply
An application package can be obtained by calling the CHFA Tax Credit Unit at 860-721-9501, Ext. 231.
The application information should include:
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The name of the housing program(s) to be funded;
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The value and type of each contribution;
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A letter(s) of intent from the business firm to nonprofit corporation(s) listing actual amount contributed and endorsed; and
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A Certificate of Good Standing and a Certificate of Incorporation (obtained from the Office of the Secretary of the State).
How to Compute Credit
The amount of the tax credit claimed shall be equal to the business firm’s cash contribution in the income year of payment to which CHFA’s tax credit voucher relates. The tax credit voucher certificate that is issued by CHFA lists the tax credit amount that may be claimed on the Connecticut Corporation Business Tax Return. This amount must be entered on Form CT-1120K, Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
The credit may be applied to any of the following taxes:
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Insurance companies, hospital and medical services corporations taxes (Chapter 207);
-
Corporation business tax (Chapter 208);
-
Air carriers tax (Chapter 209);
-
Railroad companies tax (Chapter 210);
-
Express, telegraph or cable and community antenna television system companies tax (Chapter 211); or
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Utility companies tax (Chapter 212).
NOTE: Effective January 1, 2000, an S corporation is eligible to claim the entire credit available for the Housing Program Contribution Credit rather than the pro-rated amount of the credit.
Attachments Required to the Connecticut Corporation Business Tax Return
A tax credit voucher will be issued by CHFA upon verification that the contribution has been made. This voucher must be attached to the Connecticut Corporation Business Tax Return.
Where to Obtain Additional Information
Please direct inquiries to:
Connecticut Housing Finance Authority
Tax Credit Unit
999 West Street
Hartford CT 06106
860-721-9501 Ext. 231
REFERENCES:
Conn. Gen. Stat. §8-395, as amended by 1999 Conn. Pub. Acts 173, §33; 2000 Conn. Pub. Acts 170, §23-24; Conn. Agencies Regs. §§8-395-1 through 8-395-10, inclusive.
Human Capital Investment Credit (REVISED)
Description
A credit may be applied against the Connecticut corporation business tax for amounts paid or incurred for the following types of Human Capital investments:
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In-state job training of person employed in Connecticut;
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Work education programs in this state which include, but are not limited to, programs in public high schools and work education-diversified occupation programs;
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In-state training and education of persons employed in this state provided by institutions of higher learning in Connecticut;
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Donations or capital contributions to institutions of higher learning in Connecticut for improvements or advancement of technology including physical plant improvements;
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Planning, site preparation, construction, renovation or acquisition of facilities in this state for the purpose of establishing a day care facility in this state;
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Child care subsidies paid to employees employed in this state; or
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Contributions made to the Individual Development Account Reserve Fund, as defined in 2000 Conn. Pub. Acts 192, §1(14) (Effective January 1, 2001).
The following questions and answers apply to in-state training of persons employed in this state (formerly referred to as the Employee Training Credit):
-
Do employees’ salaries while training qualify?
No.
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Does the cost of materials qualify?
Yes, but only if the materials are used as part of the employee’s training.
-
Does the training facility and depreciation expense qualify as an eligible training expense?
The cost of the training facility in this state is allowed, but depreciation expenses do not qualify.
-
What other expenses qualify?
In determining whether certain expenses qualify for the credit, a distinction must be made between direct and indirect expenses. For example, if a corporation hires a training instructor, the expenses of the instructor qualify to the extent that the expenses are directly related to training which meets statutory requirements. Indirect expenses such as overhead would not qualify.
-
Does the cost of course registration qualify?
Yes.
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Does tuition reimbursement qualify?
Yes, but the tuition must be paid to institutions of higher learning within this state for training in this state.
-
Do travel costs qualify?
Yes, provided the travel is within Connecticut and subject to other limitations of the law.
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Can payroll taxes and fringe benefits be included?
No. These expenses are deemed actual employee expenses and not training expenses.
Credit Percentage
The credit percentage varies from 3% to 5%, depending upon the income year during which the amount is spent. The yearly percentages are:
| For Income Years Beginning on or After |
Credit Percentage |
| January 1, 1998 January 1, 1999 January 1, 2000 |
3% 4% 5% |
Carryforward/Carryback Limitations
Any credit not used during the income year may be carried forward to the next five succeeding income years until the entire credit is used.
How to Apply
Complete Form CT-1120 HCIC, Human Capital Investment Credit. This form can be obtained from the DRS Forms Unit by calling 860-297-5962 or 1-800-382-9463 (in-state). Forms may also be obtained 24 hours a day either by calling DRS Tax-Fax, 860-297-5698, or from our Web site.
Additional Provisions
-
The credit claimed cannot exceed the amount of tax liability.
-
Corporations claiming expenditures for the Human Capital Investment Credit cannot claim or use the same expenditures against any other corporation business tax credit.
How to Compute the Credit
Calculate the credit using Form CT-1120 HCIC, Human Capital Investment Credit, by multiplying qualifying expenditures by 3% to 5%, depending upon the income year during which the amounts were spent. Report the credit amount on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Revenue Services
Taxpayer Services Division
25 Sigourney Street
Hartford CT 06106
860-297-5962 or 1-800-382-9463 (in-state).
REFERENCES:
Conn. Gen. Stat. §12-217x, as amended by 2000 Conn. Pub. Acts 192, §1.
Insurance Reinvestment Fund Credit (REVISED)
Description
Tax credits may be earned by investing in an Insurance Reinvestment Fund which invests in Connecticut companies engaged in the insurance business or providing services to insurance companies.
Investors in the fund are eligible to claim credits against the premium, corporation, or individual income tax.
Important: The Commissioner of Economic and Community Development must have registered the managers of eligible funds on or before July 1, 2000, in order for the investors to be able to claim the tax credits, and no credit will be allowed for any investment in any fund created on or after July 1, 2000. The funds must be created for the purpose of investing in insurance businesses.
Registered fund managers must have their primary place of business in this state. The credit may be claimed only with respect to an insurance business that:
-
Occupies a new facility for which an eligibility certificate has been issued by the Commissioner of Economic and Community Development; and
-
Employs not less than 25% of its total work force in new jobs.
The credit may be claimed only by a taxpayer who has invested in an insurance business through a fund that has a total asset value of not less than $30 million for the income year for which the initial credit is taken and has not less than three investors at the date the investment is made. Investors must not be related persons with respect to each other or to any insurance business in which the fund makes an investment.
A corporation that is eligible to claim the insurance reinvestment credit may not claim the Manufacturing Facility Credit for Facilities located in a Targeted Investment Community (Form CT-1120 TIC/EZ) with respect to the same investment. Also, no two taxpayers shall be eligible for any tax credit with respect to the same investment, employee, or facility.
Credit Percentage
The credit is allowable over ten years as follows:
Years 1-3: The credit amount is zero (0%).
Years 4-7: The credit amount is 10% of the taxpayer’s investment through a fund manager in an insurance business with respect to the third full income year succeeding the year in which the investment was made and the three next succeeding income years.
Years 8-10: The credit amount is 20% of the taxpayer’s investment through a fund manager in an insurance business with respect to the seventh full income year succeeding the year in which the investment was made and the two next succeeding income years.
Carryforward/Carryback Limitations
Any unused credit balance may be carried forward for the five immediately succeeding income years until the full credit has been allowed. No carryback is allowed.
How to Compute Credit
Computation procedures can be obtained by calling the Department of Economic and Community Development (DECD) at 860-270-8039.
Recapture Provision
A taxpayer must recapture a percentage of any credit previously claimed if the number of new employees of a business the fund invests in falls below 25% for more than 60 days and if the business relocates out-of-state. No subsequent credit shall be allowed.
The amount of the credit that the taxpayer is required to recapture varies depending upon the year in which the tax credit is required to be recaptured as follows:
| Year | Percent |
| Year 4 | 90% |
| Year 5 | 65% |
| Year 6 | 50% |
| Year 7 | 30% |
| Year 8 | 20% |
| Year 9-10 | 10% |
The Commissioner of Revenue Services may recapture the credit first from any taxpayer who claimed the credit, then from any taxpayer who assigned the credit, and finally, from any fund through which the investment was made.
Attachments Required to the Connecticut Corporation Business Tax Return
Investors claiming a credit must submit a copy of the eligibility certificate issued by DECD to the Department of Revenue Services, along with a completed Form CT-IRF, Insurance Reinvestment Fund, for each year a credit is claimed.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Economic
and Community Development
505 Hudson Street 3rd Floor
Hartford CT 06106-7107
860-270-8128
REFERENCES:
Conn. Gen. Stat. §38a-88a, as amended by 2000 Conn. Pub. Acts 170 §§30-31.
50% Manufacturing Facility Credit for Facilities Located in an Enterprise Zone or Entertainment District (REVISED)
Description
A credit equal to 50% of the Connecticut corporation business tax that is allocable to a manufacturing facility that is located within a designated Enterprise Zone or other area designated as having enterprise zone level benefits is available.
Employment Criteria
To qualify for the 50% credit, the corporation must, during the last quarter of its income year:
-
Employ 150 or more full-time employees who at the time of employment were:
-
Residents of the Enterprise Zone; or
-
Residents of the municipality who are eligible for training under the federal Job Training
Partnership Act; 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:
-
Residents of the Enterprise Zone; or
-
Residents of the municipality who are eligible for training under the federal Job Training
Partnership Act.
Important: If the corporation is located in an Enterprise Zone or other area designated as having enterprise zone level benefits and does not meet the job requirement, it is not eligible to claim a 50% tax credit. However, it may still be eligible to claim a 25% tax credit by filing Form CT-1120 TIC/EZ, Manufacturing Facility Credit for Facilities Located in a Targeted Investment Community/Enterprise Zone.
An employment position is directly attributable to the manufacturing 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.
A manufacturing facility is defined as any plant, building, or other real property improvement which is constructed, renovated, expanded or acquired, and is used for one of the following purposes:
-
Manufacturing, processing or assembling raw materials, parts, or manufactured products;
-
Research and development facilities directly related to manufacturing;
-
The significant servicing, overhauling or building of machinery and equipment for industrial use; or
-
The warehousing and distribution in bulk of manufactured products on other than a retail basis.
NOTE: For a complete definition, please refer to Conn. Gen. Stat. §32-9p(d).
Location Criteria
An Enterprise Zone is any area designated by the Commissioner of Economic and Community Development as an Enterprise Zone. A municipality with a designated Enterprise Zone is defined as a Targeted Investment Community.
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 |
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 benefits available in an Enterprise Corridor Zone are the same as in an Enterprise Zone and subject to the same qualifying terms and conditions.
The municipalities designated by the Commissioner of Economic and Community Development as located within Enterprise Corridor Zones are:
| Ansonia | Lisbon | Seymour |
| Beacon Falls | Naugatuck | Sprague |
| Derby | Plainfield | Sterling |
| Griswold | Putnam | Thompson |
| Killingly |
An Entertainment District is any area designated by the Commissioner of Economic and Community Development as an entertainment district. A qualified entertainment project taking place anywhere within a municipality, with an approved entertainment district, is eligible for Enterprise Zone level benefits.
Projects eligible for Enterprise Zone benefits would include but are not limited to, facilities producing live or recorded multimedia projects and any such support business needed to support such operations.
A Qualified Manufacturing Plant is a manufacturing facility designated by the Commissioner of Economic and Community Development as a Qualified Manufacturing Plant. The benefits available to an eligible corporation completing an approved project in a Qualified Manufacturing Plant are the same as in an Enterprise Zone and subject to the same qualifying terms and conditions.
A Railroad Depot Zone is an area designated by the Commissioner of Economic and Community Development as a Railroad Depot Zone. It abuts an active or inactive rail line and contains manufacturing or warehousing facilities that were originally dependent on railroad access to operate. The benefits available to an eligible corporation completing an approved project in a Railroad Depot Zone are the same as in an Enterprise Zone and subject to the same qualifying terms and conditions.
Businesses that are engaged in biotechnology, pharmaceutical, or photonics research and are located in a municipality that has a major research university with programs in biotechnology, pharmaceuticals, or photonics and an Enterprise Zone may also qualify for Enterprise Zone benefits.
The Contiguous Municipality Zone, the Defense Plant Zone and the Manufacturing Plant Zone are other areas designated by the Commissioner of Economic and Community Development as having Enterprise Zone level benefits. The municipalities containing these zones are not considered to be Targeted Investment Communities. The Town of Plainville contains the only designated Contiguous Municipality Zone. The Town of Bloomfield contains the only designated Manufacturing Plant Zone. The state’s only Defense Plant Zone is located in Stratford.
How to Apply
Corporations may call the DECD at 860-270-8143 and request the Urban Jobs/Enterprise Zone Program questionnaire.
Upon review of the completed questionnaire, a DECD staff representative will contact the corporation to explain the program and the formal application process.
NOTE: If the formal application is approved, DECD will issue to the corporation Forms UT-4, Eligibility Certificate For Urban Jobs Benefits, and UT-9, Claim For Corporate Business Tax Credit Under The Provisions Of The Urban Jobs and Development Program.
Credit Percentage
The credit amount applied against the Connecticut corporation business tax is 50% of the tax allocable to any manufacturing facility located within a designated enterprise or other area designated as having enterprise zone level benefits. The credit period granted by the Department of Economic and Community Development (DECD) is ten years. It begins with the first full calendar year following the year of issuance of the eligibility certificate and continues for the following nine income years.
How to Compute Credit
Use Form CT-1120 TIC/EZ to compute the credit. Corporation business tax credit forms may also be obtained 24 hours a day either by calling DRS Tax-Fax, 860-297-5698, or from our Web site
The tax credit is computed by using the arithmetical mean of two fractions (property and wages) to determine the portion of the corporation business tax liability that is allocable to the Connecticut manufacturing facility.
Property (numerator calculation): Determine the average monthly net book value of the Connecticut manufacturing facility and machinery and equipment installed therein (without reduction for any encumbrance). If the facility is rented, the numerator is calculated by multiplying the gross rents payable for the manufacturing facility times eight.
Property (denominator calculation): Determine the average monthly net book value of all real property and machinery and equipment located in Connecticut.
Wages (numerator calculation): Determine the wages, salaries, and compensation of employees whose positions are directly attributable to the Connecticut manufacturing facility.
Wages (denominator calculation): Determine the wages, salaries, and compensation paid to all Connecticut employees.
The credit is reported on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Carryforward/Carryback Limitations
No carryforward or carryback is allowed.
Attachments Required
Form CT-1120 TIC/EZ and Forms UT-4 and UT-9, issued by DECD, must be attached to the Connecticut Corporation Business Tax Return.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Economic
and Community Development
505 Hudson Street
Hartford CT 06106-7107
860-270-8143
REFERENCES: Conn. Gen. Stat. §12-217e, as amended by 2000 Conn. Pub. Acts 174, §22.
25% Manufacturing Facility Credit for Facilities Located in a Targeted Investment Community (REVISED)
Description
A credit equal to 25% of the Connecticut corporation business tax that is allocable to a manufacturing facility that is located in a Targeted Investment Community or other area with enterprise zone level benefits is available.
A Targeted Investment Community is any municipality in this state, which contains an Enterprise Zone designated under Conn. Gen. Stat. §32-70.
This credit is available to manufacturing facilities which are constructed, renovated, expanded or acquired anywhere within a Targeted Investment Community or Enterprise Corridor Zone (including those facilities located within an area designated as having enterprise zone level benefits, that do not meet the employment requirements necessary to qualify for the 50% credit). This 25% credit is also available to otherwise eligible entertainment related projects and businesses that are engaged in biotechnology, pharmaceutical, or photonics research that do not meet the employment requirements necessary to qualify for the 50% credit.
A manufacturing facility is defined as any plant, building, or other real property improvement which is constructed, renovated, expanded or acquired and is used for one of the following purposes:
-
Manufacturing, processing or assembling raw materials, parts, or manufactured products;
-
Research and development facilities directly related to manufacturing;
-
The significant servicing, overhauling or building of machinery and equipment for industrial use; or
-
The warehousing and distribution in bulk of manufactured products on other than a retail basis.
NOTE: For a complete definition, please refer to Conn. Gen. Stat. §32-9p(d).
Credit Percentage
The credit amount applied against the Connecticut corporation business tax is 25% of the tax allocable to a manufacturing facility that has been certified by the Department of Economic and Community Development (DECD).
The credit period is ten years. It begins with the first full calendar year following the year of issuance of the eligibility certificate and continues for the following nine years.
Carryforward/Carryback Limitations
No carryforward or carryback is allowed.
How to Apply
Corporations may call DECD at 860-270-8143 and request the Urban Jobs/Enterprise Zone Program questionnaire. Upon review of the completed questionnaire, a DECD staff representative will contact the corporation to explain the program and the formal application process.
Corporation business tax credit forms may also be obtained 24 hours a day either by calling DRS Tax-Fax, 860-297-5698, or from our Web site
NOTE: If the formal application is approved, DECD will issue to the corporation Forms UT-4, Eligibility Certificate For Urban Jobs Benefits, and UT-9, Claim For Corporate Business Tax Credit Under The Provisions Of The Urban Jobs and Development Program.
How to Compute Credit
Form CT-1120 TIC/EZ is used to compute the credit. The tax credit is computed by using the arithmetical mean of two fractions (property and wages) to determine the portion of the corporation business tax liability that is allocable to the Connecticut manufacturing facility.
Property (numerator calculation): Determine the average monthly net book value of the Connecticut manufacturing facility and machinery and equipment installed therein (without reduction for any encumbrance). If the facility is rented, the numerator is calculated by multiplying the gross rents payable for the manufacturing facility times eight.
Property (denominator calculation): Determine the average monthly net book value of all real property and machinery and equipment located in Connecticut.
Wages (numerator calculation): Determine the wages, salaries, and compensation of employees whose positions are directly attributable to the Connecticut manufacturing facility.
Wages (denominator calculation): Determine the wages, salaries, and compensation paid to all Connecticut employees.
The credit is reported on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Attachments required to the Connecticut Corporation Business Tax Return
Form CT-1120TIC/EZ and Forms UT-4 and UT-9, issued by DECD, must be attached to the Connecticut Corporation Business Tax Return.
Where to Obtain Additional Information
Please direct any inquiries to:
Department of Economic
and Community Development
505 Hudson Street
Hartford CT 06106-7107
860-270-8143
REFERENCES: Conn. Gen. Stat. §12-217e; Conn. Gen. Stat. §32-9p; Conn. Gen. Stat. §32-70.
Machinery and Equipment Expenditure Credit (REVISED)
Description
A credit may be applied against the Connecticut corporation business tax based upon a percentage of the incremental increase in expenditures for machinery and equipment acquired for and installed in a facility in Connecticut which exceeds the amount spent for such expenditures in the prior income year.
The credit amount is determined by the number of the corporation’s full-time, permanent employees whose wages, salaries or other compensation is paid in Connecticut.
Definitions
Machinery is defined as the basic machine itself, including all of its component parts such as belts, pulleys, shafts, moving parts, operating structures, and all equipment or devices used or required to control, regulate or operate the machinery, including without limitation, computers and data processing equipment.
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 defined as a device separate from machinery but essential to the business. Repair and replacement parts for equipment also qualify for the credit under the same terms as provided for parts purchased for machinery.
An employee is defined as 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 defined as any employee who is required to work an average of at least 35 hours per week for at least eight consecutive weeks.
Question and Answers on Machinery and Equipment Expenditure Credit
-
Does the corporation’s line of business in any way limit its ability to claim this credit?
No. The corporation's line of business does not limit its ability to claim this credit.
-
If a corporation employs 250 full-time, permanent employees in Connecticut on December 30, and 251 employees on December 31, how is the final employee number derived?
The final employee number is determined by taking the average of the number of full-time, permanent employees in Connecticut that are reported on the Employer’s Quarterly State Tax Returns (Forms
CT-941).
-
Do motor vehicles, mobile transportation or construction equipment (for interior or exterior use) expenses qualify?
No. Conn. Gen. Stat. §12-217o requires that the machinery and equipment be installed in a facility in Connecticut.
-
What is the definition of "facility?"
Facility means any plant, building or other real property improvement used by the corporation in its trade or business (See, for example, definition of manufacturing facility in Conn. Gen. Stat. §32-9p (d)).
-
When an asset is traded in, what is considered the expenditure – cash paid in excess of an allowance for a traded asset or cash paid plus the tax-basis of a traded asset?
The expenditure is the cash paid plus the consideration received for the asset traded.
-
What amount is taken into account on machinery and equipment expenditures and dispositions – gross or net purchases?
The credit is based on the amounts spent by the corporation on machinery and equipment without regard to dispositions, reductions for the original tax cost or adjusted tax basis of disposed assets, or consideration received for disposed assets.
-
Is there any required holding period for an asset to qualify for this credit?
No. Conn. Gen. Stat. §12-217o does not set forth a holding period requirement to qualify for this credit.
-
Does the use of Internal Revenue Code section 179 depreciation in any way limit eligibility for this credit?
No.
-
Do leasehold improvements qualify?
Yes, if the improvements fall within the definition of machinery and equipment.
-
Do bundled, unbundled, custom or canned software expenses qualify?
Canned software qualifies if it is preloaded with the machinery on which it is used. However, custom software does not qualify.
Credit Percentage
The tax credit applied against Connecticut corporation business tax is 5% or 10%, depending upon the number of full-time, permanent employees whose wages, salaries or other compensation is paid in this State.
The 5% credit applies if the corporation employed between 251 and 800 full-time, permanent employees in Connecticut. The 10% credit applies if the corporation had not more than 250 full-time, permanent employees in Connecticut.
Carryback/Carryforward Limitation
No carryforward or carryback is allowed.
How to Apply
Complete Form CT-1120 MEC, Machinery and Equipment Credit. This form can be obtained from the DRS Forms Unit by calling 860-297-5962 or 1-800-382-9463 (in-state). Forms may also be obtained 24 hours a day either by calling DRS Tax-Fax, 860-297-5698, or from our Web site
How to Compute Credit
Calculate the credit using Form CT-1120 MEC, Machinery and Equipment Credit, by multiplying the appropriate percentage (5% or 10%) by the excess of machinery and equipment expenditures during the income year over the expenditures incurred during the preceding income year.
NOTE: A corporation filing its initial Connecticut Corporation Business Tax Return should use "0" (zero) to indicate expenditures incurred during its preceding income year.
Attachments Required
Schedules listing machinery and equipment expenditures and full-time employment verification must be attached to a completed Form CT-1120 MEC. The credit amount reported on Form CT-1120 MEC must be entered on Form CT-1120K, Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Please direct inquiries to:
Department of Revenue Services
Taxpayer Services Division
25 Sigourney Street
Hartford CT 06106
860-297-5962 or 1-800-382-9463 (in-state)
REFERENCES: Conn. Gen. Stat. §12-217o, as amended by 1999 Conn. Pub. Acts 121, §3.
Neighborhood Assistance Program Credit (REVISED)
Description
A credit may be applied against various Connecticut business taxes by business firms which make individual cash investments of at least $250 to certain community programs that have received both municipal and state approval. However, the business firm’s total charitable contributions during a taxable year must equal or exceed its total charitable contributions during the preceding taxable year.
Programs must be proposed and conducted by tax exempt or municipal agencies and be approved both by the municipality in which they are conducted and the DRS.
Examples of Eligible Programs
Neighborhood Assistance: The furnishing of financial assistance, labor, material, or technical advice to aid in the physical improvement of all or any part of a neighborhood.
Energy Conservation: Energy conservation projects directed toward properties occupied by persons, at least 75% of whom are at an income level not exceeding 150% of the poverty level for the year next preceding the year during which the credit is to be granted, or toward properties occupied by charitable corporations, foundations, trusts, or other entities.
Employment and Training: Employment and training programs:
-
Directed for disabled persons;
-
Directed at youth, at least 75% of whom are at an income level not exceeding 150% of the poverty level for the year next preceding the year during which the tax credit is granted;
-
Directed for unemployed workers who are 50 years of age or older; or
-
Directed for recipients of temporary family assistance.
Child Care Services: Any activity which aids in child care services.
Alcohol Abuse Programs: Any community-based alcoholism prevention or treatment programs.
Child Day Care Facilities: Any program directed at the planning, site preparation, construction, renovation or acquisition of facilities for the purpose of establishing a child day care facility to be used primarily by children of the business firm and for equipment installed in such facility which is necessary to operate such facility.
Donation of Money to Open Space Acquisition Fund: Any donation of money to any political subdivision of the state or any nonprofit land conservation organization which fund qualifies under Conn. Gen. Stat. §12-631(h) and is used for the purchase of land, interest in land or permanent conservation restriction on land, which is to be permanently preserved as protected open space.
Credit Percentages
Credit amounts vary depending on the type of community program receiving the assistance.
The maximum credit allowed to any corporation is $75,000 annually and the maximum credit allowed in the aggregate to all corporations is $5 million in any one fiscal year, of which $3 million shall be granted to business firms eligible for the 60% credit under Conn. Gen. Stat.§ 12-635.
60% Credit
There is allowed a credit not to exceed 60% of the total cash invested during the taxable year in certain energy conservation, employment and training programs, and child care services programs as provided in Conn. Gen. Stat. §12-635. (See Conn. Gen. Stat. §12-633.)
40% Credit
There is also allowed a credit not to exceed 40% of the total cash invested during the taxable year in qualifying community programs or for the donation of money to an open space acquisition fund pursuant to Conn. Gen. Stat. §12-632.
Both credits may be applied to any of the following taxes:
-
Insurance companies, hospital and medical services corporations taxes (Chapter 207);
-
Corporation business tax (Chapter 208);
-
Air carriers tax (Chapter 209);
-
Railroad companies tax (Chapter 210);
-
Express, telegraph or cable and community antenna television systems companies tax (Chapter 211); or
-
Utility companies tax (Chapter 212).
Carryforward/Carryback Limitations
Any tax credit that is not taken in the income year in which the investment was made may be carried back to the two immediately preceding income years (beginning with the earlier of such years).
NOTE: DRS will allow the claiming of a Neighborhood Assistance Act tax credit that is carried forward to the five immediately succeeding income years by a business firm whose proposal was approved by the Department of Social Services prior to 1995.
How to Apply
Business firms that wish to make a cash contribution to a qualified community program are required to complete Form NAA-02 and mail or hand-deliver the form to the DRS between September 15 through October 1 of each year.
Neighborhood organizations and Connecticut municipalities desiring to obtain benefits under the Neighborhood Assistance Act must complete Form NAA-01, Parts I, II, and III and submit it to the municipal agency that will be overseeing the implementation of the proposal. (The overseeing municipal agency will then complete Form NAA-01, Part IV and submit it to the DRS on or before July 1 of each year.) For specific information, call 860-297-5687. Application forms may also be obtained 24 hours a day either by calling DRS Tax-Fax, 860-297-5698, or from our Web site
How to Compute Credit
DRS issues a Neighborhood Assistance Program approval letter to corporations that qualify. The letter indicates the tax credit amount that may be claimed on the Connecticut Corporation Business Tax Return. The credit amount must also be entered on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
NOTE: Any S Corporation with an income year beginning on or after January 1, 1999, but before December 31, 2000, is eligible to claim the entire credit available under the Neighborhood Assistance Act rather than the pro-rated amount of the credit.
Attachments Required to the Connecticut Corporation Business Tax Return
A Neighborhood Assistance Act tax credit approval letter issued by DRS and a copy of the corporation’s federal income tax return for the current income year and for the preceding income year must be attached to the Connecticut Corporation Business Tax Return.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Revenue Services
Neighborhood Assistance Act Program
Attn: Research Unit
25 Sigourney Street
Hartford CT 06106
860-297-5687
REFERENCES:
Conn. Gen. Stat. §§12-631 through 12-638, inclusive, as amended by 1999 Conn. Pub. Acts 83, §1; 1999 Conn. Pub. Acts 173, §45; 1999 Conn. Pub. Acts 235, §1; 2000 Conn. Pub. Acts 174, §35.
Research and Development Credit (Nonincremental) (REVISED)
Description
A credit may be applied against the Connecticut corporation business tax for research and development expenses incurred in Connecticut.
Research and development expenses are those that may be deducted under section 174 of the Internal Revenue Code of 1986, as in effect on May 28, 1993, and basic research payments as defined under section 41 of the Internal Revenue Code, as in effect on May 28,1993. They may include, but are not limited to:
-
Expenditures incurred in connection with the taxpayer’s trade or business which represent research and development costs in the experimental or laboratory sense;
-
All costs incident to the development of an experimental or pilot model, a plant process, a product, a formula, an invention, or similar property, and the improvement of already existing property of the type mentioned; or
-
Costs of obtaining a patent, such as attorneys’ fees expended in making and perfecting a patent application.
The following are examples of Internal Revenue Code section 174 expenses that would not qualify:
-
Overhead and other expenses, such as general and administrative expenses, which relate to a corporation’s activities as a whole and do not contribute directly to the research and development effort.
-
The ordinary testing or inspection of materials or products for quality control, for efficiency surveys, management studies, consumer surveys, advertising or promotions, for research in connection with literary, historical, or similar projects and the costs of acquiring another’s patent, model, production or process.
NOTE: Special rules apply for taxpayers (or a combined group, in the case of a combined return) that pay or incur research and development expenses over $200 million, aerospace companies, and qualified small businesses.
For income years beginning on or after January 1, 2000, a tentative credit of 6% will be available to a qualified small business. A qualified small business is defined as a company that has gross income for the previous income year that does not exceed $100 million and has not met the gross income test through transactions with a related person, as defined in the statute.
The credit provided is subject to the following limitations:
-
No more than one-third of the amount of the credit allowable for any income year may be included in the calculation of the amount of the credit that may be taken in that income year; or
-
The total amount of the credit that may be taken for any income year is limited to the greater of:
-
50% of the taxpayer’s tax liability, determined without regard to any credits allowed by this section; or
-
The lesser of 200% of the credit otherwise allowed for the income year or 90% of the taxpayer’s tax liability, determined without regard to any credits allowed by this section.
NOTE: Any taxpayer also claiming a corporation business tax credit on Form CT-1120RC, Research Credit, shall reduce the amount of research and development expenses that might otherwise be taken into account in computing the allowable credit by the amount of the incremental increase in research and experimental expenditures, as computed on Form CT-1120RC.
Any taxpayer also claiming a corporation business tax credit on Form CT-1120GC, Tax Credit for Research and Development Grant to Institutions of Higher Education, shall reduce the amount of research and development expenses that might otherwise be taken into account in computing the allowable credit by the amount of the incremental increase in grants, as computed on Form CT-1120GC.
Credit Percentage Table
|
Expense Amounts |
Credit Percentage |
|
| $50 million or less | `1% | |
| more than $50 million but not more than $100 million |
$500,000 + 2% over $50 million |
|
| more than $100 million but not more than $200 million |
$1,500,000 + 4% over $100 million |
|
| more than $200 million | $5,500,000 + 6% over $200 million |
Carryforward/Carryback Limitations
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. All allowable credits from prior years must be carried forward and applied before current year’s credit may be taken. No carryback is allowed.
Exchange of Tax Credit for Cash
For taxable years beginning on or after January 1, 2000, a qualified small business that cannot take this tax credit in a taxable year in which it would otherwise be taken, as a result of having no tax liability, may exchange such credit with the State of Connecticut for a cash payment equal to 65% of the value of the credit, or may elect to carry such credit forward as indicated above. The application to exchange tax credits must be made at the same time the taxpayer files a final return for the income year.
For these purposes, qualified small business means a company that has gross income for the previous income year that does not exceed $70 million and has not met the gross income test through transactions with a related person, as defined in Conn. Gen. Stat. §12-217w. (See 1999 Conn. Pub. Acts 173, §38.)
NOTE: The definition of qualified small business that is eligible for the exchange of this tax credit for cash is different than the definition of qualified small business which is eligible for a tentative credit equal to 6% of research and development expenses.
How to Apply
Complete Form CT-1120 RDC. This form can be obtained from the DRS Forms Unit by calling 860-297-5962 or 1-800-382-9463 (in-state). Forms may also be obtained 24 hours a day either by calling DRS Tax-Fax, 860-297-5698, or from our Web site
How to Compute Credit
Calculate the credit by multiplying the amount spent on research and development conducted in Connecticut by the appropriate percentage and completing Form CT-1120 RDC. The calculation reported on Form CT-1120 RDC must be entered on Form CT-1120K, Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Attachments Required
The following information should be attached to the tax return:
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Locations in Connecticut where research and experimentation was conducted;
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Amounts spent directly on research and experimentation, as defined in section 174 of the Internal Revenue Code of 1986, in the current income year and in the preceding income year; and
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A completed Form CT-1120 RDC.
Please direct future inquiries to:
Department of Revenue Services
Taxpayer Services Division
25 Sigourney Street
Hartford CT 06106
860-297-5962 or 1-800-382-9463 (in-state)
REFERENCES:
Conn. Gen. Stat.§12-217n, as amended by 1999 Conn. Pub. Acts 173, §§38 and 40; and 1999 Conn. Pub. Acts 1, §28 (June Spec. Session); Special Notice 93(21); 26 U.S.C. §§41, 174.
Research and Experimental Expenditures Credit (Incremental) (REVISED)
Descriptions
A credit may be applied against the Connecticut corporation business tax for the incremental increase in research and experimental expenditures conducted in Connecticut.
Research and experimental expenditures as defined in section 174 of the Internal Revenue Code of 1986, as amended, include, but are not limited to:
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Expenditures incurred in connection with the taxpayer’s trade or business which represent research and development costs in the experimental or laboratory sense;
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All costs incident to the development of an experimental or pilot model, a plant process, a product, a formula, an invention, or similar property, and the improvement of already existing property of the type mentioned; or
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Costs of obtaining a patent, such as attorneys’ fees expended in making and perfecting a patent application.
The following are examples of expenses that would not qualify:
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Overhead and other expenses, such as general and administrative expenses, which relate to a corporation’s activities as a whole and do not contribute directly to the research and development effort; or
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The ordinary testing or inspection of materials or products for quality control, for efficiency surveys, management studies, consumer surveys, advertising or promotions, for research in connection with literary, historical, or similar projects and the costs of acquiring another’s patent, model, production or process.
Credit Percentage
The credit percentage is 20% of the excess of research and experimental expenditures in Connecticut in the current income year over research and experimental expenditures in the preceding income year.
Carryforward/Carryback Limitations
For income years beginning on or after January 1, 2000, corporations will be allowed a 15-year credit carryforward to each successive year until the credits are fully taken. Previously, only biotechnology companies were allowed a 15-year carryforward.
Exchange of Tax Credit for Cash
For taxable years beginning on or after January 1, 2000, a qualified small business that cannot take this tax credit in a taxable year in which it would otherwise be taken, as a result of having no tax liability, may exchange such credit with the State of Connecticut for a cash payment equal to 65% of the value of the credit, or may elect to carry such credit forward as indicated above. The application to exchange tax credits must be made at the same time the taxpayer files a final return for the income year.
For these purposes, qualified small business means a company that has gross income for the previous income year that does not exceed $70 million and has not met the gross income test through transactions with a related person, as defined in Conn. Gen. Stat. §12-217w.
How to Apply
Complete Form CT-1120RC, Research and Experimental Expenditures Credit. This form can be obtained from the DRS Forms Unit by calling 860-297-5962 or 1-800-382-9463 (in-state). Forms may also be obtained 24 hours a day either by calling DRS Tax-Fax, 860-297-5698, or from our Web site.
How to Compute Credit
The amount of the credit is equal to 20% of the amount spent on research and experimental expenditures conducted in Connecticut during the income year which exceeds the amount spent on such expenditures conducted in Connecticut during the preceding income year. The calculation reported on Form CT-1120RC must be entered on Form CT-1120K, Corporation Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
NOTE: A corporation filing its initial Connecticut Corporation Business Tax Return should use "0" (zero) to indicate expenditures incurred during its preceding income year.
Attachments Required
The following information should be attached to the tax return:
-
Locations in Connecticut where research and experimentation was conducted;
-
Amounts spent directly on research and experimentation, as defined in section 174 of the Internal Revenue Code of 1986, in the current income year and in the preceding income year; and
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A completed Form CT-1120RC.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Revenue Services
Taxpayer Services Division
25 Sigourney Street
Hartford CT 06106
860-297-5962 or 1-800-382-9463 (in-state)
REFERENCES: Conn. Gen. Stat. §12-217j, as amended by 1999 Conn. Pub. Acts 173, §38; 26 U.S.C. §174.
Traffic Reduction Programs Credit (REVISED)
Description
A credit may be applied against the Connecticut corporation business tax for corporations which participate in traffic reduction programs in Connecticut in order to achieve the goals of the federal Clean Air Act. To qualify for the credit, the corporation is required to employ 100 or more people.
Credit Percentage
The credit is equal to 50% of the amount spent in Connecticut for the direct costs of traffic reduction programs and services conducted in Connecticut in response to the provisions of Conn. Gen. Stat. §§13b-38o through 13b-38y, inclusive. However, the credit may not exceed $250 per employee for each employee employed in Connecticut who participates in alternative means of commuting pursuant to such traffic reduction programs in the income year, and the maximum credit allowed in the aggregate to all corporations is $1.5 million annually.
Carryforward/Carryback Limitations
No carryforward or carryback is allowed.
How to Apply
A qualified corporation must submit a completed application for the tax credit to the Department of Transportation by July 1. The corporation may not claim the credit on its corporation business tax return unless it has received written notification from the Department of Transportation approving the amount of the credit that may be claimed.
Attachments Required to the Connecticut Corporation Business Tax Return
A copy of the written notification received from the Department of Transportation approving the amount of the credit that may be claimed should be attached to the corporation’s Form CT-1120K, Business Tax Credit Summary or Form CT-1120SK, S Corporation Business Tax Credit Summary.
Where to Obtain Additional Information
Please direct inquiries to:
Department of Transportation
PO Box 317546
2800 Berlin Turnpike
Newington CT 06131-7546
860-594-3492
REFERENCES: Conn. Gen. Stat. §12-217s, as amended by 2000 Conn. Pub. Acts 174, §23; Conn. Agencies Reg. §12-217s-1.
MISSION STATEMENT
The Mission of the Connecticut Department of Revenue Services is to administer the tax laws of the State of Connecticut and collect the tax revenues in the most cost effective manner; achieve the highest level of voluntary compliance through accurate, efficient and courteous customer services; and perform in a manner
which instills public confidence in the integrity and fairness of the state's tax programs.
Special Notice 2000(15), Connecticut Corporation Business Tax Credits, 1999 – 2000 Update
Department of Revenue Services
25 Sigourney Street
Hartford CT 06106
Issued: September 14, 2000