Connecticut R&D Tax Credit Explained for Businesses

Connecticut and the R&D Tax Credit

State Credit Name: Research and Experimental Expenditures Tax Credit

Expiration Date: Indefinite

Who Can Apply? Corporations and flow-through entities

Credit Carry Forward: Unlimited carry forward for the Non-Incremental credit. 15 year carry forward for the Incremental Credit. There is a mandatory carry forward of of 2/3 of the credit received in the tax year. No carry back.

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Special Notes:
The Incremental Method: 20% of the amount spent by the corporation directly on Connecticut research and experimentation expenditures that exceed expenses in the previous years.

Non-Incremental Method: Businesses with a gross income of less than $100 million from the previous year can take 6% of QRE’s. Large companies are eligible for a graduated percentage. If a company is in an enterprise zone, they can choose to use 3.5%.

Taxpayers can elect both the Incremental and the Non-Incremental methods in a tax year. Taxpayers with a gross revenue of less than $70 million may elect to receive a refund of 65% of unused credits. The credit used in one year is limited to 1/3 of the current year credit received.

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Swanson Reed is one of the only companies in the United States to exclusively focus on R&D tax credit preparation. Swanson Reed’s office location at 1000 Lafayette Boulevard, Bridgeport, Connecticut provides R&D tax credit consulting and advisory services to Bridgeport, New Haven, Stamford, Hartford, Waterbury, Norwalk, Danbury, New Britain, Bristol and Meriden.

If you have any questions or need further assistance, please call or email our local Connecticut Partner on (203) 680-9655.
Feel free to book a quick teleconference with one of our Connecticut R&D tax credit specialists at a time that is convenient for you. Click here for more information about R&D tax credit management and implementation.

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Connecticut R&D Tax Credit Filing Instructions

To claim the Research and Development (R&D) tax credit in Connecticut, businesses must generally engage in qualified research activities within the state, which align with federal R&D definitions. Connecticut offers both incremental and non-incremental R&D tax credits for corporate income tax. Eligible expenses typically include wages for employees directly involved in R&D, costs for supplies used in research, and payments to third parties for qualified research. Businesses can claim a portion of their tentative tax credit when filing their annual corporate income tax return. For the primary claim of the Research and Development Expenditures Tax Credit, businesses must file Form CT-1120 RDC, “Research and Development Expenditures Tax Credit,” with the Connecticut Department of Revenue Services (DRS). Additionally, some businesses, particularly qualified small businesses, may be able to exchange unused credits for a refund by filing Form CT-1120 XCH, “Application for Exchange of Research and Development or Research and Experimental Expenditures Tax Credits by a Qualified Small Business.” It’s crucial to attach detailed schedules identifying the type, amount, and Connecticut location of the R&D expenses.