IP 2006(15), Guide to Connecticut Business Tax Credits · 2 Informational Publication 2006(15),...

Informational Publication 2006(15)Issued: 04/24/07

State of ConnecticutDepartment of Revenue Services

Guide to

Connecticut

Business Tax

Credits

2 Informational Publication 2006(15), Guide to Connecticut Business Tax CreditsIssued: 04/24/07

A Message from the Commissioner:

Informational Publication 2006(15), Guide to Connecticut Business Tax Credits, is published by theDepartment of Revenue Services (DRS) as part of the agency’s goal to provide taxpayers with the mostcomprehensive tax information available. The guide contains information about available tax credits, as wellas updates of credit summaries that identify legislative or policy changes. Please review this informationto see how these credits or changes may impact your business.

The DRS website at www.ct.gov/DRS also contains information about business tax credits, in additionto forms, publications, and details about electronic filing programs for personal and business taxes.

An additional feature of the DRS website is the ability to register for DRS E-News, which providesimportant tax information, updates, and alerts directly to subscribers’ email. DRS E-News also containsa direct link to documents for previewing and printing. Subscribing is free and only takes a few momentsto complete.

DRS Taxpayer Services personnel are available to assist taxpayers by phone, email, or in person,Monday through Friday, 8:30 a.m. to 4:30 p.m. Many tax questions can be answered by using theautomated phone system anytime. Call 1-800-382-9463 (Connecticut calls outside the GreaterHartford calling area only) or 860-297-5962 (from anywhere).

DRS is dedicated to continually improving the way we do business. Please feel free to contact uswith your comments.

Sincerely,

Pam LawCommissioner

3Informational Publication 2006(15), Guide to Connecticut Business Tax CreditsIssued: 04/24/07

Table of Contents

General Information ............................................................................. 5

Credit Summaries .................................................................................. 7

Apprenticeship Training Credit in Manufacturing, Plastics, Plastics-Related,or Construction Trades .................................................................................................................. 9

Clean Alternative Fuel Credit (10% and 50%) for: Vehicles, Equipment,and Related Filling or Recharging Stations ................................................................................ 11

Computer Donation Credit ................................................................................................................... 13

Credits for the Donation of Land ........................................................................................................ 15

Displaced Worker Credits .................................................................................................................... 17

Electronic Data Processing Equipment Property Tax Credit ......................................................... 19

Employer-Assisted Housing Tax Credit ............................................................................................. 21

Enterprise Zone Credit for Qualifying Corporations ........................................................................ 23

Film Production Tax Credit .................................................................................................................. 25

Financial Institutions Credit .................................................................................................................. 27

Fixed Capital Investment Credit .......................................................................................................... 31

Hiring Incentive Tax Credit .................................................................................................................. 33

Historic Homes Rehabilitation Credit ................................................................................................. 35

Historic Structures Rehabilitation Credit ........................................................................................... 37

Housing Program Contribution Credit ................................................................................................ 39

Human Capital Investment Credit ....................................................................................................... 41

Insurance Reinvestment Fund Credit ................................................................................................. 43

Machinery and Equipment Expenditure Credit ................................................................................. 45

Neighborhood Assistance Program Credit ........................................................................................ 47

New Jobs Creation Tax Credit ............................................................................................................ 49

Research and Development Credit for Grants to Institutions of Higher Education ................... 51

Research and Development (Nonincremental) Expenditures Credit ............................................ 53


Research and Experimental (Incremental) Expenditures Credit ................................................... 57

Small Business Guaranty Fee Tax Credit .......................................................................................... 59

Service Facility Credit ........................................................................................................................... 61

50% Manufacturing Facility Credit for Facilities Located in an Enterprise Zone (or Other Area Having Enterprise Zone Level Benefits) ...................................................... 65

25% Manufacturing Facility Credit ..................................................................................................... 69

Traffic Reduction Programs Credit .................................................................................................... 71

Urban and Industrial Site Reinvestment Credit ................................................................................ 73

Connecticut Tax Assistance ..................................................Back Cover


General InformationLimit on CreditsThe amount of tax credits otherwise allowableagainst the corporation business tax and insurancepremiums tax for any income year must not exceed70% of the amount of tax due prior to theapplication of the tax credit.Conn. Gen. Stat. §§12-212a and 12-217zz

No tax credit can be applied against the minimum taxof $250.Conn. Gen. Stat. §12-219

Flow-Through of CorporationBusiness Tax CreditsUnless specifically provided in the tax credit statute, atax credit may only be claimed by the entity that earnedthe credit. Thus, in the case of most tax credits, a taxcredit earned by a partnership in which a corporatetaxpayer is a partner may not be claimed by thecorporation. See Bell Atlantic Nynex Mobile v.Commissioner of Revenue Services, 273 Conn. 240,869 A.2d 611 (2005).

How to Claim Tax Credit(s) Againstthe Connecticut CorporationBusiness Tax� Follow the instructions in the How to Apply

heading for each applicable credit.� Complete the applicable tax credit form.� Report credit amount(s) on Form CT-1120K,

Business Tax Credit Summary.� Enter your carryforward and carryback credits on

Form CT-1120K. A worksheet and all applicableschedules must be attached listing all details ofeach credit item taken for computing the creditcarryforward or carryback balance(s).

Credit SummariesEach section may include the following information:

� Credit Description� Definition(s)� Effective Date(s) - newer credits only� Credit Percentage� Credit Amount� How to Compute the Credit� Credit Carryforward/Carryback Limitations� How to Apply� Attachments Required� Where to Get Additional Information� Statutory and Regulatory Reference(s)� Questions and Answers

Ordering Rules for ClaimingCorporation Business Tax CreditsConn. Gen. Stat. §12-217aa establishes specificordering rules for corporations claiming more than oneConnecticut corporation business tax credit.

The credits must be applied in the following order:

1. Carrybacks expiring first;2. Current year credits that do not have a

carryforward or carryback provision;3. Any credit carryforward expiring first;4. Non-expiring credits.

The Financial Institutions Credit (see Page 27) mustbe claimed before any other credit allowed againstthe Connecticut corporation business tax. Inaddition, the Electronic Data Processing EquipmentProperty Tax Credit (see Page 19) must be claimedafter all other credits allowed against the taxesimposed by Chapters 207, 208, 208a, 209, 210,211, or 212 of the Connecticut General Statuteshave been applied.


Effect on Other DocumentsInformational Publication 2006(15), Guide toConnecticut Business Tax Credits, supersedesInformational Publication 2004(20), Guide toConnecticut Business Tax Credits, which may nolonger be relied upon on or after the issuance dateof this publication.

Effect of This DocumentAn Informational Publication issued by theDepartment of Revenue Services (DRS) addressesfrequently asked questions about a current position,policy, or practice, usually in a less technicalquestion and answer format.

For Further InformationCall DRS during business hours, Monday throughFriday:

� 1-800-382-9463 (Connecticut calls outside theGreater Hartford calling area only); or

� 860-297-5962 (from anywhere).

TTY, TDD, and Text Telephone users onlymay transmit inquiries anytime by calling860-297-4911.

Forms and PublicationsForms and publications are available anytime by:

• Internet: Visit the DRS website atwww.ct.gov/DRS to download and printConnecticut tax forms; or

• Telephone: Call 1-800-382-9463 (Connecticutcalls outside the Greater Hartford calling area only)and select Option 2 from a touch-tone phone, or860-297-4753 (from anywhere).

Paperless Filing/Payment Methods(fast, easy, free, and confidential):• For business returns: Fast-File through the new,

electronic Taxpayer Service Center (TSC) to filesales and use taxes, business use tax, roomoccupancy tax, estimated corporation business tax,business entity tax, attorney occupational tax,nursing home provider fee, admissions and duestax, or withholding tax returns over the Internet.Visit the DRS website at www.ct.gov/DRS andclick on the TSC logo.

• For payment of business taxes other than thoselisted above: Fast-File through the TSC to payyour business taxes over the Internet or by phone.Visit the DRS website at www.ct.gov/DRS andclick on Electronic Services for a list of eligibletaxes. The ACH debit method is used to make thetransfer. No preregistration is required.

• For resident income tax returns: WebFilethrough the new electronic Taxpayer ServiceCenter (TSC) to file personal income taxreturns over the Internet. Visit the DRS websiteat www.ct.gov/DRS and click on the TSC logo.

• For electronic filing of income tax extensions,estimated payments, and for electronic billpayments: WebFile through the TSC toelectronically file personal income tax returnsover the Internet. You can also make anelectronic income tax payment for a prior year.Visit the DRS website at www.ct.gov/DRS andclick on File/Register OnLine.

DRS E-News Service: Get connected to the latestnews from DRS. Receive notification by email ofchanges to legislation, policies, and procedures.DRS E-News is easy to sign up for – visitwww.ct.gov/DRS and follow the directions.Subscription services are available for employer’swithholding tax, Fast-File information, Alerts,News – Press Releases, and Top 100 DelinquencyList.


CreditSummaries


Notes


Apprenticeship TrainingCredit in Manufacturing,Plastics, Plastics-Related, orConstruction Trades

DescriptionA credit against the Connecticut corporation businesstax is available to corporations that employ apprenticeswho are receiving training in the manufacturing,plastics, plastics-related, or construction trades.This credit is designed to encourage the developmentof skilled workers through apprentice training programsin order to counter the current and projected shortageof skilled workers in the manufacturing, plastics,plastics-related, and construction trades.

DefinitionsAs defined in Conn. Agencies Regs. §12-217g-2, anapprenticeship means the establishment andcontinuance, under a qualified program, of one or morefull-time apprentice training positions within a pool ofskilled workers, whereby unskilled or semi-skilledapprentices are employed full-time as apprenticesunder a written agreement.

A qualifying apprenticeship training program isa program that must meet the following requirements:

� The apprenticeship period must be at least4,000 hours (two years) but not more than8,000 hours (four years); and

� Each apprentice must be employed on a full-timebasis, which is defined as working a minimum of120 hours per month.

Wages of pre-apprentices are not eligible for this taxcredit.

Manufacturing TradesCorporations claiming this credit must have a qualifiedapprenticeship training program that is:

� Certified in accordance with regulations adoptedby the Commissioner of the ConnecticutDepartment of Labor (Labor Commissioner);and

� Registered with the Connecticut StateApprenticeship Council established underConn. Gen. Stat. §31-51b.

Some examples of trades eligible for this creditinclude:

� Machinist;� Toolmaker;� Tool and Diemaker;� Tool and Machine Setter; and� Machine Tool Repairer.

Plastics and Plastics-Related TradesCorporations claiming this credit must have a qualifiedapprenticeship training program that is:

� Certified in accordance with regulations adoptedby the Labor Commissioner; and

� Registered with the Connecticut StateApprenticeship Council established underConn. Gen. Stat. §31-51b.

Most apprenticeship programs in the plastics andplastics-related trades qualify for the credit availablefor the manufacturing trades because there is someoverlap between the two trades.

Construction TradesCorporations claiming this credit must have aregistered apprenticeship training program that is:

� At least four years in duration;� Certified in accordance with regulations

adopted by the Labor Commissioner; and� Registered with the Connecticut State

Apprenticeship Council established underConn. Gen. Stat. §31-51b.


Credit AmountManufacturing, Plastics, and Plastics-RelatedTradesFor manufacturing, plastics, and plastics-relatedtrades, the credit against the Connecticut corporationbusiness tax is computed by multiplying the totalnumber of apprentice work hours during the incomeyear by $4. This credit may only be taken duringthe first half of a two-year apprenticeship or thefirst three-quarters of a four-year apprenticeship.

The credit may not exceed 50% of actual wagespaid to each apprentice in the income year or$4,800, whichever is less.

Construction TradesFor construction trades, the credit is computed bymultiplying the total number of hours completedby each apprentice over the first four income yearsof the apprenticeship by $2.

The credit may not exceed 50% of actual wagespaid to each apprentice in the income year or$4,000, whichever is less.

The credit is awarded upon completion andnotification of completion, in the income year inwhich completion and notification of completionof the apprenticeship program occur.

How to Compute the CreditThe Connecticut Department of Labor (CTDOL)will compute the tax credit and issue a CorporateTax Credit Certification letter to the taxpayer.The amount listed on the Corporate Tax CreditCertification letter should be entered on FormCT-1120K, Business Tax Credit Summary.

Carryforward/CarrybackLimitationsNo carryforward or carryback is allowed.

How to ApplyTo apply for the credit, contact CTDOL at860-263-6085 or www.ctapprenticeship.com toobtain an Apprenticeship Tax Credit Worksheetand a Monthly Worksheet. Completed worksheets withverification of hours worked by each apprenticeshould be submitted to:

Connecticut Department of LaborApprenticeship Training Unit200 Folly Brook Blvd.Wethersfield CT 06109

www.ctdol.state.ct.us

Where to Get AdditionalInformationDirect inquires to CTDOL, Apprenticeship TrainingUnit, at the above address and telephone number.

REFERENCES:

Conn. Gen. Sta t . §§12-217g and 31-51b;Conn. Agencies Regs. §§12-217g-1 through12-217g-10


� The purchase and installation of equipmentincorporated into or used in a compressed naturalgas, liquefied petroleum gas or liquefied natural gasfilling station, or electric recharging station forvehicles powered by clean alternative fuel, includingbut not limited to compressors, storage cylinders,associated framing, tubing and fittings, valves andfuel poles, and fuel delivery lines.

DefinitionsIncremental cost means the difference between thepurchase price of a vehicle that is exclusively poweredby a clean alternative fuel and the manufacturer'ssuggested retail price of a comparably equipped vehiclethat is not powered by a clean alternative fuel.

Clean alternative fuel means compressed naturalgas, liquefied petroleum gas, liquefied natural gas, orelectricity when used as a motor vehicle fuel.

Sunset ProvisionConn. Gen. Stat. §12-217i contains a sunset provisionfor this credit. This credit may be claimed for incomeyears beginning prior to January 1, 2008.

How to Compute the CreditCalculate the credit by multiplying all qualifyingalternative fuel vehicles and related equipmentexpenses by the appropriate percentage.

The 10% credit may be applied against any one ofthe following taxes:

� Corporation business tax (Chapter 208);� Air carriers tax (Chapter 209);� Railroad companies tax (Chapter 210);� Community antenna television system

companies tax (Chapter 211); or� Utility companies tax (Chapter 212).

The 50% credit may only be applied against thecorporation business tax (Chapter 208).

Carryforward/CarrybackLimitationsAny unused credit balance may be carried forward inany of three succeeding income years. No carrybackis allowed.

Clean Alternative FuelCredit (10% and 50%) for:Vehicles, Equipment, andRelated Filling or RechargingStations

Description10% CreditA credit may be applied against the Connecticutbusiness taxes imposed by Chapters 208, 209, 210,211, or 212 of the Connecticut General Statutes inan amount equal to 10% of the expenditures paid orincurred for the incremental cost of purchasing avehicle that is exclusively powered by a cleanalternative fuel.

50% CreditA credit may be applied against the Connecticutcorporation business tax (Chapter 208) in an amountequal to 50% of the expenditures paid or incurred forany of the following:

� The construction of any filling station orimprovements to any existing filling station inorder to provide compressed natural gas, liquefiedpetroleum gas, or liquefied natural gas;

� The purchase and installation of conversionequipment incorporated into or used in convertingvehicles powered by any other fuel to eitherexclusive use of clean alternative fuel or dual useof such other fuel and a clean alternative fuel,including but not limited to storage cylinders,cylinder brackets, regulated mixers, fill valves,pressure regulators, solenoid valves, fuel gauges,electronic ignitions, and alternative fuel deliverylines, if such converted vehicles, after conversion,meet generally accepted standards, includingbut not limited to the standards set by the AmericanGas Association, the National Fire ProtectionAssociation, the American National StandardsInstitute, the American Society of TestingMaterials, or the American Society of MechanicalEngineers; or


How to ApplyComplete Form CT-1120 CAF, Clean AlternativeFuel - Vehicles, Equipment, and Related Filling orRecharging Stations Credit, and attach it to FormCT-1120K, Business Tax Credit Summary.

Forms are available anytime from the DRS website atwww.ct.gov/DRS or by calling the DRS FormsUnit at 1-800-382-9463 (Connecticut calls outsidethe Greater Hartford calling area only) and selectingOption 2 from a touch-tone phone, or 860-297-4753(from anywhere).

TTY, TDD, and Text Telephone users only maytransmit inquiries anytime by calling 860-297-4911.

Where to Get AdditionalInformationDirect inquiries to:

Department of Revenue ServicesTaxpayer Services Division25 Sigourney StreetHartford CT 06106

1-800-382-9463 (Connecticut calls outsidethe Greater Hartford calling area only), or860-297-5962 (from anywhere)

www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §12-217i


Computer Donation Credit

DescriptionA credit may be applied against various Connecticutbusiness taxes for the donation of new or usedcomputers to a local or regional board of educationor a public or nonpublic school. The used computersmay not be more than two years old at the time ofdonation.

The amount of the credit granted to any business firmmust not exceed $75,000 annually. The total amountof business credits allowed to all business firms mustnot exceed $1 million in any one fiscal year.

Credit PercentageThe amount of the credit must not exceed 50% ofthe fair market value of the new or used computersat the time of donation.

How to Compute the CreditReport the credit amount on Form CT-1120K,Business Tax Credit Summary.

The credit may be applied to any of the following taxes:

� Insurance companies, hospital and medical servicescorporations taxes (Chapter 207);

� Health care centers tax (Chapter 207);� Corporation business tax (Chapter 208);� Air carriers tax (Chapter 209);� Railroad companies tax (Chapter 210);� Community antenna television system



How to ApplyThe business firm must submit Form CT-CDC,Computer Donation Credit Application, to DRS.Along with the application, the business firm mustprovide a copy of the written agreement betweenthe business firm and the local or regional board ofeducation or public or nonpublic school. Thewritten agreement will provide for the acceptanceof the computers by the board of education or publicor nonpublic school, an acknowledgment that thecomputers are in good working condition, and arequirement that the business firm install, set up, andprovide training to school staff on these computers.

The Commissioner of Revenue Services willreview each application and within 30 days followingits receipt, approve or disapprove the applicationin writing.

Submit Form CT-CDC to:

Department of Revenue ServicesResearch Unit25 Sigourney StreetHartford CT 06106

Where to Get AdditionalInformationDirect inquiries to the above address or contactDRS Research Unit at 860-297-5691. Inquiriesmay also be submitted to the DRS website atwww.ct.gov/DRS



REFERENCES:

Conn. Gen. Stat. §10-228b


Notes


Credits for the Donation ofLand

DescriptionThere are two credits available for the donation ofland:

� A credit for the donation of open space land;and

� A credit for the donation of land foreducational use.

Both credits are in an amount equal to 50% of thevalue of any donated land and both credits may beapplied against the corporation business tax.

DefinitionsDonation of open space land means the value ofany land conveyed without financial consideration,or the value of any discount of the sale price in anysale of land or any interest in land, to the state, apolitical subdivision of the state, or a nonprofitland conservation organization, where the land is tobe permanently preserved as protected open space.

Donation of land for educational use means thevalue of any land or interest in land conveyed withoutfinancial consideration, or the value of any discountof the sale price in any sale of land or interest inland, to any town, city, or borough, whetherconsolidated or unconsolidated, and any schooldistrict or regional school district for the purposesof schools and related facilities.

Use value means the fair market value of land at itshighest and best use, as determined by a certified realestate appraiser.

Credit PercentageThe credit amount available is equal to 50% of anydonation of open space land or 50% of any donationof land for educational use.

Carryforward/CarrybackLimitationsBoth credits may be carried forward for a period of 15successive income years until the credit is fully taken.No carryback is allowed.

How to ApplyComplete Form CT-1120DL, Donation of LandCredit, and attach it to Form CT-1120K, BusinessTax Credit Summary.

Forms are available anytime from the DRS websiteat www.ct.gov/DRS or by calling the DRS FormsUnit at 1-800-382-9463 (Connecticut calls outsidethe Greater Hartford calling area only) and selectingOption 2 from a touch-tone phone, or 860-297-4753(from anywhere).





www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §§12-217dd and 12-217ff


Notes


Displaced Worker Credits

DescriptionThere are two distinct credits available for displacedworkers:

� Displaced Electric Worker CreditA credit against the Connecticut corporationbusiness tax is available to any electric supplierin Connecticut, other than a generation entity oraffiliate of an electric company, that hires adisplaced electric worker for a minimum periodof six months of full-time employment.Conn. Gen. Stat. §12-217bb

� Displaced Worker CreditA credit against the tax imposed under Chapters207, 208, or 212 of the Connecticut GeneralStatutes is available for each displaced workerhired by an employer on or after January 1, 2006.

Conn. Gen. Stat. §12-217hh

DefinitionsAn electric supplier means a facility that provideselectric generation services as defined in Conn. Gen.Stat. §16-1.

A displaced electric worker means any Connecticutemployee, other than an officer or a director, of anelectric company, as defined in Conn. Gen. Stat.§16-1, or a generation entity or affiliate, who has beenterminated as a direct result of the restructuring ofthe electric industry.

A displaced worker is defined as any personemployed in Connecticut whose position wasterminated because of a business restructuring inwhich at least ten employees were terminated andwhose new salary is at least 75% of their previousannual wages or salary. It does not include anyperson whose former employer is or was at the timeof termination a “related person” with respect tothe taxpayer.

Credit AmountDisplaced Electric Worker CreditThe credit amount available to each electric supplieris $1,500 for each displaced electric worker that ishired. The credit is allowed in the income year in whichthe displaced electric worker first completes six fullmonths of full-time employment.

Electric suppliers can only claim credits once for eachdisplaced worker that is hired.

Displaced Worker CreditThe credit amount available for each displaced workerhired by an employer on or after January 1, 2006, is$1,500. The credit is allowed for the income yearduring which the displaced worker first completes 12full months of full-time employment.

The credit may only be taken once with respect to anydisplaced worker, and no taxpayer may claim this creditand the credit under Conn. Gen. Stat. §12-217bb forthe same displaced worker.



How to ApplyComplete Form CT-1120 DWC, Displaced WorkerCredit, and attach it to Form CT-1120K, BusinessTax Credit Summary.






www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §§12-217bb and 16-1; Conn. Gen.Stat. §12-217hh


Electronic Data ProcessingEquipment Property TaxCredit

DescriptionA credit equal to 100% of the personal property taxowed and paid on electronic data processing (EDP)equipment during any income year may be appliedagainst certain Connecticut business taxes.

DefinitionElectronic data processing equipment is definedas computers, printers, peripheral computer equipment,bundled software, and any computer-based equipmentacting as a computer, as defined under Section 168 ofthe Internal Revenue Code of 1986, and any otherequipment reported as a Code 20 on the PersonalProperty Declaration as prescribed by the Secretaryof the Office of Policy and Management accordingto Conn. Gen. Stat. §12-27.

If the EDP equipment is leased, the lessee will beentitled to claim this credit if the lease by its terms oroperation imposes on the lessee the cost of the personalproperty taxes on such equipment. However, thelessor and lessee may elect in writing that the lessormay claim the credit. The lessor will provide a copyof the written election upon the request of theCommissioner of the Department of RevenueServices (DRS).

Credit PercentageThe amount allowed as a credit is 100% of theConnecticut personal property tax owed and paid inany income year on EDP equipment. No credit willbe allowed for any interest or penalty paid.

Rules Relating to OrderingThe credit is applied first against the corporationbusiness tax after all other tax credits have been applied,and then may be applied against any of the followingtaxes:


� Health care centers tax (Chapter 207);� Unrelated business income tax (Chapter 208a);� Air carriers tax (Chapter 209);� Railroad companies tax (Chapter 210);� Community antenna television system


Combined Return FilersIf a taxpayer is filing Form CT-1120CR, CombinedCorporation Business Tax Return, this credit will beallowed on a combined basis so that the EDP equipmentproperty tax credits of each company will be combinedand allowed against the combined tax liability of themembers included in the combined return.

Credits of taxpayers which are only subject to thecorporation business tax must be used prior to creditsof companies included in the combined return whichare also subject to tax under Chapter 207, the healthcare centers tax under Chapter 207, Chapters208a, 209, 210, 211, or 212, of the ConnecticutGeneral Statutes.

Carryforward/CarrybackLimitationsIf the amount of credit allowable in any income yearexceeds the Connecticut corporation business tax andany taxes imposed by Chapter 207, 208a, 209, 210,211, or 212 (after all other credits allowable againstthe taxes have first been applied), then any unusedcredit balance may be carried forward to any of thefive succeeding income years. No carryback is allowed.


How to ApplyComplete Form CT-1120 EDPC, Electronic DataProcessing Equipment Property Tax Credit, andattach it to Form CT-1120K, Business Tax CreditSummary.






www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §12-217t


Employer-Assisted HousingTax Credit

This credit was repealed effective June 7, 2006.

DescriptionThe Employer-Assisted Housing Tax Credit wasformerly allowed against the taxes administeredunder Chapters 207, 208, 209, 210, 211, or 212 ofthe Connecticut General Statutes. Business firmsreceived tax credits equal to the amount contributedinto a revolving loan fund established to provideloans for housing in Connecticut for low and moderateincome employees of the business firm or anysubsidiary of the business firm.

Tax credits earned before the credit was repealed maybe carried forward or back for five succeeding orpreceding income years.

Recapture ProvisionsAny business firm that does not loan at least 60%of the fund's capital within three years after thedate the revolving loan fund is established will berequired to recapture some or all of the previoustax credits claimed. The Connecticut HousingFinance Authority (CHFA) notifies the business firmand DRS that recapture is required, and the businessfirm must recapture the tax credit on the first taxreturn required to be filed on or after the date ofthe CHFA notice.

How to Compute the CreditComplete Form CT-1120 EAH, Employer-AssistedHousing Credit, to claim this credit. Attach FormCT-1120 EAH to Form CT-1120K, Business TaxCredit Summary.




Connecticut Housing Finance AuthorityEmployer Assisted Housing Tax Credit Unit999 West StreetRocky Hill CT 06067-4005

860-721-9501, Ext. 362

www.chfa.org

REFERENCES:

Conn. Gen. Stat. §12-217p


Notes


Enterprise Zone Credit forQualifying Corporations

DescriptionA tax credit administered by the Department ofEconomic and Community Development (DECD)may be applied against the Connecticut corporationbusiness tax by a qualifying corporation establishedin an area designated for enterprise zone levelbenefits and that meets certain employment levels.

DefinitionsQualifying corporation means a corporation that iscreated on or after January 1, 1997, (incorporated onor after the date) in an enterprise zone or other areadesignated as having enterprise zone level benefits,and which either:

� Has 375 or more employees, at least 40% ofwhom:

� Are residents of the municipality in which theenterprise zone is located; and

� Qualify under the federal WorkforceInvestment Act (WIA);

OR

� Has fewer than 375 employees, at least 150 ofwhom:� Are residents of the municipality in which the

enterprise zone is located; and

� Qualify under the federal WIA.

An Enterprise Zone is any area designated by theCommissioner of DECD as an Enterprise Zone.A municipality with a designated Enterprise Zone isdefined as a Targeted Investment Community.Areas that are currently designated as enterprise zonesare situated within the following municipalities:

Bridgeport Meriden NorwichBristol Middletown SouthingtonEast Hartford New Britain StamfordGroton New Haven WaterburyHamden New London WindhamHartford Norwalk

In addition, the following locations are designated ashaving enterprise zone level benefits:

� Enterprise Corridor Zones;� Qualified Manufacturing Plant;� Railroad Depot Zones;� Contiguous Municipality Zone;� Defense Plant Zone; and� Manufacturing Plant Zone.

Enterprise Corridor Zones are located alongRoute 8 in the state’s Naugatuck Valley andInterstate 395 in the eastern region of the state.

The municipalities designated by the Commissionerof DECD as located within Enterprise CorridorZones are:

Ansonia Lisbon SeymourBeacon Falls Naugatuck SpragueDerby Plainfield SterlingGriswold Putnam ThompsonKillingly

A Qualified Manufacturing Plant is a manufacturingfacility designated by the Commissioner of DECD asa Qualified Manufacturing Plant. The benefits availableto an eligible corporation completing an approvedproject in a Qualified Manufacturing Plant are thesame as in an Enterprise Zone and subject to the samequalifying terms and conditions.

A Railroad Depot Zone is an area designated bythe Commissioner of DECD as a Railroad DepotZone. It abuts an active or inactive rail line and containsmanufacturing or warehousing facilities that wereoriginally dependent on railroad access to operate.

The Contiguous Municipality Zone, theManufacturing Plant Zone, and the DefensePlant Zone are areas designated by theCommissioner of DECD as having enterprise zonelevel benefits. The municipalities containing thesezones are not considered to be Targeted InvestmentCommunities. The town of Plainville contains the onlydesignated Contiguous Municipality Zone. The townof Bloomfield contains the only designatedManufacturing Plant Zone. The state’s only DefensePlant Zone is located in Stratford.


Credit PercentageThe credit amount applied against the corporationbusiness tax is equal to:

� 100% of the corporation business tax liabilityin years 1 through 3; and

� 50% of the corporation business tax liabilityin years 4 through 10.


How to ApplyCorporations may call DECD at 860-270-8143 andrequest the Enterprise Zone Program pre-applicationquestionnaire.

Upon review of the completed pre-applicationquestionnaire, a DECD staff representative will contactthe corporation to discuss the program further and toexplain the formal application process. The completionof the initial questionnaire does not constitute a formalapplication for the credit.

Once a formal application is approved, DECD willissue to the corporation Forms UT-4, EligibilityCertificate for Enterprise Zone Benefits, and UT-9,Claim for Corporate Business Tax Credit Under theProvisions of the Enterprise Zone Program.


Department of Economic andCommunity Development505 Hudson StreetHartford CT 06106

860-270-8143

www.ct.gov/ecd

REFERENCES:

Conn. Gen. Stat. §§12-217v, 32-9p, and 32-70


Film Production Tax Credit

A tax credit administered by the ConnecticutCommission on Culture and Tourism (CCT) isavailable for qualified film production expenses.Any eligible production company incurringqualified production expenses or costs in excessof $50,000 may apply for a credit equal to 30% ofqualified production expenses and costs. The taxcredit may be applied against the corporationbusiness tax.

Effective DateEffective July 1, 2006, and applicable to incomeyears beginning on or after January 1, 2006.

DefinitionsEligible production company means a corporation,partnership, limited liability company, or otherbusiness entity engaged in the business of producingqualified productions on a one-time or ongoingbasis, and qualified by the Secretary of the Stateto engage in business in the state.

Production expenses and costs means allexpenditures clearly and demonstrably incurred inthe state in the development, preproduction,production, or post production cost of a qualifiedproduction.

Credit PercentageThe credit is equal to 30% of qualified productionexpenses and costs and must be claimed in theincome year in which final certification is made.

How to ApplyApplications for the tax credit must be made with CCT.Visit CCT's website at www.cultureandtourism.orgfor applications.

An application to earn the tax credit must besubmitted to CCT not later than 90 days after thefirst production expenses and costs are incurred.

Then, not later than 90 days after the last productionexpenses or costs are incurred, the eligible productioncompany applies to CCT for a production taxcredit certificate.

Any credit allowed may be sold, assigned, orotherwise transferred in whole or in part, to one ormore taxpayers provided the taxpayers may claim thecredit only for an income year in which the eligibleproduction company would have been eligible toclaim the credit.

The tax credit must be claimed for the income yearin which final certification is made by CCT.Complete Form CT-1120FP, Film Production TaxCredit, and attach it to Form CT-1120K, BusinessTax Credit Summary.



Carryforward/CarrybackLimitationsAny tax credit not used in the income year for which itis allowed may be carried forward for three succeedingincome years. No carryback is allowed.


Connecticut Commissionon Culture and TourismOne Financial Plaza755 Main StreetHartford CT 06103

860-571-7130

www.cultureandtourism.org

REFERENCES:

Conn. Gen. Stat. §12-217jj


Notes


Financial Institutions Credit

DescriptionA credit that may be applied against the Connecticutcorporation business tax is granted to financialinstitutions that build and occupy a facility located in Connecticut of at least 900,000 square feet, andcreate and maintain an average of 1,200 to 2,000qualified employees in Connecticut. The credit isallowed for ten consecutive years, but this period maybe extended for an additional five years if thetaxpayer employs an average of at least 3,000employees in the income year following the ten yearperiod. The credit is allowed for a maximum of 15consecutive years.

Depending upon the number of qualified employeesemployed by the financial institution, the amountof the credit allowed to an eligible financial institutionvaries from 30% to 50% of its corporation businesstax liability. The aggregate credit is limited to between$72 million and $120 million over the ten-yearperiod for which it is claimed. If the credit is taken forthe additional five-year period, the amount of the creditallowed to an eligible financial institution for years11 through 15 is 25% of its corporation business taxliability, and the total aggregate credit is limited to$145 million over the 15-year period.

The Financial Institutions Credit may be claimed againstthe tax of the combined group in the case of afinancial institution included on a Form CT-1120CR,Combined Corporation Business Tax Return.

The Financial Institutions Credit must be claimed priorto any other credits allowed against the Connecticutcorporation business tax. A taxpayer claiming this creditis not eligible to claim the Fixed Capital InvestmentCredit, Conn. Gen. Stat. §12-217w.

RequirementsAs described below, a financial institution is entitled tothe Financial Institutions Credit if it satisfies certainrequirements during the initial qualified year andsubsequent qualified years.

Initial Qualified Year (Year 1)A financial institution is entitled to the credit if, duringthe initial qualified year, it:

� Constructs a new facility in Connecticut of at least900,000 gross square feet for the exclusive purposeof carrying on the business of a financial institution;

� Obtains a temporary or permanent certificate ofoccupancy for such facility;

� Employs during the income year for which the creditis claimed an average of at least 1,200 to 2,000qualified employees (see Credit Amount,Page 29); and

� Obtains an initial Certificate of Eligibility from theCommissioner of the Department of Economic andCommunity Development (DECD).

In the case of a taxpayer receiving financial assistanceunder Conn. Gen. Stat. §32-236, the initial qualifyingyear is the year in which DECD executes an agreementto provide financial assistance.

Subsequent Qualified Years (Years 2 through 10)A financial institution will continue to be entitled to thecredit if, during the subsequent qualified years, it:

� Continues to employ during the income years forwhich the credit will be claimed an average of 1,200to 2,000 qualified employees (see CreditAmount, Page 29); and

� Obtains an annual eligibility certificate from theCommissioner of DECD.


Additional Qualified Years (Years 11 through 15)A financial institution may claim a credit in years11 through 15 if it:

� Employs an average of at least 3,000 qualifiedemployees in each of years 11 through 15; and

� Has been issued a certificate by the Commissionerof DECD.

DefinitionsFor purposes of this credit, the following definitionsapply:

A financial institution is:

� Any bank, holding company, or out-of-state bank,as defined in Conn. Gen. Stat. §36a-2, and anyout-of-state holding company, as defined in Conn.Gen. Stat. §36a-410; or

� Any establishment described in major group 61 or62 in the Standard Industrial Classification (SIC)Manual, 1987, or in Subsector 522 or 523 in theNorth American Industry Classification System(NAICS), United States, 1997, as engagedprimarily in the extending of credit in the form ofloans or the underwriting, purchase, sale, orbrokerage of securities and other financialcontracts on its own account or for the accountof others, and exchanges, exchangeclearinghouses, and other services allied withthe exchange of securities and commodities ora holding company controlling any suchestablishment.

A qualified employee is an individual whosecompensation is paid within this state and is either:

� Employed directly by the financial institution or arelated person and works an average of at least35 hours per week for at least eight consecutiveweeks; or

� An independent contractor of the financialinstitution or of a related person and works anaverage of at least 35 hours per week for at leasteight consecutive weeks for the financialinstitution or the related person;

OR

� An employee or principal of a company otherthan the financial institution or a related personif:� The individual works an average of at least

35 hours per week for at least eightconsecutive weeks providing services to thefinancial institution or a related person; and

� The company derives at least 80% of itsgross revenues from the financial institution,from one or more related persons, or from acombination.

However, this general definition is subject toseveral limitations (See Conn. Gen. Stat.§12-217u(d)). For example, a qualifiedemployee does not include an individual whowould have satisfied the criteria of a qualified employeebefore the Commissioner of DECD approved thefinancial institution’s proposal to create new positionsin Connecticut.

Compensation is paid within this state if theindividual's service is performed:

� Entirely within the state; or� Both within and outside the state, but the service

performed outside the state is incidental to theindividual’s service within the state.

Special rules apply to determining the number ofqualified employees with respect to any taxpayerwho has received financial assistance under Conn.Gen. Stat. §32-236. (See Conn. Gen. Stat.§12-217u(n)(3)).

A related person means a corporation, limitedliability company, partnership, trust, association,unincorporated organization, or similar organizationthat is controlled by the financial institution.

With respect to a corporation, control meansownership of stock possessing at least 50% of the totalcombined voting power of all classes of stock entitledto vote. With respect to a partnership, association, orsimilar unincorporated organization, control meansownership of at least 50% of the capital or profitsinterest in such partnership or association. With respectto a trust, control means ownership of at least 50%of the beneficial interest in the principal or incomeof such trust. (Ownership is determined as provided


in Section 267(c) of the Internal Revenue Code of1986, as in effect on October 14, 1994, other thanparagraph (3) of that section.)

The average number of qualified employees is thesum of the average of the number of qualifiedemployees:

� Reported on federal Form 941, Employer'sQuarterly Federal Tax Return, of the financialinstitution or a related person;

� Who are included on the quarterly reportsrequired to be submitted to the Commissionerof DECD. Conn. Gen. Stat. §12-217u(g)requires quarterly reports of the number ofindividuals to whom the financial institution or arelated person made payments of $600 ormore that must be reported as provided bySection 6041 of the Internal Revenue Code of1986; and

� Reported on federal Form 941, Employer'sQuarterly Federal Tax Return of thecompany described in Conn. Gen. Stat.§12-217u(d)(1)(c).

Credit AmountDuring the initial and subsequent qualified years,a financial institution that satisfies the aboverequirements will be eligible for the amount of creditindicated below:

Additional Five-Year PeriodIf the financial institution satisfies the requirements forthe additional five-year credit period by employing anaverage of 3,000 or more qualified employees, then itis eligible for a 25% credit for years 11 through 15.The aggregate amount of credit over the 15-year periodmay not exceed $145 million.

How to Compute the CreditFor years one through ten, the amount of the creditallowed to an eligible financial institution varies from30% to 50%, depending upon the number of qualifiedemployees employed by the corporation. The creditmust be taken before any other credits for which thecompany is eligible.


How to ApplyA financial institution that intends to build and occupya facility located in Connecticut of at least 900,000square feet and to create and maintain new jobs inConnecticut should submit a proposal to theCommissioner of DECD. The Commissioner ofDECD, in consultation with the Commissioner ofBanking, and the Commissioner of the Departmentof Revenue Services (DRS), determines whetherthe applicant is eligible for the credit. If the proposalis approved, the Commissioner of DECD will issuean eligibility certificate to the financial institution.


Department of Economicand Community DevelopmentManaging Director, Business RecruitmentDivision505 Hudson StreetHartford CT 06106

860-270-8040

www.ct.gov/ecd

REFERENCES:

Conn. Gen. Sta t . §§12-217u, 36a-2 , and36a-410; 26 U.S.C. §§267(c) and 6041

Percentage ofCorporation

Business Tax ThatMay be Taken

as a Credit

30%

40%

50%

Average Numberof QualifiedEmployees

Employed Duringthe Year

1,200 – 1,599

1,600 – 1,999

2,000 or more

MaximumAggregate Amountof Credit That May

be Taken OverTen Year Period

$72 million

$96 million

$120 million


Notes


Fixed Capital InvestmentCredit

DescriptionA credit may be applied against the Connecticutcorporation business tax for amounts paid or incurredfor fixed capital.

DefinitionsFixed capital means any new tangible personalproperty that meets all of the following criteria:

� It must have a class life of more than four years;� It must have been purchased from someone other

than a related person;� It is not leased to another person within

12 months of purchase; and� It will be held and used in Connecticut by a

corporation in the ordinary course of thecorporation's trade or business in Connecticutfor a period of not less than five full years followingits purchase.

Fixed capital does not include:

� Inventory;� Land;� Buildings or structures; or� Mobile transportation property.

Related person means a corporation, partnership,association, or trust controlled by the corporation;an individual, corporation, partnership, association,or trust that is in control of the corporation; acorporation, partnership, association, or trustcontrolled by an individual, corporation, partnership,association, or trust that is in control of the corporation;or a member of the same controlled group as thecorporation.

With respect to a corporation, control meansownership, directly or indirectly, of stock possessing50% or more of the total combined voting power ofall classes of the stock of the corporation entitled tovote; with respect to a trust, control means ownership,

directly or indirectly, of 50% or more of the beneficialinterest in the principal or income of the trust.(Ownership is determined as provided in Section 267(c)of the Internal Revenue Code of 1986, or anysubsequent corresponding Internal Revenue Code ofthe United States, as from time to time amended, otherthan paragraph (3) of that section.)

Mobile transportation property is any transportequipment designed to move or convey people orproperty from one place to another, including but notlimited to:

� Trucks;� Buses;� Forklifts;� Snowplows; or� Certain construction equipment such as backhoes,

bulldozers, cement mixers, and loaders.

Credit PercentageThe credit percentage is 5%.

Carryforward/CarrybackLimitationsAny tax credit not used during the income year in whichthe acquisition was made may be carried forward tothe next five succeeding income years until the entirecredit is used. No carryback is allowed.

How to ApplyComplete Form CT-1120 FCIC, Fixed CapitalInvestment Credit, and attach it along with anyrequired detailed schedules to Form CT-1120K,Business Tax Credit Summary.




Recapture Provisions� If the fixed capital on account of which a

corporation claimed the credit is not held and usedin Connecticut in the ordinary course of thecorporation's trade or business in Connecticut forthree full years following its acquisition, thecorporation will be required to recapture 100% ofthe amount of the credit allowed on its corporationbusiness tax return required to be filed for the income year immediately succeeding the incomeyear during which the three-year period expires.

� If the fixed capital on account of which acorporation claimed the credit is not held and usedin Connecticut in the ordinary course of thecorporation's trade or business in Connecticut forfive full years following its acquisition, thecorporation will be required to recapture 50% ofthe amount of the credit allowed on its corporationbusiness tax return required to be filed for the incomeyear immediately succeeding the income yearduring which the five-year period expires.

� The recapture provisions do not apply if theproperty that is the subject of the tax credit isreplaced.

� If the recapture amount is not paid when due, it willaccrue interest at 1% per month or fraction of amonth from the due date to the date of payment.

Additional ProvisionCorporations claiming expenditures for the FixedCapital Investment Credit cannot claim or use the sameexpenditures against any other corporation business taxcredit.




www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §12-217w


Hiring Incentive Tax Credit

DescriptionA credit may be applied against the Connecticutcorporation business tax by business firms that hirerecipients of Temporary Family Assistance (TFA).

DefinitionsA qualifying employee is any employee who:

� Is employed not less than 30 hours per week; and� At the time of employment, has been receiving

benefits from the TFA program for more than ninemonths and meets other requirements that theCommissioner of the Connecticut Department ofLabor (CTDOL) may establish in regulationsadopted in accordance with Chapter 54.

Business firm means any business entity authorizedto do business in Connecticut and subject to thecorporation business tax.

Eligibility RequirementsIn order to qualify for this program, a business firmmust:

� Submit an application to the Commissioner ofCTDOL on or after July 1 but not later thanDecember 31;

� Receive reservation approval to hire an eligibleTFA recipient by December 31; and

� Employ a qualifying TFA recipient for a minimumof 30 hours per week for a full calendar month.

Credit AmountA business firm may claim a tax credit on its taxreturn for the income year during which a qualifyingemployee was employed, in the amount of $125for each full month that the employee wasemployed. The maximum credit allowed to all businessfirms in any one fiscal year is $1 million.

No credit will be allowed, with respect to wages paidto any qualifying employee, to any business firm thathas previously been granted a tax credit with respectto wages paid to the same employee.

How to Compute the CreditCalculate the credit on Form CT-1120 HIC, HiringIncentive Tax Credit, by multiplying the number ofcomplete calendar months worked by a qualifyingemployee during the income year by $125. The creditamount reported on Form CT-1120 HIC must beentered on Form CT-1120K, Business Tax CreditSummary.

Carryforward/CarrybackLimitationsAny unused credit balance can be carried forward andapplied to five successive income years. No carrybackis allowed.

How to ApplyForms necessary to apply for the Hiring IncentiveTax Credit are available by contacting CTDOLProgram Support Unit at 860-263-6030. Formsmust be submitted to CTDOL between July 1 andDecember 31 of each year. Applications will beapproved or denied in the order in which theyare received.

Connecticut tax forms are available anytime fromthe DRS website at www.ct.gov/DRS or by calling1-800-382-9463 (Connecticut calls outside theGreater Hartford calling area only) and selectingOption 2 from a touch-tone phone, or 860-297-4753(from anywhere).


Connecticut Department of LaborProgram Support Tax Credit Unit200 Folly Brook Blvd.Wethersfield CT 06109-1114

860-263-6030

REFERENCES:

Conn. Gen. Stat. §12-217y


Notes


Historic Homes RehabilitationCredit

DescriptionA tax credit voucher system administeredby the Connecticut Commission on Culture andTourism (CCT), provides a tax credit for ownersrehabilitating an historic home or taxpayersmaking contributions to qualified rehabilitationexpenditures. The credit may be applied against thetaxes administered under Chapters 207, 208, 209,210, 211, or 212 of the Connecticut General Statutes.

DefinitionsOwner means any taxpayer filing a State ofConnecticut tax return who possesses title to anhistoric home or prospective title to an historichome in the form of a purchase agreement or optionto purchase, or a nonprofit corporation thatpossesses the title or prospective title.

Historic home means a building that:

� Will contain one to four dwelling units of whichat least one unit will be occupied as the principalresidence of the owner for not less than five yearsfollowing the completion of rehabilitation work;

� Is located in a targeted area; and� Is listed individually on the National or State

Register of Historic Places, or located in a districtlisted on the National or State Register of HistoricPlaces, and has been certified by CCT ascontributing to the historic character of the district.

Qualified rehabilitation expenditures means anycosts incurred for the physical construction involvedin the rehabilitation of an historic home, but excludes:

� The owner’s personal labor;� The cost of site improvements, unless to provide

building access to persons with disabilities;� The cost of a new addition, except as may be

required to comply with any provision of the StateBuilding Code or the State Fire Safety Code;

� Any cost associated with the rehabilitation ofan outbuilding, unless such building contributesto the historical significance of the historic home;and

� Any nonconstruction costs such as architecturalfees, legal fees, and financing fees.

Targeted area means:

� A federally designated qualified census tract inwhich 70% or more of the families have a medianincome of 80% or less of the state-wide medianfamily income;

� A state designated and federally approved areaof chronic economic distress; or

� An urban and regional center as identified in theConnecticut Conservation and DevelopmentPolicies Plan.

Qualifying for the CreditPrior to beginning any rehabilitation work on anhistoric home, the owner must submit to CCT:

� A rehabilitation plan for a determination ofwhether the rehabilitation work meets thestandards required; and

� An estimate of the qualified rehabilitationexpenditures.

CCT certifies that the rehabilitation plan conforms tothe standards for approval of the rehabilitation andreserves an allocation for a tax credit equivalent to30% of the projected qualified rehabilitationexpenditures.

Following the completion of the rehabilitation ofan historic home, CCT verifies the owner's compliancewith the rehabilitation plan and issues a tax creditvoucher to either the owner rehabilitating the historichome or to the taxpayer named by the owner ascontributing to the rehabilitation.

The owner is not eligible for a tax credit voucher unlessthe owner incurs qualified rehabilitation expendituresexceeding $25,000. The owner must verify that he orshe will occupy the historic home as his or her primaryresidence for at least five years, or that the owner willconvey the home to a new owner who will occupy thehome as his or her primary residence for at least five


years, or record an encumbrance in favor of thefunding source that will require the owner or owner’ssuccessors to occupy the home for five years.

In no event will any credit allowed exceed $30,000per dwelling unit for an historic home. The aggregateamount of tax credits reserved in any fiscal yearmay not exceed $3 million.

Credit PercentageThe credit is equal to the lesser of 30% of the projectedqualified rehabilitation expenditures or 30% ofthe actual rehabilitation expenditures.

Carryforward/CarrybackLimitationsThe credit may be carried forward for four yearsfollowing the year in which the voucher was issued.No carryback is allowed.

How to ApplyApplications for the tax credit voucher must bemade with CCT. Contact CCT at 860-566-3005,Ext. 317 for application information.

Complete Form CT-1120 HRC, HistoricRehabilitation Credit, and attach it to FormCT-1120K, Business Tax Credit Summary, to claimthis credit.



How to Compute the CreditThe tax credit must be taken by the holder of the taxcredit voucher in the same year in which the voucheris issued.

The amount listed on the tax credit voucher mustbe entered on Form CT-1120 HRC and FormCT-1120K.






Connecticut Commission on Culture and Tourism59 South Prospect StreetHartford CT 06106

860-566-3005 Ext. 317


REFERENCES:

Conn. Gen. Stat. §10-416; Conn. AgenciesRegs. §§10-320j-1 through 10-320j-9


Historic StructuresRehabilitation Credit

DescriptionFor income years beginning on or after January 1,2006, a new tax credit administered by theConnecticut Commission on Culture and Tourism(CCT) is available to owners rehabilitating certifiedhistoric structures for residential use. This creditmay be applied against the taxes administered underChapters 207, 208, 209, 210, 211, or 212 of theConnecticut General Statutes. This credit may beassigned.

DefinitionsOwner means any person, firm, limited liabilitycompany, nonprofit or for-profit corporation, orother business entity which possesses title to anhistoric structure and undertakes the rehabilitation ofthe structure.

Certified historic structure means an historiccommercial or industrial property that:

� Is listed individually on the National or StateRegister of Historic Places; or

� Is located in a district listed on the National orState Register of Historic Places and has beencertified by CCT as contributing to the historiccharacter of the district.

Qualified rehabilitation expenditures mean anycosts incurred for the physical construction involvedin the rehabilitation of a certified historic structurefor residential use, but excludes:

� The owner's personal labor;� The cost of a new addition, except as may be

required to comply with any provision of the StateBuilding Code or the State Fire Safety Code; and

� Any nonconstruction costs such as architecturalfees, legal fees, and financing fees.

Substantial rehabilitation means the qualifiedrehabilitation expenditures of a certified historicstructure that exceed 25% of the assessed value ofthe structure.

Qualifying for the CreditPrior to any rehabilitation work taking place, the ownermust submit a rehabilitation plan to CCT along withan estimate of the qualified expenditures. CCT willcertify the plan and reserve credits equal to 25% of theprojected expenditures, not to exceed $2.7 million. Theaggregate amount of tax credits reserved in anyfiscal year may not exceed $15 million.

Once the substantially rehabilitated structure is placedin service, CCT verifies the owner's compliance withthe rehabilitation plan and issues a credit voucher. Inthe case of projects completed in phases, the tax creditvoucher is prorated to the identifiable portion of thesubstantially rehabilitated building placed in service.

Credit PercentageThe tax credit is equal to the lesser of the tax creditreserved upon certification of the rehabilitationplan or 25% of the actual qualified rehabilitationexpenditures not exceeding $2.7 million.

Carryforward/CarrybackLimitationsThe credit may be carried forward for five yearsfollowing the year in which the voucher was issued.No carryback is allowed.

How to ApplyApplications for the tax credit voucher must bemade with CCT. Contact CCT at 860-566-3005,Ext. 317 for application information.

Complete Form CT-1120 HRC, HistoricRehabilitation Credit, and attach it to FormCT-1120K, Business Tax Credit Summary, toclaim this credit.

Forms are available anytime from the DRS websiteat www.ct.gov/DRS or by calling the DRS FormsUnit at 1-800-382-9463 (Connecticut calls outside theGreater Hartford calling area only) and selectingOption 2 from a touch-tone phone, or 860-297-4753(from anywhere).



How to Compute the CreditThe tax credit must be taken by the holder of the taxcredit voucher in the same year in which the voucher isissued. The amount listed on the tax credit vouchermust be entered on Form CT-1120 HRC and FormCT-1120K.






Connecticut Commissionon Culture and Tourism59 South Prospect StreetHartford CT 06106

860-566-3005 Ext. 317


REFERENCES

Conn. Gen. Stat. §10-416a


Housing ProgramContribution Credit

DescriptionA tax credit voucher system administeredby the Connecticut Housing Finance Authority(CHFA), provides tax credits for cash contributionsmade by business firms to housing programssponsored, developed, or managed by nonprofitcorporations that benefit low and moderate incomeindividuals and families. The credit may be appliedagainst various Connecticut business taxes.

The Housing Program Contribution Credit was createdto encourage cooperation between nonprofit andfor-profit firms to develop affordable housing thatotherwise would not be built. The contributionsprovided by business firms can reduce the amount offinancing a project needs.

DefinitionBusiness firm means any business entity authorizedto do business in Connecticut and subject to any of thefollowing taxes:




Credit PercentageA tax credit voucher may be granted by CHFA in anamount equal to 100% of the cash contribution made.The annual minimum credit allowed to any businessfirm is $250, but there is no annual maximum creditthat may be granted to any business firm. The maximumcredit allowed in the aggregate to all business firms is$10 million. Until November 1 of each year, $2 million

of the total amount of tax credits will be set asidefor the Supportive Housing Pilots Initiative or NextSteps Initiative and $1 million of the total amount ofall tax credits will be set aside for workforce housingto the extent that the applicants are submitted for theannual funding round. In addition, no organizationconducting an eligible housing program mayreceive cash contributions in excess of $500,000in any fiscal year.

How to Compute the CreditThe credit must first be claimed on the tax return forthe business firm's income year during which the cashcontribution was made. Upon verification that thecontribution has been made, CHFA will issue a taxcredit voucher to the business firm. The tax creditvoucher issued by CHFA lists the tax credit amountthat may be claimed.

Carryforward/CarrybackLimitationsThe amount of tax credit that is not used in the incomeyear for which the credit is issued may be carriedforward or back for the five immediately succeeding orpreceding income years until the full credit is taken.

How to ApplyThe amount listed on the tax credit voucher issuedby CHFA must be entered on Form CT-1120 HPC,Housing Program Contribution Credit, and FormCT-1120K, Business Tax Credit Summary.

An application package can be obtained by callingCHFA Tax Credit Unit at 860-721-9501, Ext. 237.

The application information should include:

� The name of the housing program(s) to be funded;� The amount of each cash contribution;� A letter(s) of intent from the business firm to the

nonprofit corporation(s) listing the actual cashamount to be contributed and endorsed; and

� A Certificate of Legal Existence and a Certificateof Incorporation (obtained from the Office ofthe Secretary of the State).


No business firm will receive both the Housing ProgramContribution Credit and the Neighborhood AssistanceAct Credit for the same cash contribution.








Connecticut Housing Finance AuthorityTax Credit Unit999 West StreetRocky Hill CT 06067-4005

860-721-9501 Ext. 237

www.chfa.org

REFERENCES

Conn. Gen. Stat. §8-395; Conn. Agencies Regs.§§8-395-1 through 8-395-10


Human Capital InvestmentCredit

DescriptionA credit may be applied against the Connecticutcorporation business tax for expenditures madeby a corporation for the following types ofhuman capital investments:

� In-state job training of persons employed inConnecticut;

� Work education programs in Connecticut whichinclude but are not limited to programs in publichigh schools and work education-diversifiedoccupation programs;

� Worker training and education of persons employedin Connecticut provided by Connecticut institutionsof higher learning;

� Donations or capital contributions to institutions ofhigher learning in Connecticut for improvements oradvancement of technology, including physical plantimprovements;

� Planning, site preparation, construction, renovation,or acquisition of facilities in Connecticut for thepurpose of establishing a day care facility to be usedprimarily by the children of employees who areemployed in Connecticut;

� Child care subsidies paid to employees employedin Connecticut for child care provided inConnecticut; or

� Contributions made to the Individual DevelopmentAccount Reserve Fund, as defined in Conn. Gen.Stat. §31-51ww.

DefinitionsTraining is the instruction, maintenance, orimprovement of the skills required by the employerfor the proper performance of the employee’sduties that are conducted in Connecticut.

Work education programs include but are not limitedto programs in public high schools and work education-diversified occupation programs.

Expenditures are those amounts paid or incurredfor the income year.

Q & A on the Human CapitalInvestment Credit Applying toIn-State Training of PersonsEmployed in Connecticut:1. Do employees’ salaries while training qualify?

No.2. Can payroll taxes and fringe benefits be

included?No. These expenses are deemed actual employeeexpenses and not training expenses.

3. Does the cost of training materials qualify?Yes, if the training takes place in Connecticut.

4. Does the training facility and depreciationexpense qualify as an eligible trainingexpense?The cost of the training facility in Connecticut isallowed, but depreciation expenses do not qualify.

5. What other expenses qualify?In determining whether certain expenses qualify forthe credit, a distinction must be made between directand indirect expenses. Direct training expensesqualify, but indirect expenses do not qualify. Forexample, if a corporation hires a training instructor,the expenses of the instructor qualify to the extentthat the expenses are directly related to training thatmeets the statutory requirements. Indirect expensessuch as overhead do not qualify.

6. Does the cost of course registration qualify?Yes.

7. Does tuition reimbursement qualify?Yes, but the tuition must be paid to institutions ofhigher learning within Connecticut for training inConnecticut.

8. Do travel costs related to the training qualify?Yes, provided the travel is within Connecticut.


Credit PercentageThe credit percentage is 5% .

Carryforward/CarrybackLimitationsAny credit not used during the income year may becarried forward to the next five succeeding incomeyears until the entire credit is used. No carryback isallowed.

How to ApplyComplete Form CT-1120 HCIC, Human CapitalInvestment Credit, and attach it to Form CT-1120K,Business Tax Credit Summary, along with all requireddetailed schedules.



Additional ProvisionsCorporations claiming expenditures for the HumanCapital Investment Credit cannot claim or use the sameexpenditures against any other corporation businesstax credit.




www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §12-217x


Insurance ReinvestmentFund Credit

DescriptionTax credits are available for investments made in anInsurance Reinvestment Fund that invests inConnecticut companies engaged in an insurancebusiness or providing services to insurance companies.This tax credit is administered by the Department ofEconomic and Community Development (DECD).

At this time all funds are closed and are nolonger open to new investors. No tax credit willbe granted for investments made in an insurancebusiness after December 31, 2015.



� Health care centers tax (Chapter 207);� Corporation business tax (Chapter 208);� Income tax (Chapter 229); or� Surplus lines broker tax (Conn. Gen. Stat.

§38a-743).

Claiming the CreditThe tax credit may only be claimed with respect to anincome year for which a certification of continuedeligibility is issued by DECD to the insurance businessin which the investment was made. In order to obtain acertificate of continued eligibility, the insurancebusiness in which the investment was made mustannually submit the information required by DECDto determine whether the occupancy and employmentrequirements have been met. The certificate ofcontinued eligibility is issued on the first day of thethird month following the close of the insurancebusiness' income year.

The tax credit is claimed by completing Form CT-IRF,Insurance Reinvestment Fund. Attach Form CT-IRFto Form CT-1120K, Business Tax Credit Summary.

The same investment in an insurance business cannot generate tax credits for both the investor and theinsurance business. For example, the investment thatallows an eligible insurance business to qualifyfor the Fixed Capital Investment credit (FormCT-1120 FCIC, Fixed Capital InvestmentCredit) can not also be used to claim theInsurance Reinvestment Fund credit.

The tax credits may be assigned by the taxpayer toanother person provided the person may claim thecredit only with respect to a calendar year for whichthe assigning taxpayer would have been eligible toclaim the credit.

Credit PercentageThe credit is allowable over ten years as follows:

� Income year in which the investment was made andthe two succeeding income years, 0%;

� Third full income year following the year in whichthe investment in the insurance business was madeand the three succeeding income years, 10%; and

� Seventh full income year following the year in whichthe investment in the insurance business was madeand the two succeeding income years, 20%.

How to Compute the CreditComputation procedures can be obtained by callingDECD at 860-270-8128.

Carryforward/CarrybackLimitationsAny unused credit balance may be carried forward forthe five immediately succeeding income years until theentire credit is taken. No carryback is allowed.


Recapture ProvisionA taxpayer must recapture a percentage of the creditallowed for the entire period of eligibility if an investmentis made in an insurance company or in a company thatprovides services to an insurance business if:

� The number of new employees on account of whicha taxpayer claimed the credit decreases to less than25% of its total work force for more than 60 daysduring any of the taxable years for which thecredit is claimed;

� Those employees are not replaced by otheremployees who have not been shifted from anexisting location of the subject insurance businessin Connecticut; and

� The insurance business in which the investment wasmade has relocated to a location outsideConnecticut.

The recapture will not apply and the tax credits maycontinue to be claimed if, for the entire period that thecredit is applicable, the decrease in the percentage oftotal work force employed in Connecticut on a regular,full-time, and permanent basis does not result in anactual decrease in the number of persons employed bythe subject insurance business in Connecticut.

The taxpayer must recapture a percentage of the creditthat is related to an investment in a company that meetsthe requirements provided above as follows:

Year Percentage

Year 4 90%

Year 5 65%

Year 6 50%

Year 7 30%

Year 8 20%

Years 9 and 10 10%

The Commissioner of Revenue Services may recapturethe credit first from any taxpayer who claimed the credit,then from any taxpayer who assigned the credit, andfinally from any fund through which the investment thatgenerated the credit was made.


Department of Economicand Community DevelopmentAttn: Michael Lettieri505 Hudson Street 2nd FloorHartford CT 06106-7107

860-270-8127

www.ct.gov/ecd

REFERENCES:

Conn. Gen. Stat. §38a-88a


Machinery and EquipmentExpenditure Credit

DescriptionA credit against the Connecticut corporation businesstax for expenditures in machinery and equipmentis available to corporations that have no more than 800full-time, permanent employees in Connecticut. Theamount of the credit is based upon a percentage of theincremental increase in expenditures for machineryand equipment acquired for and installed in a facilityin Connecticut that exceeds the amount spent forsuch expenditures in the prior income year.

The credit percentage available depends on the numberof the corporation’s full-time, permanent employeeswhose wages, salaries, or other compensation is paidin Connecticut.

DefinitionsMachinery is the basic machine itself, including all ofits component parts such as belts, pulleys, shafts, movingparts, operating structures, replacement and repair parts,whether purchased separately or in conjunction witha complete machine and regardless of whether themachine or component parts are assembled by thetaxpayer or another related party; and all equipmentor devices used or required to control, regulate, oroperate the machinery, including without limitationcomputers and data processing equipment. Furnitureand fixtures, automobiles, or other property used fortransportation are not machinery.

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

Equipment is a device separate from machinery butessential to the business. Repair and replacement partsfor equipment also qualify for the credit under the sameterms as provided for parts purchased for machinery.Furniture and fixtures, automobiles, constructionequipment, or other property used for transportationare not equipment.

An employee is any individual who, under the usualcommon law rules applicable in determining theemployer-employee relationship, has the status of anemployee.

A full-time employee is any employee whose wages,salaries, or other compensation is paid in Connecticutand whose employment requires an average of 35 hoursor more of service each week for at least eightconsecutive weeks.

Facility means any plant, building, or other realproperty improvement used by the corporation in itstrade or business.

Credit Percentage5% creditA credit equal to 5% of the incremental increase inexpenditures for machinery and equipment is availableif the corporation employed between 251 and 800full-time, permanent employees in Connecticut.

10% creditA credit equal to 10% of the incremental increase inexpenditures for machinery and equipment is availableif the corporation employed not more than 250full-time, permanent employees in Connecticut.

How to Compute the CreditCalculate the credit by multiplying the appropriatepercentage (5% or 10%) by the incremental increasein machinery and equipment expenditures during theincome year over the expenditures incurred duringthe preceding income year.The incremental increase in machinery and equipmentis calculated by including all the prior year'sexpenditures on machinery and equipment withoutregard to whether or not the expenditures were claimedagainst this credit in the prior year.

Carryback/CarryforwardLimitationNo carryforward or carryback is allowed.


How to ApplyComplete Form CT-1120 MEC, Machinery andEquipment Credit.



Attachments RequiredSchedules listing machinery and equipmentexpenditures and verification of the number offull-time employees must be attached to a completedForm CT-1120 MEC. The credit amount reportedon Form CT-1120 MEC must be entered onForm CT-1120K, Business Tax Credit Summary.Form CT-1120 MEC and all schedules must beattached to Form CT-1120K.

Q & A on the Machinery andEquipment Expenditure Credit:1. How is the final number of employees

determined?The final number of employees is determined bytaking the average of the number of full-time,permanent employees in Connecticut that arereported on the corporation's Form CT-941,Connecticut Quarterly Reconciliation ofWithholding, for the income year.

2. Do motor vehicles, mobile transportation, orconstruction equipment (for interior orexterior use) expenses qualify?No. Conn. Gen. Stat. §12-217o requires that themachinery and equipment be installed in afacility in Connecticut.

3. When an asset is traded in, what is thecorporation's expenditure for the asset thatis replaced?The expenditure is the cash paid plus theconsideration received for the asset traded.

4. What amount is taken into account onmachinery and equipment expenditures anddispositions – gross or net purchases?The credit is based on the amounts spent by thecorporation on machinery and equipmentwithout regard to dispositions, reductions for theoriginal tax cost or adjusted tax basis of disposedassets, or consideration received for disposedassets.

5. Do bundled, unbundled, custom, or cannedsoftware expenses qualify?Canned software qualifies if it is preloaded withthe machinery on which it is used. However, customsoftware does not qualify.




www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §12-217o


Neighborhood AssistanceProgram Credit

DescriptionA credit may be applied against various Connecticutbusiness taxes by a business firm that makes individualcash investments of at least $250 to certain communityprograms that have received both municipal and stateapproval.

The cash investments must be made in communityprograms that are proposed and conducted by taxexempt or municipal agencies and must be approvedboth by the municipality in which programs areconducted and DRS.

DefinitionBusiness firm means any business entity authorizedto do business in Connecticut and subject to any of thefollowing taxes:


� Corporation business tax (Chapter 208);� Air carriers tax (Chapter 209);� Railroad companies tax (Chapter 210);� Community antenna television system

companies tax (Chapter 211);� Utility companies tax (Chapter 212); or� Public service companies tax (Chapter 212a).

Examples of Eligible ProgramsNeighborhood AssistancePrograms that furnish financial assistance, labor,material, or technical advice to aid in the physicalimprovement of all or any part of a neighborhood.

Energy ConservationEnergy conservation projects.

Employment and TrainingEmployment and training programs.

Child Care ServicesAny activity that aids in child care services.

Alcohol Abuse ProgramsAny community-based alcoholism prevention ortreatment programs.

Child Day Care FacilitiesAny program directed at the planning, site preparation,construction, renovation, or acquisition of facilities forthe purpose of establishing a child day care facility andfor equipment installed in the facility that is necessaryto operate the facility. The amount of credit allowed toany one business firm for day care facilities cannotexceed $50,000. No credit may be granted under theNeighborhood Assistance Act (NAA) for daycare if ataxpayer is claiming the Human Capital InvestmentCredit for the same expenditures for the same year.

Donation of Money to Open Space AcquisitionFundAny donation of money that is used for the purchaseof land, interest in land, or permanent conservationrestriction on land, which is to be permanentlypreserved as protected open space.

Crime PreventionAny activity that aids in the reduction of crime inConnecticut.

Construction or RehabilitationConstruction or rehabilitation of dwelling units forfamilies of low or moderate income in Connecticut.

Community ServicesAny type of counseling and advice, emergencyassistance, or medical care furnished to individuals orgroups in Connecticut.

Job TrainingAny type of instruction to any person who resides inConnecticut that enables the person to acquirevocational skills to become employable or seek ahigher grade of education.

Credit PercentageThe tax credit amount available is equal to 60% ofthe amount contributed to programs approvedby DRS. Except for the donation of money to an


open space acquisition fund, the business firm’s totalcharitable contributions during a taxable year mustequal or exceed its prior year's charitable contributionsin order to be eligible for the tax credit.

The maximum credit allowed to any business firmis $75,000 annually. A nonprofit organization islimited to receiving $150,000 in contributions inthe aggregate. The maximum credit allowed in theaggregate to all business firms is $5 million inany one fiscal year.

No business firm will receive both the NAA credit andthe Housing Program Contribution Credit for thesame cash contribution.

The NAA credit may be applied to any of thefollowing taxes:


� Corporation business tax (Chapter 208);� Air carriers tax (Chapter 209);� Railroad companies tax (Chapter 210);� Community antenna television systems

companies tax (Chapter 211);� Utility companies tax (Chapter 212); or� Public Service companies tax (Chapter 212a).

Carryforward/CarrybackLimitationsNo carryforward is allowed. Any tax credit that is nottaken in the income year in which the investment wasmade may be carried back to the two immediatelypreceding income years (beginning with the earlier ofthe years).

How to ApplyNon-profits and MunicipalitiesNeighborhood organizations and Connecticutmunicipalities desiring to obtain benefits under theNeighborhood Assistance Act must complete FormNAA-01, Connecticut Neighborhood Assistance Act(NAA) Program Proposal, Parts I, II, and III, andsubmit it to the municipal agency that will be overseeingthe implementation of the proposal. (The overseeingmunicipal agency will then complete Form NAA-01,Part IV and submit it to DRS on or before July 1 ofeach year.)

Business FirmsBusiness firms that wish to make a cash contributionto a qualified community program can obtain a listof approved programs from DRS by September 1of each year. The business firm is required tocomplete Form NAA-02, Connecticut NeighborhoodAssistance Act Business Application, and mail orhand-deliver the form to DRS between September 15through October 1 of each year.

For specific information, call DRS Research Unit at860-297-5687. Application forms and the approvedprograms list are available anytime from the DRSwebsite at www.ct.gov/DRS or by calling the DRSForms Unit at 1-800-382-9463 (Connecticut callsoutside the Greater Hartford calling area only) andselecting Option 2 from a touch-tone phone, or860-297-4753 (from anywhere).


How to Compute the CreditDRS issues a Neighborhood Assistance Programapproval letter to corporations that make qualifyingcontributions. The letter indicates the tax creditamount that may be claimed on the ConnecticutCorporation Business Tax Return. The credit amountmust be entered on Form CT-1120K, Business TaxCredit Summary.


Department of Revenue ServicesNeighborhood Assistance Act ProgramAttn: Research Unit25 Sigourney StreetHartford CT 06106

860-297-5687

www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §§12-631 through 12-638


New Jobs Creation Tax Credit

DescriptionA tax credit is available for the creation of 50 newjobs. The credit is available to any taxpayer that issubject to the insurance premiums tax underChapter 207; the corporation business tax underChapter 208; or the utilities company tax underChapter 212 of the Connecticut General Statutesprovided that the entity was not conductingbusiness in Connecticut prior to its relocation toConnecticut.

Effective DateEffective for income years beginning on or afterJanuary 1, 2006.

DefinitionsA new job is defined as a job which did not existprior to the application and which is filled by anew employee hired by the taxpayer to fill afull-time job.

Relocation to Connecticut means the taxpayercreating the new job must not have been conductingbusiness in Connecticut prior to the taxpayer'sapplication to Department of Economic andCommunity Development (DECD) for an eligibilitycertificate.

New employee means a person hired by the taxpayerto fill a new full-time job. A new employee doesnot include a person who was employed inConnecticut by a related person with respect to thetaxpayer within the prior 12 months.

Full-time job means a job in which the employee ishired to work at least 35 hours per week and doesnot include a temporary or seasonal job.

Credit Percentage

The credit allowed is an amount up to 25% of theincome tax deducted and withheld from the wagesof new employees and paid over to the stateaccording to Chapter 229 of the Connecticut generalstatutes. For each new employee, credits may begranted for five successive years.

How to Compute the Credit

The credit is administered by the Commissioner ofDECD. To be entitled to claim the credit anapplication for an eligibility certificate must besubmitted to DECD. The total amount of creditsgranted to all taxpayers will not exceed $10 millionin any one fiscal year.

Claiming the CreditComplete Form CT-1120 NJC, New Jobs CreationCredit, and attach it to Form CT-1120K, BusinessTax Credit Summary.



Carryforward/CarrybackLimitations

No carryforward or carryback is allowed. The creditis claimed in the income year in which it is earned andany credit not used in a tax year expires.


Recapture Provisions

A taxpayer must recapture a percentage of the creditallowed if:

� The number of new employees on account ofwhich a taxpayer claimed the credit decreases toless than the number for which the commissionerissued an eligibility certificate during any of thefour years succeeding the first full income yearfollowing the issuance of an eligibility certificate;and

� Those employees are not replaced by otheremployees who have not been shifted from anexisting location of the taxpayer or a related personin this state.

The taxpayer will be required to recapture a percentageof the credit as follows:

Year Percentage

Year 1 90%

Year 2 65%

Year 3 50%

Year 4 30%

Where to Get AdditionalInformationDirect inquires to:

Department of Economicand Community Development505 Hudson StreetHartford CT 06106

860-270-8045

www.ct.gov/ecd

REFERENCES:

Conn. Gen. Stat. §12-217ii


Research and DevelopmentCredit for Grants to Institutionsof Higher Education

DescriptionA credit may be applied against the Connecticutcorporation business tax for the incremental increasein amounts spent by a corporation for any grantor combination of grants to any institution ofhigher education in Connecticut made for thepurposes of research and development related toadvancements in technology.

DefinitionsAn institution of higher education is any public ornonprofit institution in Connecticut that:

� Admits regular students having a certificate ofgraduation from high school or equivalentcertificate;

� Is licensed, accredited, or approved by the Boardof Governors of Higher Education to providea program beyond high school education; and

� Provides an educational program in Connecticutfor which it awards a bachelor’s or higherdegree, or provides a program towards gainfulemployment.

Research and development related toadvancements in technology means developmentof new products, development of new uses forexisting products, and improving methods forproducing products.

Research and development related to advancementsin technology does not include:

� Testing or inspection for quality control purposes;� Efficiency surveys, management studies, consumer

surveys or other market research;� Advertising or promotional activities; or� Research in connection with literary, historical, or

similar projects.

Credit PercentageThe credit is equal to 25% of the amount by whichqualifying grants made in the current income yearexceed the average qualifying grants made duringthe three immediately preceding income years.

How to Compute the CreditCalculate the credit by multiplying by 25% theexcess of the current income year's expenditures forresearch and development grants to Connecticutinstitutions of higher education over the averageexpenditures for such grants during the threeimmediately preceding income years.


How to ApplyComplete Form CT-1120GC, Tax Credit for Researchand Development Grants to Institutions of HigherEducation, and attach it to Form CT-1120K, BusinessTax Credit Summary.






www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §12-217l


Notes


Research and Development(Nonincremental)Expenditures Credit

DescriptionA credit may be applied against the Connecticutcorporation business tax for research anddevelopment expenses incurred in Connecticut.

DefinitionResearch and development expenses are thoseexpenses that may be deducted under Section 174of the Internal Revenue Code of 1986, as in effecton May 28, 1993, and basic research payments asdefined under Section 41 of the Internal RevenueCode of 1986, as in effect on May 28, 1993, providedthe expenditures and payments are:

� Paid or incurred for the research andexperimentation and basic research conductedin Connecticut; and

� Not funded, as provided in Section 41(d)(4)(H)of the Internal Revenue Code of 1986, as ineffect on May 28, 1993, by any grant, contract,or otherwise by a person or governmentalentity other than the taxpayer unless the otherperson is included in a combined return with theperson paying or incurring such expenses.

Research and development expenses may include butare not limited to:

� Expenditures incurred in connection with thetaxpayer’s trade or business that represent researchand development costs in the experimental orlaboratory sense;

� All costs incident to the development orimprovement of a product including any pilotmodel, process, formula, invention, technique,patent, or similar property. The product can beused by the corporation in its trade or businessor can be held for sale, lease, or license; or

� Costs of obtaining a patent, such as attorneys’ feesexpended in making and perfecting a patentapplication.

The following are examples of Internal Revenue Codeof 1986, Section 174 expenses that do not qualify:

� Overhead and other expenses, such as generaland administrative expenses that relate to acorporation’s activities as a whole and do notcontribute directly to the research and developmenteffort; or

� The ordinary testing or inspection of materialsor products for quality control, for efficiencysurveys, management studies, consumer surveys,advertising or promotions, for research inconnection with literary, historical, or similarprojects, and the costs of acquiring another’spatent, model, production, or process.

Credit PercentageA tentative credit of 6% is available to a qualifiedsmall business.

A qualified small business is defined as a companythat has gross income for the previous income yearthat does not exceed $100 million and has not metthe gross income test through transactions with arelated person, as defined in Conn. Gen. Stat.§12-217w.

All other companies calculate their credit as providedin the chart below.

Expense Amounts Credit Percentage $50 million or less

more than $50 million but not more than $100 million

more than $100 million but not more than $200 million

more than $200 million

Companies headquartered in an Enterprise Zone,with revenues in excess of $3 billion, employingmore than 2,500 employees, may elect to multiplytheir research and development expenses by 3.5%instead of using the credit percentage listed above.

$5,500,000 + 6% over $200 million

$500,000 + 2% over $50 million

$1,500,000 + 4%over $100 million

1%


Connecticut Wage BaseReductionTaxpayers that pay or incur more than $200 million inresearch and development expenses in an income yearmust reduce their Research and Development Credit ifworkforce reductions exceed certain percentages. Todetermine the extent of workforce reductions, the currentConnecticut wage base is compared to a historicConnecticut wage base determined from the third fullincome year immediately preceding the current incomeyear. The Connecticut wage base is calculated fromthe total wages assigned to Connecticut with exclusionsfor the ten most highly paid executives of the taxpayer.

The Research and Development Credit must be reducedby the following percentages based on the extent of theworkforce reduction from the historic wage base.

How to Compute the CreditThe allowable credit is the lesser of:

� One-third of the amount of the credit allowablefor any income year; or

� The greater of:� 50% of the taxpayer’s tax liability, determined

without regard to any credits allowed byConn. Gen. Stat. §12-217n; or

� The lesser of 200% of the credit otherwiseallowed for the income year or 90% of thetaxpayer’s tax liability, determined withoutregard to any credits allowed by Conn. Gen.Stat. §12-217n.

Any taxpayer also claiming a corporation business taxcredit on Form CT-1120RC, Research andExperimental Expenditures Credit, will reduce theamount of research and development expenses that

might otherwise be taken into account in computing theallowable credit by the amount of the incrementalincrease in research and experimental expenditures, ascomputed on Form CT-1120RC.

Any taxpayer also claiming a corporation businesstax credit on Form CT-1120GC, Tax Credit forResearch and Development Grants to Institutionsof Higher Education, will reduce the amount ofresearch and development expenses that mightotherwise be taken into account in computing theallowable credit by the amount of the incrementalincrease in grants, as computed on Form CT-1120GC.

Calculate the credit by multiplying the amount spenton research and development conducted in Connecticutby the appropriate percentage. The calculationreported on Form CT-1120 RDC, Research andDevelopment Credit, must be entered on FormCT-1120K, Business Tax Credit Summary.

In the case of combined returns, all allowances andlimitations will be made on an aggregate basis for alltaxpayers included in the combined return, provided,the credit attributable to a qualified small businessmay be taken only against the combined tax liabilityattributable to the qualified small business. Theamount of the combined tax for all corporationsproperly included in a combined corporation businesstax return that is attributable to a qualified smallbusiness will be in the same ratio to the combined taxthat the net income apportioned to Connecticut of thequalified small business bears to the net income inthe aggregate of all corporations included in thecombined return. For the purposes of computing thisratio, any net loss apportioned to Connecticut by acorporation included in the combined return willbe disregarded.

Carryforward/CarrybackLimitationsCredits that are allowed but that exceed the limitationamounts may be carried forward to each successiveincome year until such credits are fully taken. Allallowable credits from prior years must be carriedforward and applied before the current year credit maybe taken. No carryback is allowed.

Workforce Wage Base Reduction ReductionPercentage Percentagenot more than 2% 0%

more than 2% but not more than 3% 10%




more than 6% 100%


How to ApplyComplete Form CT-1120 RDC and attach it to FormCT-1120K.



Attachments RequiredThe following information should be attached toForm CT-1120 RDC:

� A full and complete description of the nature of theresearch projects conducted by the companyduring the income year, and the location(s) wherethe research is conducted;

� A full and complete description of the methodsused to obtain the total expenditures and paymentsfor research and experimentation and basicresearch conducted in Connecticut, in accordancewith Conn. Gen. Stat. §12-217n;

� A detailed description of each source of informationused to compute the credit, including the methodsand calculations of expense allocation, if any;and

� The job title and detailed description of eachemployee whose wages are included in the researchexpenditures.

Exchange of Tax Credit forRefundA qualified small business that cannot take this taxcredit in a taxable year in which it could otherwise betaken, as a result of having no tax liability, mayexchange the credit with the State of Connecticut fora credit refund equal to 65% of the value of thecredit or may elect to carry the credit forward asindicated above.

For the purpose of exchanging tax credits, qualifiedsmall business means a company that has grossincome for the previous income year that does not

exceed $70 million and has not met the gross incometest through transactions with a related person, asdefined in Conn. Gen. Stat. §12-217w.

The definition of qualified small business used indetermining whether the taxpayer is eligible for theexchange of this tax credit for a credit refund is differentthan the definition of qualified small business used indetermining if the taxpayer is eligible for a tentativecredit equal to 6% of research and developmentexpenses.

A qualified small business may receive no more than$1,500,000 of credit refund for any one income year.

A qualified small business that reports no net income(prior to the application of net operating losses) orpays either the minimum tax of $250 or the capitalbase tax under Conn. Gen. Stat. §12-219 is permittedto exchange research and development tax credits.

A qualified small business that wishes to exchange taxcredits must complete Form CT-1120 XCH,Application for Exchange of Research andDevelopment or Research and ExperimentalExpenditures Tax Credits by a Qualified SmallBusiness, and submit it with the final tax returnfor the income year. See Conn. Gen. Stat. § 12-217ee.




www.ct.gov/DRS

REFERENCES:

Conn. Gen. Sta t .§§12-217n and 12-217ee;Special Notice 93(21); 26 U.S.C. §§41 and 174


Notes


Research and Experimental(Incremental) ExpendituresCredit

DescriptionA credit may be applied against the Connecticutcorporation business tax for the incremental increase inresearch and experimental expenditures conductedin Connecticut.

Research and experimental expenditures as definedin Section 174 of the Internal Revenue Code of 1986,as amended, include but are not limited to:

� Expenditures incurred in connection with thetaxpayer’s trade or business that represent researchand development costs in the experimental orlaboratory sense;

� All costs incident to the development orimprovement of a product, including any pilotmodel, process, formula, invention, technique,patent, or similar property. The product can beused by the corporation in its trade or business orcan be held for sale, lease, or license; or

� Costs of obtaining a patent, such as attorneys’ feesexpended in making and perfecting a patentapplication.

The following are examples of expenses that do notqualify:

� Overhead and other expenses, such as general andadministrative expenses, that relate to acorporation’s activities as a whole and do notcontribute directly to the research and developmenteffort; or

� The ordinary testing or inspection of materials orproducts for quality control, for efficiency surveys,management studies, consumer surveys,advertising or promotions, for research inconnection with literary, historical, or similarprojects and the costs of acquiring another’spatent, model, production, or process.

Credit PercentageThe credit percentage is 20% of the excess ofresearch and experimental expenditures inConnecticut in the current income year overresearch and experimental expenditures inConnecticut in the preceding income year.

How to Compute the CreditThe amount of the credit is equal to 20% of theamount spent on research and experimentalexpenditures conducted in Connecticut during theincome year that exceeds the amount spent onresearch and experimental expenditures conductedin Connecticut during the preceding income year.The credit amount reported on Form CT-1120RC,Research and Experimental Expenditures Credit,must be entered on Form CT-1120K, Business TaxCredit Summary.

Carryforward/CarrybackLimitationsCorporations are allowed a 15-year creditcarryforward to each successive year until thecredits are fully taken. Previously, only biotechnologycompanies were allowed a 15-year carryforward.No carryback is allowed.

How to ApplyComplete Form CT-1120RC and attach it to FormCT-1120K.




Attachments RequiredThe following information should be attached toForm CT-1120RC:

� A full and complete description of the nature of theresearch projects conducted by the companyduring the income year, and the location(s) wherethe research is conducted;

� A full and complete description of the methods usedto obtain the amount spent directly on research andexperimental expenditures conducted inConnecticut, in accordance with Conn. Gen. Stat.§12-217j;

� A detailed description of each source of informationused to compute the credit, including the methodsand calculations of expense allocation, if any; and

� The job title and detailed description of eachemployee whose wages are included in the researchexpenditures.

Exchange of Tax Credit forRefundA qualified small business that cannot take this taxcredit in a taxable year in which it could otherwise betaken, as a result of having no tax liability, may exchangesuch credit with the State of Connecticut for a creditrefund equal to 65% of the value of the credit or mayelect to carry such credit forward as indicated above.

For the purpose of exchanging tax credits, qualifiedsmall business means a company that has grossincome for the previous income year that does notexceed $70 million and has not met the gross incometest through transactions with a related person, asdefined in Conn. Gen. Stat. §12-217w.

A qualified small business that reports no net income(prior to the application of net operating losses) or payseither the minimum tax of $250 or the capital base taxunder Conn. Gen. Stat. §12-219 is permitted toexchange research and development tax credits.

A qualified small business that wishes to exchange taxcredits must complete Form CT-1120 XCH,Application for Exchange of Research andDevelopment or Research and ExperimentalExpenditures Tax Credits by a Qualified SmallBusiness, and submit it with the final tax return forthe income year. See Conn. Gen. Stat. §12-217ee.




www.ct.gov/DRS

REFERENCES:

Conn. Gen. Sta t . §§12-217j and 12-217ee;26 U.S.C. §174


Small Business GuarantyFee Tax Credit

DescriptionA tax credit is allowed against the Connecticutcorporation business tax in an amount equal to theamount paid during the income year by a smallbusiness to the federal Small Business Administrationas a guaranty fee to obtain guaranteed financing.

DefinitionSmall business means any business entity qualifyingas a small business under 13 CFR Part 121, which hasgross receipts of not more than $5 million for theincome year in which the credit is first allowed.

Credit AmountThe credit is equal to the amount paid during theincome year as a guaranty fee to the federal SmallBusiness Administration.

Carryforward/CarrybackLimitationsAny unused amount of the credit may be carriedforward to any of the four succeeding income years.No carryback is allowed.

How to ApplyComplete Form CT-1120 SBA, Small BusinessAdministration Guaranty Fee Tax Credit, and attachit to Form CT-1120K, Business Tax Credit Summary.






www.ct.gov/DRS

REFERENCES:

Conn. Gen. Stat. §12-217cc


Notes


Service Facility Credit

DescriptionA credit may be applied against the portion of theConnecticut corporation business tax that is allocableto a service facility located outside of an EnterpriseZone in a Targeted Investment Community. Theamount of the credit depends upon the number ofnew employees working at the facility.

The credit is certified by the Department of Economicand Community Development (DECD). To qualify,the taxpayer must contact DECD at 860-270-8143for application procedures.

A service facility located in an Enterprise Zone cannotqualify for this credit, however, it may qualify for the50% or 25% Manufacturing Facility Credit (see Pages65 and 69).

DefinitionsA service facility is defined as any plant, building, orother real property improvement that is constructed,renovated, expanded, or acquired, and that is used forthe following services as further defined by theCommissioner of DECD:

� Depository institutions or nondepository creditinstitutions;

� Finance and insurance;� Holding or other investment offices;� Business services;� Health care and social assistance;� Fishing, hunting, and trapping;� Transportation and warehousing;� Air, water, and other transportation services;� Security and commodity brokers, dealers,

exchanges, and services;� Professional, scientific, and technical services;� Administrative and support services assistance;� Telemarketing, engineering, accounting, research,

management, and related services; or

� Supplying goods or services in the field of computerhardware or software, computer networking,telecommunications, or communications.

For a detailed list of the qualifying servicesectors, see Conn. Agencies Regs. §32-9p-5.

An Enterprise Zone is any area designated by theCommissioner of DECD as an Enterprise Zone. SeePage 65 for a more detailed description.

A Targeted Investment Community is defined as amunicipality that contains an Enterprise Zone.

A new employee is defined as a person hired by thetaxpayer to fill a position for a new job or a personshifted from an existing location of the taxpayeroutside Connecticut to a service facility located inConnecticut, provided the total number of newemployees allowed for purposes of this credit will notexceed the total increase in the taxpayer's employmentin Connecticut. The increase in the taxpayer'semployment will be the difference between thenumber of employees employed in Connecticut atthe time of application for this credit and the highestnumber of employees employed by the taxpayer inConnecticut in the year preceding the taxpayer'sapplication for this credit. To be considered a newemployee, the person's duties in connection with theoperation of the facility must be on a regular, full-time,and permanent basis.

A new job is defined as a job that did not exist in thebusiness of a taxpayer in Connecticut prior to thetaxpayer's application for this credit and that is filled bya new employee. A new job does not include a jobcreated when an employee is shifted from an existinglocation within Connecticut.


Credit PercentagesThere are six different credit percentages as providedin the chart below, to be applied against the portionof the Connecticut corporation business tax that isallocable to the service facility. The percentage variesdepending upon the number of new employeesoccupying the service facility.

Number ofNew Employees Credit

Working at the Facility Percentage

300 – 599 15%

600 – 899 20%

900 – 1,199 25%

1,200 – 1,499 30%

1,500 – 1,999 40%

2,000 or more 50%

How to Compute the CreditThe credit is computed by using the arithmetical meanof two fractions (property and wages) to determine theportion of the corporation business tax liability that isallocable to the Connecticut service facility.

Property (numerator calculation)Determine the average monthly net book value of theConnecticut service facility and the machinery andequipment acquired for and installed therein (withoutreduction for any encumbrance). If the facility is rented,the service facility portion of the numerator is calculatedby multiplying the annual gross rents payable for theservice facility times eight.

Property (denominator calculation)Determine the average monthly net book value of allreal property and machinery and equipment located inConnecticut and the value of all real property andmachinery and equipment rented by the corporationin Connecticut.

Wages (numerator calculation)Determine the wages, salaries, and compensation ofemployees whose positions are directly attributable tothe Connecticut service facility.

An employment position is directly attributable to themanufacturing facility if all of the following are true:

� The work is performed or the base of operations isat the service facility;

� The position did not exist prior to the acquisition,construction, renovation, or expansion of the servicefacility; and

� If not for the acquisition, construction, renovation,or expansion of the service facility, the positionwould not have existed.

Wages (denominator calculation)Determine the wages, salaries, and compensation paidto all Connecticut employees.

The credit period is ten years and begins with the firstfull income year following the year of issuance of theeligibility certificate and continues for the followingnine income years.

If within the ten year period the facility ceases to qualifyas a service facility or the taxpayer ceases to occupythe property, the entitlement to the credit terminatesand there is no pro-rata application of the credit duringthe income year in which the entitlement or occupancyterminates.

The credit is claimed on Form CT-1120SF,Service Facility Credit, and must also be enteredon Form CT-1120K , Business Tax CreditSummary.



How to ApplyA taxpayer may call DECD at 860-270-8143 andrequest the Urban Jobs/Enterprise Zone Programquestionnaire in order to determine whether its servicefacility qualifies for the credit.

Upon review of the completed questionnaire, aDECD staff representative will contact the taxpayerto explain the program and the formal applicationprocess.

Once the formal application is approved, DECDwill issue to the taxpayer Forms UT-4, EligibilityCertificate for Urban Jobs Benefits, and UT-9,Claim for Corporate Business Tax Credit Underthe Provisions of the Enterprise Zone Program.

Where to Get AdditionalInformationDirect any inquiries to:

Department of Economicand Community Development505 Hudson StreetHartford CT 06106-7107

860-270-8143

www.ct.gov/ecd

REFERENCES:

Conn. Gen. Stat. §§12-217e, 32-9p, and 32-70;Conn. Agencies Regs. §32-9p-5


Notes


50% Manufacturing FacilityCredit for Facilities Locatedin an Enterprise Zone (orOther Area Having EnterpriseZone Level Benefits)

DescriptionA credit equal to 50% of the Connecticut corporationbusiness tax allocable to a manufacturingfacility located within a designated Enterprise Zone(or other area designated as having EnterpriseZone level benefits) is available to a manufacturingfacility that meets certain employment criteria. If itdoes not meet the employment criteria, the facilitymay still qualify for the 25% Manufacturing FacilityCredit. (See Page 69.)

The 50% and 25% Manufacturing Facility Creditsare certified by the Department of Economic andCommunity Development (DECD). To qualify foreither credit, taxpayers must contact DECD at860-270-8143, for application procedures.

DefinitionA manufacturing facility is defined as any plant,building, or other real property improvement that isconstructed, renovated, expanded, or acquired and thatis used for one of the following purposes:

� Manufacturing, processing, or assembling of rawmaterials, parts or manufactured products;

� Research and development facilities directly relatedto manufacturing;

� The significant servicing, overhauling or rebuildingof machinery and equipment for industrial use;

� The warehousing and distribution in bulk ofmanufactured products on other than a retail basis(new construction only); or

� Certain service sectors as defined by theCommissioner of DECD in Conn. AgenciesRegs. §32-9p-5.

For a complete definition of a manufacturingfacility, see Conn. Gen. Stat. §32-9p(d).

Employment CriteriaTo qualify for the 50% credit, the corporation must,during the last quarter of its income year, either:

� Employ 150 or more full-time employees who atthe time of employment were:� Residents of the Enterprise Zone (or other

area having Enterprise Zone level benefits;or

� Residents of the municipality who are eligiblefor training under the federal WorkforceInvestment Act (WIA);

OR

� Have 30% or more of its full-time employmentpositions directly attributable to the manufacturingfacility held by employees who at the time ofemployment were:� Residents of the Enterprise Zone (or other

area having Enterprise Zone level benefits);or

� Residents of the municipality who are eligiblefor training under the federal WIA.

Location CriteriaAn Enterprise Zone is any area designated by theCommissioner of DECD as an Enterprise Zone.

Areas that are currently designated as Enterprise Zonesare situated within the following municipalities:

Bridgeport Meriden NorwichBristol Middletown SouthingtonEast Hartford New Britain StamfordGroton New Haven WaterburyHamden New London WindhamHartford Norwalk


A Targeted Investment Community is defined as amunicipality with an Enterprise Zone designatedunder Conn. Gen. Stat. §32-70. A municipality mayhave only one Enterprise Zone. However, a TargetedInvestment Community may, with approval of DECDand if certain conditions are met, designate otherareas within the municipality as having the equivalentof Enterprise Zone level benefits. These designationsinclude:

� Entertainment District. Once a municipality hasbeen designated as having an entertainment district,projects within the Targeted Investment Communitythat are eligible for Enterprise Zone benefits includebut are not limited to facilities producing live orrecorded multimedia, and any support businessneeded to support such projects.

� Qualified Manufacturing Plant. A qualifiedmanufacturing plant is a manufacturing planthaving an area of at least 500,000 square feetoutside of an Enterprise Zone. The Town of Bristoland the City of New Britain are communities thathave facilities with this designation.

� Railroad Depot Zone. A Targeted InvestmentCommunity with an abandoned or underutilizedrailroad depot area, outside of the Enterprise Zone,may qualify as a Railroad Depot Zone. A railroaddepot is an area that abuts an active or inactive railline and contains manufacturing or warehousingfacilities that were originally dependent on railroadaccess to operate. East Hartford, Hamden, andNorwich contain Railroad Depot Zones.

In addition, the following are designated as havingEnterprise Zone level benefits:

� Businesses engaged in biotechnology,pharmaceutical or photonics research,development, or production, with not more than300 employees, located in a municipality with amajor research university with programs inbiotechnology, pharmaceuticals, or photonics,and an Enterprise Zone, are entitled to EnterpriseZone level benefits.

� Enterprise Corridor Zones. Enterprise CorridorZones are located along Route 8 in the state’sNaugatuck Valley and Interstate 395 in the easternregion of the state.

The municipalities designated by the Commissionerof DECD as located within Enterprise CorridorZones are:Ansonia Lisbon SpragueBeacon Falls Naugatuck SterlingDerby Plainfield ThompsonGriswold Putnam TorringtonKillingly Seymour Winchester

� Contiguous Municipality Zone. The Town ofPlainville contains Connecticut's only designatedContiguous Municipality Zone.

� Defense Plant Zone. The Town of Stratfordcontains Connecticut's only Defense Plant Zone.

� Manufacturing Plant Zone. The Town ofBloomfield contains Connecticut's onlydesignated Manufacturing Plant Zone.

Enterprise Corridor Zone municipalities and thosemunicipalities containing a Contiguous MunicipalityZone, a Defense Plant Zone, or a Manufacturing PlantZone are not considered to be Targeted InvestmentCommunities.


How to ApplyA taxpayer may call DECD at 860-270-8143 andrequest the Urban Jobs/Enterprise Zone Programquestionnaire.

Upon review of the completed questionnaire, aDECD staff representative will contact the taxpayerto explain the program and the formal applicationprocess.

If the formal application is approved, DECD willissue to the corporation Forms UT-4, EligibilityCertificate for Enterprise Zone Benefits, and UT-9,Claim for Corporate Business Tax Credit Under theProvisions of the Enterprise Zone Program.


Credit PercentageThe credit amount applied against the Connecticutcorporation business tax is 50% of the tax allocable toany manufacturing facility located within a designatedEnterprise Zone (or other area designated as havingEnterprise Zone level benefits).

To qualify for the 50% credit, the corporation must meetthe employment criteria (see Employment Criteria,Page 65). If the employment criteria is not met, thecorporation is only entitled to a 25% credit.


The tax credit is computed by using the arithmeticalmean of two fractions (property and wages) todetermine the portion of the corporation businesstax liability that is allocable to the Connecticutmanufacturing facility. This portion is thenmultiplied by 50%.Property (numerator calculation)Determine the average monthly net book value of theConnecticut manufacturing facility and the machineryand equipment acquired for and installed therein(without reduction for any encumbrance). If the facilityis rented, the facility portion of the numerator iscalculated by multiplying the annual gross rentspayable for the manufacturing facility times eight.Property (denominator calculation)Determine the average monthly net book value of allreal property and machinery and equipment located inConnecticut and the value of all real property andmachinery and equipment rented by the corporationin Connecticut.Wages (numerator calculation)Determine the wages, salaries, and compensation ofemployees whose positions are directly attributable tothe Connecticut manufacturing facility.

An employment position is directly attributable tothe manufacturing facility if all of the followingare true:

� The work is performed or the base of operations isat the facility;

� The position did not exist prior to the acquisition,construction, renovation, or expansion of thefacility; and

� If not for the acquisition, construction, renovation,or expansion of the facility, the position would nothave existed.



If within the ten year period the facility ceases to qualifyas a manufacturing facility or the taxpayer ceases tooccupy the property, the entitlement to the creditterminates, and there is no pro-rata application of thecredit during the income year in which the entitlementor occupancy terminates.

Complete Form CT-1120 TIC/EZ, ManufacturingFacility Credit for Facilities Located in a TargetedInvestment Community/Enterprise Zone, to computethe credit. Attach Form CT-1120 TIC/EZ to FormCT-1120K, Business Tax Credit Summary.





860-270-8143

www.ct.gov/ecd

REFERENCES:Conn. Gen. Stat. §§12-217e, 32-9p, and32-70


Notes


25% Manufacturing FacilityCredit

DescriptionA credit is available equal to 25% of the Connecticutcorporation business tax allocable to amanufacturing facility located within:

� A Targeted Investment Community; or� An Enterprise Zone (or other area having Enterprise

Zone level benefits).

If the manufacturing facil ity meets theemployment criteria (see Employment Criteria,Page 65), it may be eligible for the 50% credit.

The 25% Manufacturing Facility Credit is certified bythe Department of Economic and CommunityDevelopment (DECD). To qualify for this credit thecorporation must contact DECD at 860-270-8143for application procedures.

DefinitionsA manufacturing facility is any plant, building, orother real property improvement that is constructed,renovated, expanded, or acquired and is used for oneof the following purposes:

� Manufacturing, processing, or assembling of rawmaterials, parts, or manufactured products;

� Research and development facilities directly relatedto manufacturing;

� The significant servicing, overhauling, or buildingof machinery and equipment for industrial use;

� The warehousing and distribution in bulk ofmanufactured products on other than a retail basis(new construction only); or

� Certain service sectors located in an EnterpriseZone, as defined by the Commissioner of DECDin Conn. Agencies Regs. §32-9p-5.

For a complete definition of a manufacturing facility,see Conn. Gen. Stat. §32-9p(d).

A Targeted Investment Community is anymunicipality in Connecticut that contains anEnterprise Zone designated under Conn. Gen. Stat.§32-70.

Credit PercentageThe credit amount applied against the Connecticutcorporation business tax is 25% of the tax allocableto a manufacturing facility that has been certifiedby DECD.


How to ApplyA taxpayer may call DECD at 860-270-8143 andrequest the Urban Jobs/Enterprise Zone Programquestionnaire. Upon review of the completedquestionnaire, a DECD staff representative willcontact the taxpayer to explain the program andthe formal application process.

If the formal application is approved, DECD willissue to the taxpayer Forms UT-4, Eligibility Certificatefor Enterprise Zone Benefits, and UT-9, Claimfor Corporate Business Tax Credit Under theProvisions of the Enterprise Zone Program.


The tax credit is computed by using the arithmeticalmean of two fractions (property and wages) todetermine the portion of the corporation businesstax liability allocable to the Connecticut manufacturingfacility. This portion is then multiplied by 25%.

Property (numerator calculation)Determine the average monthly net book value of theConnecticut manufacturing facility and machinery andequipment acquired for and installed therein (withoutreduction for any encumbrance). If the facility is rented,the facility portion of the numerator is calculated bymultiplying the annual gross rents payable for themanufacturing facility times eight.


Complete Form CT-1120 TIC/EZ, ManufacturingFacility Credit for Facilities Located in a TargetedInvestment Community/Enterprise Zone to computethe credit. Attach Form CT-1120 TIC/EZ to FormCT-1120K, Business Tax Credit Summary.



Where to Get AdditionalInformationDirect any inquiries to:


860-270-8143

www.ct.gov/ecd

REFERENCES:

Conn. Gen. Stat. §§12-217e, 32-9p, and32-70

Property (denominator calculation)Determine the average monthly net book value of allreal property and machinery and equipment located inConnecticut and the value of all real property andmachinery and equipment rented by the corporation inConnecticut.

Wages (numerator calculation)Determine the wages, salaries, and compensation ofemployees whose positions are directly attributable tothe Connecticut manufacturing facility. Wages aredirectly attributable to the manufacturing facility if allof the following are true:

� The work is performed or the base of operations isat the manufacturing facility;

� The position did not exist prior to the acquisition,construction, renovation, or expansion of themanufacturing facility; and

� If not for the acquisition, construction, renovation,or expansion of the manufacturing facility, theposition would not have existed.



If within the ten year period the facility ceases to qualifyas a manufacturing facility or the taxpayer ceases tooccupy the property, the entitlement to the creditterminates, and there is no pro-rata application ofthe credit during the income year in which theentitlement or occupancy terminates.


Traffic Reduction ProgramsCredit

This credit is currently inactive.*

*Effective June 15, 2004, the federal EPA changedthe designation of the area which included all ofthe towns in Fairfield County except Shelton,plus the towns of New Milford and Bridgewater,from a “severe nonattainment area” to a “moderatenonattainment area.”

DescriptionA credit may be applied against the Connecticutcorporation business tax by Connecticut corporationsthat participate in traffic reduction programsin Connecticut established under Conn. Gen. Stat.§13b-38p in order to achieve the goals of the federalClean Air Act. To qualify for the credit, the corporationis required to employ 100 or more employees at awork location located in a severe nonattainmentarea.

DefinitionA severe nonattainment area means the geographicarea in Connecticut designated as such by thefederal Environmental Protection Agency (EPA)according to the federal Clean Air Act.

Credit PercentageThe credit is equal to 50% of the amount spent in asevere nonattainment area for the direct costs of trafficreduction programs and related services conductedin Connecticut in response to the provisions ofConn. Gen. Stat. §§13b-38o, 13b-38p, 13b-38t,13b-38v, and 13b-38x, not to exceed $250 annuallyper employee. The employee must be employed ina severe nonattainment area and participate in analternative means of commuting according to aqualifying traffic reduction program. The maximumcredit allowed in the aggregate to all corporationsis $1.5 million annually.



Department of TransportationPO Box 3175462800 Berlin TurnpikeNewington CT 06131-7546

860-594-2852

www.ct.gov/dot

REFERENCES:

Conn. Gen. Stat. §§12-217s, 13b-38o, 13b-38p,13b-38t, 13b-38v, and 13b-38x; Conn. AgenciesRegs. §12-217s-1


Notes


Urban and Industrial SiteReinvestment Credit

DescriptionA tax credit is available to be applied against variousConnecticut business taxes for investments in eligibleindustrial site investment projects or eligible urbanreinvestment projects. This credit is administeredby the Department of Economic and CommunityDevelopment (DECD).

The Commissioner of DECD may register managersof funds and community development entities createdfor the purpose of investing in eligible urban reinvestmentprojects and eligible industrial site investment projects.Any fund manager or community development entitywill have its primary place of business in Connecticut.Any fund manager registered under Conn. Gen. Stat.§38a-88a (Insurance Reinvestment Fund Credit) onor before July 1, 2000, will be eligible to serve as afund manager.

DefinitionsInvestment means all amounts invested in an eligibleproject by or on behalf of a taxpayer whether directly,through a fund, or through a community developmententity, including but not limited to equity investmentsmade by the taxpayer and loans.

Project means the acquisition, leasing, demolition,remediation, construction, renovation, expansion orother development, or redevelopment of real propertyand improvements within Connecticut, includingfurniture, fixtures, equipment, associated interest andfinancing costs, relocation costs, start-up costs,architectural, engineering, legal and other professionalservices, plans, specifications, surveys, permits, andstudies necessary to the project.

Eligible industrial site investment project meansa project located in Connecticut for the developmentor redevelopment of real property:

� That has been subject to a spill, as defined in Conn.Gen. Stat. §22a-452c, is an establishment, asdefined in Conn. Gen. Stat. §22a-134(3), asamended, or is a facility, as defined in 42 USC§9601(9);

� That, if remediated, renovated, or demolished inaccordance with applicable law and regulations andthe standards of remediation of the Department ofEnvironmental Protection and used for businesspurposes will add significant new economic activityand employment in the municipality in which theinvestment is to be made and will generate additionaltax revenues to Connecticut;

� For which the use of the urban and industrial sitereinvestment program will be necessary to attractprivate investment to the project;

� The business use of which would beeconomically viable and would generate direct andindirect economic benefits to Connecticut thatexceed the amount of the investment during theperiod for which the tax credits are granted; and

� That is, in the judgment of the Commissioner ofDECD, consistent with the strategic economicdevelopment priorities of the state and themunicipality.

Eligible urban reinvestment project means aproject:

� That would add significant new economic activityand new jobs in a new facility in the eligiblemunicipality in which the project is located and willgenerate significant additional tax revenues to thestate or the municipality;

� For which the use of the urban and industrial sitereinvestment program will be necessary to attractprivate investment to an eligible municipality;

� That is economically viable;� For which the direct and indirect economic benefits

to the state outweigh the costs of the project; and


� That is, in the judgment of the Commissioner ofDECD, consistent with the strategic economicdevelopment priorities of the state and themunicipality.

Claiming the CreditAny taxpayer, fund manager, or communitydevelopment entity wishing to make an investmentmust submit a written application to theCommissioner of DECD containing informationconcerning the type of project proposed to be made,its location, the number of jobs to be created orretained, the physical infrastructure that might becreated or preserved, feasibility studies or businessplans for the project, projected revenue the statemight derive as a result of the project, and any otherinformation necessary to demonstrate the financialviability of the project and to demonstrate that theproject will provide net benefits to the economy of,and employment for citizens of, the municipalityand the state. The amount of the investment approvedwill not exceed the amount of state revenue that willbe generated according to the revenue impactassessment prepared by the Commissioner of DECD.

Upon approving an investment, the Commissionerof DECD will issue a certificate of eligibilitycertifying that the applicant has complied withthe provisions of this credit.

The credit may be claimed by a taxpayer who has madean investment:

� Directly of at least $20 million;� Through a fund if the fund has a total asset value

of at least $60 million for the income year inwhich the initial credit is taken and not lessthan three investors who are not related persons; or

� Through a community development entity.

The credit may be assigned but must be claimed by theassignee in the same year that it could have beenclaimed by the taxpayer.

No taxpayer will be eligible for this credit andthe tax credits under Conn. Gen. Stat. §§12-217e(tax credit for manufacturing and service facilities)

or 38a-88a (Insurance Reinvestment Fund) for thesame investment. No two taxpayers will be eligible forany tax credit with respect to the sameinvestment or the same project costs.

The sum of tax credits granted will not exceed$100 million with respect to a single project. The sumof all tax credits granted will not exceed $500 million.However, a taxpayer may apply for a tax creditthat exceeds the limit, and the Commissioner ofDECD will make a recommendation to theGeneral Assembly as to whether or not the creditshould be granted.

The credit may be applied to any combination ofthe following taxes:



companies tax (Chapter 211);� Utility companies tax (Chapter 212);� Public service companies tax (Chapter 212a); or� Surplus lines brokers tax (Conn. Gen. Stat.

§38a-743).

The credit may be claimed on Form CT-UISR, Urbanand Industrial Site Reinvestment Credit. AttachForm CT-UISR to Form CT-1120K, Business TaxCredit Summary.

Credit PercentageThe credit is allowable over ten years as follows:

� The income year in which the investment was madeand the two succeeding income years, 0%;

� The third full income year following the year inwhich the investment was made and the threesucceeding income years, 10%; and

� The seventh full income year following the yearin which the investment was made and the twosucceeding income years, 20%.


Carryforward/CarrybackLimitationsThe tax credit may be carried forward for the fiveimmediately succeeding income years until the full credithas been taken. No carryback is allowed.

Recapture ProvisionNo later than July 1 in each year that credits are claimed,the Commissioner of DECD may conduct a study toestimate the state revenue generated by the eligibleproject in which the investment is made. If the sumof all state revenue actually generated by the project is less than the amount of the total sum of tax creditsclaimed on the date of the analysis, the Commissionerof DECD may determine an applicable recaptureamount and may revoke the certificate of eligibility.

Any taxpayer that has claimed credits related to aproject for which the Commissioner of DECD hasrevoked the certificate of eligibility will be required torecapture its pro-rata share of the recapture amount,and no subsequent credit will be allowed unless thecertificate of eligibility is reinstated. The amount of thecredit that the taxpayer is required to recapture variesdepending upon the year in which the tax credit isrequired to be recaptured as follows:

Year Percentage

Year 4 90%

Year 5 65%

Year 6 50%

Year 7 30%

Year 8 20%

Years 9-10 10%

The Commissioner of Revenue Services may recapturethe credit first from any taxpayer who claimed the credit,then from any taxpayer who assigned the credit, andfinally, from any fund through which the investment wasmade.

How to ApplyApplications and registration information can beobtained by contacting DECD at 860-270-8128.

How to Compute the CreditComputation procedures can be obtained bycalling DECD at 860-270-8128.



860-270-8128

www.ct.gov/ecd

REFERENCES:

Conn. Gen. Stat. §32-9t

State of ConnecticutDepartment of Revenue Services

Mission StatementThe 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.

Connecticut Taxpayer Service Center

Statewide Services

Visit the ConneCT website at www.ct.gov forinformation on statewide services and programs.

Federal Tax Information

For questions about federal taxes, visit www.irs.gov or contact theInternal Revenue Service (IRS) at 1-800-829-1040.

To order federal tax forms, call 1-800-829-3676.

Telephone

Write

Department of Revenue Services

Taxpayer Services Division

25 Sigourney Street

Hartford CT 06106-5032

Walk-InOffices

Free personal taxpayerassistance and forms areavailable by visiting ouroffices, Monday throughFriday, 8:00 a.m. to 5:00p.m. Call CONN-TAX fordirections to DRS offices.If you require speciala c c o m m o d a t i o n s ,please advise the DRSrepresentative.

Location Address Phone*

* All calls are answered at our Customer Service Center, not at the local office.

Bridgeport 10 Middle Street 203-336-7890

Hartford 25 Sigourney Street 860-297-5962

Norwich 2 Cliff Street 860-425-4123

Hamden 3074 Whitney Avenue, Building #2 203-287-8243

Waterbury 55 West Main Street, Suite 100 203-805-6789

Forms and Publications

1-800-382-9463 (Connecticut calls outside the Greater

Hartford calling area only) and select Option 2; or

860-297-4753 (from anywhere).

Department of Revenue Services

Forms Unit

25 Sigourney Street

Hartford CT 06106-5032

Tax Information

For telephone assistance, call our Taxpayer Services

Division at 1-800-382-9463 (Connecticut calls

outside the Greater Hartford calling area only); or

860-297-5962 (from anywhere).

Visit the new Taxpayer Service Center (TSC ) to

file, pay, and review some Connecticut business tax

account information!

Various Connecticut Business tax forms can be

filed, at no charge, by Internet using TSC. Visit the

DRS website at www.ct.gov/DRS for more information about TSC eligible taxes.

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