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February 29, 2024

Business groups support R&D tax credit expansion

HBJ Photo | Skyler Frazer Members of the state legislature’s Commerce Committee in 2024.

Business groups in the state widely support a new state legislative proposal that would establish a research and development tax credit for pass-through entities, which would benefit small to midsize Connecticut companies.

What’s in the bill:

Senate Bill 157 would establish a tax credit for research and development expenses of pass-through entities, or S corporations, limited liability companies, and limited liability partnership companies that report their taxes differently than other business types.

The credit would be “equal to 6% of the research and development expenses paid or incurred by a taxpayer during the taxable year,” according to the bill’s current language.

The bill was introduced by the Commerce Committee, which held a public hearing on the proposal Feb. 27.

What’s at stake:

Currently, pass-through entities can’t take advantage of the research and development tax credit because it can only be applied to the corporation tax, which they don’t pay.

Who’s for it:

Business advocates in the state -- including the Connecticut Business & Industry Association (CBIA), Nation Federation of Independent Business (NFIB) and ManufactureCT -- have been pushing for this tax credit expansion for several years.

They argue it would encourage small and midsize companies, manufacturers in particular, to invest in research and development efforts that yield new innovative products and contribute to economic growth.

  • “Many companies in our state, like our manufacturers, rely heavily on being innovative and continuously improving processes and products to compete in a global market,” said Ashley Zane, a lobbyist with the CBIA. “By expanding the R&D tax credit, companies will be able to invest in not only equipment and other efficiencies, but people. The R&D tax credit will help offset the cost of hiring additional engineers, scientists, and other professionals as well as ‘Connecticut-shore’ employees engaging in R&D in other states.” 

Who’s against it:

So far, no one has submitted testimony in opposition of the bill. It hasn’t gotten through the legislature in past years because of concerns of how it would impact tax revenues. 

What’s next:

The bill is currently with the Commerce Committee, which is scheduled to meet again next week.

If the bill is signed into law this session, the tax credit would go into effect Jan. 1, 2025.

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