Chapter 208 - Corporation Business Tax

Sec. 12-214. Imposition of tax. Surcharge. (a)(1) Every mutual savings bank, savings and loan association and every company engaged in the business of carrying passengers for hire over the highways of this state in common carrier motor vehicles doing business in this state, and every other company carrying on, or having the right to carry on, business in this state, including a dissolved corporation which continues to conduct business, except those companies described in subdivision (2) of this subsection, shall pay, annually, a tax or excise upon its franchise for the privilege of carrying on or doing business, owning or leasing property within the state in a corporate capacity or as an unincorporated association taxable as a corporation for federal income tax purposes or maintaining an office within the state, such tax to be measured by the entire net income as herein defined received by such corporation or association from business transacted within the state during the income year and to be assessed for each income year commencing prior to January 1, 1995, at the rate of eleven and one-half per cent, for income years commencing on or after January 1, 1995, and prior to January 1, 1996, at the rate of eleven and one-quarter per cent, for income years commencing on or after January 1, 1996, and prior to January 1, 1997, at the rate of ten and three-fourths per cent, for income years commencing on or after January 1, 1997, and prior to January 1, 1998, at the rate of ten and one-half per cent, for income years commencing on or after January 1, 1998, and prior to January 1, 1999, at the rate of nine and one-half per cent, for income years commencing on or after January 1, 1999, and prior to January 1, 2000, at the rate of eight and one-half per cent, and for income years commencing on or after January 1, 2000, at the rate of seven and one-half per cent. The exemption of companies described in subparagraphs (G) and (H) of subdivision (2) of this subsection shall not be allowed with respect to any income year of any such company commencing on or after January 1, 1998, and any such company claiming such exemption for any income years commencing on or after January 1, 1985, but prior to January 1, 1998, shall be required to file a corporation business tax return in accordance with section 12-222 for each such income year.

(2) The following companies shall be exempt from the tax imposed under this chapter: (A) Insurance companies incorporated or organized under the laws of any other state or foreign government and for income years commencing on or after January 1, 1999, domestic insurance companies; (B) companies exempt by the federal corporation net income tax law, and any company which qualifies as a domestic international sales corporation (DISC), as defined in Section 992 of the Internal Revenue Code and as to which a valid election under subsection (b) of said Section 992 to be treated as a DISC is effective, but excluding companies, other than any company which so qualifies as, and so elects to be treated as, a DISC, which elect not to be subject to such tax under any provision of said Internal Revenue Code other than said subsection (b) of Section 992; (C) companies subject to gross earnings taxes under chapter 210; (D) companies all of whose properties in this state are operated by companies subject to gross earnings taxes under chapter 210; (E) cooperative housing corporations, as defined for federal income tax purposes; (F) any organization or association of two or more persons established and operated for the exclusive purpose of promoting the success or defeat of any candidate for public office or of any political party or question or constitutional amendment to be voted upon at any state or national election or for any other political purpose; (G) any company which is not owned or controlled, directly or indirectly, by any other company, the gross annual revenues of which in the most recently completed year did not exceed one hundred million dollars and which engaged in the research, design, manufacture, sale or installation of alternative energy systems or motor vehicles powered in whole or in part by electricity, natural gas or solar energy including their parts and components, provided at least seventy-five per cent of the gross annual revenues of such company are derived from such research, design, manufacture, sale or installation; (H) any company which engages in the research, design, manufacture or sale in Connecticut of aero-derived gas turbine systems in advanced industrial applications, which applications are developed after October 1, 1992, which are limited to simple-cycle systems, humid air, steam or water injection, recuperation or intercooling technologies, including their parts and components, to the extent that such company's net income is directly attributable to such purposes; (I) any non-United States corporation, which shall be any foreign corporation, as defined in Section 7701(a)(5) of the Internal Revenue Code, whose sole activity in this state during the income year consists of the trading in stocks, securities or commodities for such corporation's own account, as defined in Section 864(b)(2)(A)(ii) of said Internal Revenue Code; and (J) for income years commencing on or after January 1, 2001, S corporations.

(3) (A) A company is carrying on or doing business in this state if it is a general partner of a partnership that does business, owns or leases property or maintains an office in this state. (B) A company is carrying on or doing business in this state if it is a limited partner of a limited partnership, other than an investment partnership, that does business, owns or leases property or maintains an office in this state. (C) A company that is not otherwise carrying on or doing business in this state, either directly or by virtue of being a partner in a partnership described in subparagraph (A) or (B) of this subdivision is not carrying on or doing business in this state solely by virtue of being a limited partner of one or more investment partnerships.

(b) (1) With respect to income years commencing on or after January 1, 2006, and prior to January 1, 2007, any company subject to the tax imposed in accordance with subsection (a) of this section shall pay, except when the tax so calculated is equal to two hundred fifty dollars, for each such income year, an additional tax in an amount equal to twenty per cent of the tax calculated under said subsection (a) for such income year, without reduction of the tax so calculated by the amount of any credit against such tax. The additional amount of tax determined under this subsection for any income year shall constitute a part of the tax imposed by the provisions of said subsection (a) and shall become due and be paid, collected and enforced as provided in this chapter.

(2) (A) With respect to income years commencing on or after January 1, 2009, and prior to January 1, 2012, any company subject to the tax imposed in accordance with subsection (a) of this section shall pay, for each such income year, except when the tax so calculated is equal to two hundred fifty dollars, an additional tax in an amount equal to ten per cent of the tax calculated under said subsection (a) for such income year, without reduction of the tax so calculated by the amount of any credit against such tax. The additional amount of tax determined under this subsection for any income year shall constitute a part of the tax imposed by the provisions of said subsection (a) and shall become due and be paid, collected and enforced as provided in this chapter.

(B) Any company whose gross income for the income year was less than one hundred million dollars shall not be subject to the additional tax imposed under subparagraph (A) of this subdivision. This exception shall not apply to companies filing a combined return for the income year under section 12-223a or a unitary return under subsection (d) of section 12-218d.

(3) (A) With respect to income years commencing on or after January 1, 2012, and prior to January 1, 2018, any company subject to the tax imposed in accordance with subsection (a) of this section shall pay, for each such income year, except when the tax so calculated is equal to two hundred fifty dollars, an additional tax in an amount equal to twenty per cent of the tax calculated under said subsection (a) for such income year, without reduction of the tax so calculated by the amount of any credit against such tax. The additional amount of tax determined under this subsection for any income year shall constitute a part of the tax imposed by the provisions of said subsection (a) and shall become due and be paid, collected and enforced as provided in this chapter.

(B) Any company whose gross income for the income year was less than one hundred million dollars shall not be subject to the additional tax imposed under subparagraph (A) of this subdivision. With respect to income years commencing on or after January 1, 2012, and prior to January 1, 2016, this exception shall not apply to companies filing a combined return for the income year under section 12-223a or a unitary return under subsection (d) of section 12-218d. With respect to income years commencing on or after January 1, 2016, and prior to January 1, 2018, this exception shall not apply to taxable members of a combined group that files a combined unitary tax return.

(4) (A) With respect to income years commencing on or after January 1, 2018, and prior to January 1, 2029, any company subject to the tax imposed in accordance with subsection (a) of this section shall pay, for such income year, except when the tax so calculated is equal to two hundred fifty dollars, an additional tax in an amount equal to ten per cent of the tax calculated under said subsection (a) for such income year, without reduction of the tax so calculated by the amount of any credit against such tax. The additional amount of tax determined under this subsection for any income year shall constitute a part of the tax imposed by the provisions of said subsection (a) and shall become due and be paid, collected and enforced as provided in this chapter.

(c) Each taxable member of a combined group required to file a combined unitary tax return pursuant to section 12-222 shall calculate such member's tax under subsection (a) of this section, by multiplying such member's net income apportioned to this state, as provided in subsection (c) of section 12-218e, by the tax rate set forth in this section.

(1949 Rev., S. 1897; 1951, 1953, June, 1955, S. 1089d; 1957, P.A. 515, S. 1; 649, S. 1; 1959, P.A. 394, S. 1; 510; 1961, P.A. 604, S. 2; February, 1965, P.A. 147; 461, S. 7; 1969, P.A. 674; June, 1969, P.A. 1, S. 13; 1971, P.A. 683, S. 1; June, 1971, P.A. 5, S. 111; 1972, P.A. 271, S. 1; 285, S. 6; P.A. 73-350, S. 6, 27; 73-442, S. 4; P.A. 75-101, S. 1, 2; 75-213, S. 1, 53; P.A. 77-476, S. 1, 3; 77-499, S. 1, 2; P.A. 80-406, S. 4, 5; 80-483, S. 54, 186; P.A. 81-472, S. 15, 159; June Sp. Sess. P.A. 83-1, S. 1, 15; P.A. 85-431, S. 1, 2; 85-474, S. 1, 2; P.A. 88-222, S. 1, 2; P.A. 89-16, S. 1, 31; 89-211, S. 22; 89-251, S. 20, 203; P.A. 90-28, S. 1; June Sp. Sess. P.A. 91-3, S. 99, 168; P.A. 92-152, S. 1; P.A. 93-74, S. 5, 67; 93-199, S. 4, 6; P.A. 94-4, S. 1, 2; May 25 Sp. Sess. P.A. 94-1, S. 45, 130; P.A. 95-160, S. 32, 69; P.A. 96-139, S. 12, 13; 96-197, S. 3, 11; P.A. 98-110, S. 13, 27; 98-244, S. 6, 35; June Sp. Sess. P.A. 98-1, S. 106, 121; P.A. 03-2, S. 32; June 30 Sp. Sess. P.A. 03-1, S. 87; P.A. 05-251, S. 62; P.A. 06-186, S. 66; June Sp. Sess. P.A. 09-3, S. 94; P.A. 11-6, S. 76; P.A. 13-184, S. 73; P.A. 15-244, S. 83, 142; June Sp. Sess. P.A. 15-5, S. 139, 140; P.A. 19-117, S. 341; June Sp. Sess. P.A. 21-2, S. 422; P.A. 22-110, S. 12; P.A. 23-204, S. 347; P.A. 25-168, S. 356.)

History: 1959 acts changed technical language of statute, added exclusion in Subsec. (2) for companies which elect not to be subject to such tax, applied 3.75% rate to net income received in each year as opposed to only those years between 1953 and 1958; 1961 act added reference to chapter 212a, changed tax rate to 5% and changed technical language of statute; 1965 acts added Subdiv. (5) excepting nonprofit cooperative ownership housing corporations when residence is restricted to corporation members and corporation ownership is restricted to residents from payment of tax and restricted 5% tax rates to years beginning before January 1, 1966, and increased rates for years thereafter to 5.25%; 1969 acts specified stock and nonstock corporations in Subdiv. (5) and added Subdiv. (6) excepting cooperative housing corporations where there is no taxable income to corporation from payment of tax, added new Subdivs. (4) and (5) detailing companies formerly mentioned by chapter reference only in Subdiv. (3) and renumbering remaining Subdivs. accordingly, specified companies “not subject to the tax imposed by this part” in Subdiv. (6), formerly (4), changed tax rates in Subdiv. (7), formerly (5), to 5.25% for years beginning after January 1, 1971, and, in the case of companies other than telephone companies, made 5.25% rate applicable to years before January 1, 1969, and set rate for period between that date and January 1, 1971, at 8%; 1971 acts deleted proviso that minimum tax shall not be less than minimum tax under Sec. 12-219, substituted “additional” for “minimum” re tax under Sec. 12-219, deleted Subdiv. (5), renumbering following Subdivs. accordingly, and changed references to 1971 to 1973; 1972 acts included DISC companies in Subdiv. (2), changed tax rates in Subdiv. (7) to 8% without exception and deleted provisions concerning tax on telephone companies; P.A. 73-350 rewrote Subdiv. (1) to apply to insurance companies for years before January 1, 1973, and to insurance companies incorporated or organized under laws of other state or foreign company on or after that date, deleted Subdiv. (4) renumbering subsequent Subdivs. accordingly and added proviso that tax rate as of January 1, 1974, applicable to companies subject to tax under provisions of section will be 2%, effective May 9, 1973, and applicable to income years beginning on or after January 1, 1973; P.A. 73-442 included foreign municipal electric utilities under provisions of section and specifically excluded such utilities in Subdiv. (2) of exception; P.A. 75-101 added new Subdiv. (7) exempting organizations promoting success or defeat of political candidates, parties, questions, constitutional amendments etc. from payment of tax, effective May 12, 1975, and applicable to income years commencing on or after January 1, 1973; P.A. 75-213 changed 8% rate to 10% for income years beginning on or after January 1, 1975; P.A. 77-476 deleted references to foreign municipal electric utilities; P.A. 77-499 required payment for owning or leasing property in state in corporate capacity or as unincorporated association taxable for federal income tax purposes or for maintaining an office in state; P.A. 80-406 added Subdiv. (8) exempting certain companies engaged in research, design, manufacture, sale or installation of alternative energy systems from payment of tax until July 1, 1985; P.A. 80-483 deleted reference to building and loan associations; P.A. 81-472 made technical changes; June Sp. Sess. P.A. 83-1 increased the rate of tax from 10% to 11.5%, effective July 1, 1983, and applicable to income years of corporations commencing on or after January 1, 1983; P.A. 85-431 added provision allowing for retroactive exemption to date of incorporation for certain nonprofit corporations; P.A. 85-474 provided that exemption under Subdiv. (8) for alternative energy system companies shall not be allowed with respect to any income year commencing on or after January 1, 1988, instead of after July 1, 1985; P.A. 88-222 expanded the corporate tax exemption of Subdiv. (8) to include any company which is not owned or controlled, directly or indirectly, by any other company and extended the exemption until January 1, 1993, effective May 28, 1988, and applicable to income years of corporations commencing on or after January 1, 1988; P.A. 89-16 added Subsec. (b) imposing an additional tax as a percentage of the tax under Subsec. (a), effective March 23, 1989, and applicable to income years of corporations commencing on or after January 1, 1989; P.A. 89-211 clarified reference to the Internal Revenue Code of 1986; P.A. 89-251 amended Subsec. (b) by increasing the additional tax imposed under Sec. 1 of P.A. 89-16 from 15% to 20% of the tax calculated under Subsec. (a), effective July 1, 1989, and applicable to income years commencing on or after January 1, 1989; P.A. 90-28 made technical changes in the list of corporations in Subsec. (a) not subject to tax; June Sp. Sess. P.A. 91-3 amended Subsec. (b) to provide that the 20% additional tax would be applicable with respect to income years commencing prior to January 1, 1992, and to impose a 10% additional tax applicable with respect to income years commencing on or after January 1, 1992, and prior to January 1, 1993, effective August 22, 1991, and applicable to income years of corporations commencing on or after January 1, 1991; P.A. 92-152 added new Subsec. (a)(8) exempting corporation engaged in the research, design, manufacture or sale of aero-derived gas turbine systems and extended the exemptions for Subdivs. (7) and (8) until January 1, 1998; P.A. 93-74 added provisions reducing tax rates commencing on and after January 1, 1995, effective May 19, 1993, and applicable to taxable years commencing on and after January 1, 1995; P.A. 93-199 expanded exemption in Subdiv. (7) to include companies engaged in research, design, manufacture, sale or installation of motor vehicles powered by electricity, natural gas or solar energy, effective July 1, 1993, and applicable to taxable years commencing on or after January 1, 1993; P.A. 94-4 in Subdiv. (5) of Subsec. (a) eliminated provision requiring cooperative housing corporations to have no taxable income, effective April 7, 1994, and applicable for income years commencing on or after January 1, 1990; May Sp. Sess. P.A. 94-1 amended Subsec. (a) to conform section with revisions made in Sec. 5 of P.A. 93-74, effective April 7, 1994; P.A. 95-160 amended Subsec. (a) to decrease tax rate from 11% to 10.75% for the income years commencing on or after January 1, 1996, and prior to January 1, 1997, 9.5% for the income years commencing on or after January 1, 1998, and prior to January 1, 1999, 8.5% for the income years commencing on or after January 1, 1999, and prior to January 1, 2000, and 7.5% for income years commencing on or after January 1, 2000, effective June 1, 1995; P.A. 96-139 amended effective date of P.A. 95-160 to clarify applicability to income years commencing on or after January 1, 1996; P.A. 96-197 amended Subsec. (a) to reorganize provisions and added Subdiv. (3) re general partners of a partnership and made other technical changes, effective June 3, 1996, and applicable to income years commencing on or after January 1, 1996; P.A. 98-110 amended Subsec. (a)(2) to exempt domestic insurance companies and make technical changes, effective May 19, 1998, and applicable to income years commencing on or after January 1, 1999; P.A. 98-244 amended Subsec. (a)(2) to exempt S corporations from the minimum tax under Sec. 12-219 for income years commencing on or after January 1, 2001, and to exempt foreign-sourced income of non-United-States corporations from the corporation business tax, effective June 8, 1998, and applicable to income years commencing on or after January 1, 1998; June Sp. Sess. P.A. 98-1 amended Subsec. (a)(2) to add commodities, effective June 24, 1998; P.A. 03-2 added Subsec. (b)(3) re surcharge for the 2003 income year, effective February 28, 2003, and applicable to income years commencing on or after January 1, 2003; June 30 Sp. Sess. P.A. 03-1 amended Subsec. (b) to include in surcharge provided under Subdiv. (3) amounts calculated under Sec. 91 of P.A. 03-1 of the June 30 special session and to add Subdiv. (4) re surcharge for the 2004 income year, effective August 16, 2003, and applicable to income years commencing on or after January 1, 2003; P.A. 05-251 amended Subsec. (b) by deleting references to Sec. 91 of June 30 Sp. Sess. P.A. 03-1 in Subdivs. (3) and (4) and by adding Subdivs. (5) and (6) re surcharge for 2006 and 2007 income years, respectively, effective June 30, 2005, and applicable to income years commencing on or after January 1, 2006; P.A. 06-186 deleted former Subsec. (b)(6) re surcharge in income years commencing on or after January 1, 2007, and prior to January 1, 2008, effective July 1, 2006, and applicable to income years commencing on or after January 1, 2006; June Sp. Sess. P.A. 09-3 amended Subsec. (b) to add Subdiv. (6) re surcharge for 2009, 2010 and 2011 income years and exemption for companies with gross income less than $100,000,000, effective September 9, 2009, and applicable to income years commencing on or after January 1, 2009; P.A. 11-6 amended Subsec. (b) to add Subdiv. (7) re 20% surcharge for 2012 and 2013 income years and exemption for companies with gross income less than $100,000,000, effective May 4, 2011, and applicable to income years commencing on or after January 1, 2011; P.A. 13-184 amended Subsec. (b)(7)(A) to extend surcharge to income years prior to January 1, 2016, effective June 18, 2013; P.A. 15-244 amended Subsec. (b)(7)(A) to extend surcharge to January 1, 2018, amended Subsec. (b)(7)(B) to provide that for income years commencing on or after January 1, 2015, and prior to January 1, 2018, exception shall not apply to taxable members of combined group filing a combined unitary tax return, added Subsec. (b)(8)(A) re surcharge for income year commencing on or after January 1, 2018, and added Subsec. (b)(8)(B) re exemption for companies with gross income less than $100,000,000, and added Subsec. (c) re calculation of tax under Subsec. (a) for taxable member of combined group required to file combined unitary tax return, effective June 30, 2015, and applicable to income years commencing on or after January 1, 2015; June Sp. Sess. P.A. 15-5 changed effective date of P.A. 15-244, S. 83 and 142, from June 30, 2015, and applicable to income years commencing on or after January 1, 2015, to January 1, 2016, and applicable to income years commencing on or after that date, effective June 30, 2015, and amended Subsec. (b)(7)(B) to provide that exception not apply to companies filing combined return or unitary return with respect to income years commencing prior to January 1, 2016, rather than January 1, 2015, and exception not apply to taxable members of a combined group that files a combined unitary tax return with respect to income years commencing on or after January 1, 2016, rather than January 1, 2015, and amended Subsec. (b)(8)(A) to provide that additional tax apply to income years commencing prior to January 1, 2019, effective January 1, 2016, and applicable to income years commencing on or after that date; P.A. 19-117 amended Subsec. (b)(8) to replace “January 1, 2019” with “January 1, 2021”, effective June 26, 2019, and applicable to income years commencing on or after January 1, 2019; June Sp. Sess. P.A. 21-2 amended Subsec. (b)(8) to replace “January 1, 2021” with “January 1, 2023”, effective June 23, 2021; P.A. 22-110 amended Subsec. (b) by deleting former Subdivs. (1) to (4) re income years commencing prior to January 1, 2005, and redesignating existing Subdivs. (5) to (8) as Subdivs. (1) to (4); P.A. 23-204 amended Subsec. (b)(4)(A) to replace “January 1, 2023” with “January 1, 2026”, effective June 12, 2023, and applicable to income years commencing on or after January 1, 2023; P.A. 25-168 amended Subsec. (b)(4)(A) to replace “January 1, 2026” with “January 1, 2029”, effective June 30, 2025.

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Sec. 12-217. Deductions from gross income. Net income and operating loss carry-over of S corporations and combined groups. (a)(1) In arriving at net income as defined in section 12-213, whether or not the taxpayer is taxable under the federal corporation net income tax, there shall be deducted from gross income:

(A) All items deductible under the Internal Revenue Code effective and in force on the last day of the income year, except (i) any taxes imposed under the provisions of this chapter that are paid or accrued in the income year and in the income year commencing January 1, 1989, and thereafter, any taxes in any state of the United States or any political subdivision of such state, or the District of Columbia, imposed on or measured by the income or profits of a corporation that are paid or accrued in the income year, (ii) deductions for depreciation, which shall be allowed as provided in subsection (b) of this section, (iii) deductions for qualified domestic production activities income, as provided in Section 199 of the Internal Revenue Code, and (iv) in the case of any captive real estate investment trust, the deduction for dividends paid provided under Section 857(b)(2) of the Internal Revenue Code; and

(B) Additionally, in the case of a regulated investment company, the sum of (i) the exempt-interest dividends, as defined in the Internal Revenue Code, and (ii) expenses, bond premium, and interest related to tax-exempt income that are disallowed as deductions under the Internal Revenue Code; and

(C) In the case of a taxpayer maintaining an international banking facility as defined in the laws of the United States or the regulations of the Board of Governors of the Federal Reserve System, as either may be amended from time to time, the gross income attributable to the international banking facility, provided no expense or loss attributable to the international banking facility shall be a deduction under any provision of this section; and

(D) Additionally, in the case of all taxpayers, all dividends as defined in the Internal Revenue Code effective and in force on the last day of the income year not otherwise deducted from gross income, including dividends received from a DISC or former DISC as defined in Section 992 of the Internal Revenue Code and dividends deemed to have been distributed by a DISC or former DISC as provided in Section 995 of said Internal Revenue Code, other than thirty per cent of dividends received from a domestic corporation in which the taxpayer owns less than twenty per cent of the total voting power and value of the stock of such corporation; and

(E) Additionally, in the case of all taxpayers, the value of any capital gain realized from the sale of any land, or interest in land, to the state, any political subdivision of the state, or to any nonprofit land conservation organization where such land is to be permanently preserved as protected open space or to a water company, as defined in section 25-32a, where such land is to be permanently preserved as protected open space or as Class I or Class II water company land; and

(F) In the case of a manufacturer, the amount of any contribution to a manufacturing reinvestment account established pursuant to section 32-9zz in the income year that such contribution is made to the extent not deductible for federal income tax purposes; and

(G) The amount of any contribution made on or after December 23, 2017, by the state of Connecticut or a political subdivision thereof to the extent included in a company's gross income under Section 118(b)(2) of the Internal Revenue Code; and

(H) In the case of a taxpayer licensed under the provisions of chapter 420f or 420h, the amount of ordinary and necessary expenses that would be eligible to be claimed as a deduction for federal income tax purposes under Section 162(a) of the Internal Revenue Code but that are disallowed under Section 280E of the Internal Revenue Code because marijuana is a controlled substance under the federal Controlled Substance Act.

(2) (A) No deduction shall be allowed for (i) expenses related to dividends that are allowable as a deduction or credit under the Internal Revenue Code, and (ii) federal taxes on income or profits, losses of other calendar or fiscal years, retroactive to include all calendar or fiscal years beginning after January 1, 1935, interest received from federal, state and local government securities, if any such deductions are allowed by the federal government.

(B) For purposes of this subdivision, expenses related to dividends shall equal five per cent of all dividends received by a company during an income year. The net income associated with the disallowance of expenses related to dividends shall be apportioned, if the company conducts business within and without the state or is required to apportion its income under section 12-218b, in accordance with this chapter.

(3) Notwithstanding any provision of this section to the contrary, no dividend received from a real estate investment trust shall be deductible under this section by the recipient unless the dividend is: (A) Deductible under Section 243 of the Internal Revenue Code; (B) received by a qualified dividend recipient from a qualified real estate investment trust and, as of the last day of the period for which such dividend is paid, persons, not including the qualified dividend recipient or any person that is either a related person to, or an employee or director of, the qualified dividend recipient, have outstanding cash capital contributions to the qualified real estate investment trust that, in the aggregate, exceed five per cent of the fair market value of the aggregate real estate assets, valued as of the last day of the period for which such dividend is paid, then held by the qualified real estate investment trust; or (C) received from a captive real estate investment trust that is subject to the tax imposed under this chapter. For purposes of this section, “related person” has the same meaning as provided in section 12-217ii, “real estate assets” has the same meaning as provided in Section 856 of the Internal Revenue Code, “qualified dividend recipient” means a dividend recipient who has invested in a qualified real estate investment trust prior to April 1, 1997, and “qualified real estate investment trust” means an entity that both was incorporated and had contributed to it a minimum of five hundred million dollars' worth of real estate assets prior to April 1, 1997, and that elects to be a real estate investment trust under Section 856 of the Internal Revenue Code prior to April 1, 1998.

(4) Notwithstanding any provision of this section:

(A) Any excess of the deductions provided in this section for any income year commencing on or after January 1, 1973, over the gross income for such year or the amount of such excess apportioned to this state under the provisions of this chapter, shall be an operating loss of such income year and shall be deductible as an operating loss carry-over for operating losses incurred prior to income years commencing January 1, 2000, in each of the five income years following such loss year; for operating losses incurred in income years commencing on or after January 1, 2000, and prior to January 1, 2025, in each of the twenty income years following such loss year; and for operating losses incurred in income years commencing on or after January 1, 2025, in each of the thirty income years following such loss year; except that:

(i) For income years commencing prior to January 1, 2015, the portion of such operating loss that may be deducted as an operating loss carry-over in any income year following such loss year shall be limited to the lesser of (I) any net income greater than zero of such income year following such loss year, or in the case of a company entitled to apportion its net income under the provisions of this chapter, the amount of such net income that is apportioned to this state pursuant thereto, or (II) the excess, if any, of such operating loss over the total of such net income for each of any prior income years following such loss year, such net income of each of such prior income years following such loss year for such purposes being computed without regard to any operating loss carry-over from such loss year allowed under this subparagraph and being regarded as not less than zero, and provided further the operating loss of any income year shall be deducted in any subsequent year, to the extent available for such deduction, before the operating loss of any subsequent income year is deducted;

(ii) For income years commencing on or after January 1, 2015, the portion of such operating loss that may be deducted as an operating loss carry-over in any income year following such loss year shall be limited to the lesser of (I) fifty per cent of net income of such income year following such loss year, or in the case of a company entitled to apportion its net income under the provisions of this chapter, fifty per cent of such net income that is apportioned to this state pursuant thereto, or (II) the excess, if any, of such operating loss over the operating loss deductions allowable with respect to such operating loss under this subparagraph for each of any prior income years following such loss year, such net income of each of such prior income years following such loss year for such purposes being computed without regard to any operating loss carry-over from such loss year allowed under this subparagraph and being regarded as not less than zero, and provided further the operating loss of any income year shall be deducted in any subsequent year, to the extent available for such deduction, before the operating loss of any subsequent income year is deducted; and

(iii) If a combined group so elects, the combined group shall relinquish fifty per cent of its unused operating losses incurred prior to the income year commencing on or after January 1, 2015, and before January 1, 2016, and may utilize, for income years commencing prior to January 1, 2025, the remaining operating loss carry-over without regard to the limitations prescribed in subparagraph (A)(ii) of this subdivision. The portion of such operating loss carry-over that may be deducted shall be limited to the amount required to reduce a combined group's tax under this chapter, prior to surtax and prior to the application of credits, to two million five hundred thousand dollars in any income year commencing on or after January 1, 2015, and prior to January 1, 2025. The combined group, or any member thereof, shall make such election on its return for the income year beginning on or after January 1, 2015, and before January 1, 2016, by the due date for such return, including any extensions. Only combined groups with unused operating losses in excess of six billion dollars from income years beginning prior to January 1, 2013, may make the election prescribed in this clause. Any combined group that made the election pursuant to this clause shall recalculate its remaining operating loss carry-over on the return it files under this chapter for the income year commencing on or after January 1, 2025, and prior to January 1, 2026, as if such combined group had not been required to relinquish fifty per cent of its unused net operating loss carry-over to make the election under this clause. Such recalculated remaining operating losses may be utilized in income years commencing on or after January 1, 2025, subject to the provisions of this chapter, including, but not limited to, the limitation prescribed in subparagraph (A)(ii) of this subdivision and the period of time prescribed in this subparagraph, based upon when such losses were incurred, to claim such deductions; and

(B) Any net capital loss, as defined in the Internal Revenue Code effective and in force on the last day of the income year, for any income year commencing on or after January 1, 1973, shall be allowed as a capital loss carry-over to reduce, but not below zero, any net capital gain, as so defined, in each of the five following income years, in order of sequence, to the extent not exhausted by the net capital gain of any of the preceding of such five following income years; and

(C) Any net capital losses allowed and carried forward from prior years to income years beginning on or after January 1, 1973, for federal income tax purposes by companies entitled to a deduction for dividends paid under the Internal Revenue Code other than companies subject to the gross earnings taxes imposed under chapters 211 and 212, shall be allowed as a capital loss carry-over.

(5) This section shall not apply to a life insurance company as defined in the Internal Revenue Code effective and in force on the last day of the income year. For purposes of this section, the unpaid loss reserve adjustment required for nonlife insurance companies under the provisions of Section 832(b)(5) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, shall be applied without making the adjustment in Subparagraph (B) of said Section 832(b)(5).

(6) For purposes of determining net income under this section for income years commencing on or after January 1, 2018, the deduction allowed for business interest paid or accrued shall be determined as provided under the Internal Revenue Code, except that in making such determination, the provisions of Section 163(j) shall not apply.

(b) (1) For purposes of determining net income under this section, the deduction allowed for depreciation shall be determined as provided under the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, provided in making such determination, the provisions of Section 168(k) of said code shall not apply.

(2) (A) For purposes of determining net income under this section for taxable years ending after December 31, 2008, and to the extent any income from the discharge of indebtedness, under Section 108 of the Internal Revenue Code, as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009, in connection with any reacquisition, after December 31, 2008, and before January 1, 2011, of an applicable debt instrument or instruments, as those terms are defined in said Section 108, as amended by said Section 1231, is not properly includable in gross income for federal income tax purposes for the taxable year, any deferral of the recognition of any such income shall not be allowed.

(B) To the extent that any income from the discharge of indebtedness in connection with any reacquisition, after December 31, 2008, and before January 1, 2011, of an applicable debt instrument or instruments, as those terms are defined in Section 108 of the Internal Revenue Code, as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009, is properly includable in gross income for federal income tax purposes for the taxable year, any such income shall be deductible in computing net income under this section for a taxable year ending after December 31, 2008, to the extent that the deferral of recognition of such income from such discharge was not allowed pursuant to subparagraph (A) of this subdivision in computing net income for a preceding taxable year.

(C) For income years commencing on or after January 1, 2018, eighty per cent of any deduction claimed under Section 179 of the Internal Revenue Code for federal income tax purposes shall be disallowed. To the extent such a deduction is disallowed for purposes of computing the tax under this chapter, twenty-five per cent of the disallowed portion of the deduction shall be allowed as a deduction in each of the four succeeding income years.

(c) (1) Notwithstanding the provisions of subsections (a) and (b) of this section, “net income”, in the case of an S corporation, means the percentage of the nonseparately computed income or loss, as defined in Section 1366(a)(2) of the Internal Revenue Code, of such S corporation, without separate state adjustment pursuant to section 12-233 or 12-226a for the compensation of any officer or employee, to which shall be added (A) any taxes imposed under the provisions of this chapter that are paid or accrued in the income year, and (B) any taxes in any state of the United States or any political subdivision of such state, or the District of Columbia, imposed on or measured by the income or profits of a corporation that are paid or accrued in the income year as provided in subdivision (2) of this subsection.

(2) For income years commencing prior to January 1, 1997, “net income” means one hundred per cent of the amount computed under subdivision (1) of this subsection; for income years commencing on or after January 1, 1997, and prior to January 1, 1998, “net income” means ninety per cent of the amount computed under subdivision (1) of this subsection; for income years commencing on or after January 1, 1998, and prior to January 1, 1999, “net income” means seventy-five per cent of the amount computed under subdivision (1) of this subsection; for income years commencing on or after January 1, 1999, and prior to January 1, 2000, “net income” means fifty-five per cent of the amount computed under subdivision (1) of this subsection; for income years commencing on or after January 1, 2000, and prior to January 1, 2001, “net income” means thirty per cent of the amount computed under subdivision (1) of this subsection; for income years commencing on or after January 1, 2001, net income of S corporations as computed under subdivision (1) of this subsection shall not be subject to the tax under this chapter. Any S corporation subject to the tax on net income as provided in this section shall be eligible for any credit against the tax otherwise available to taxpayers under this chapter only to the extent and in the same percentage as net income of such S corporation is subject to taxation under this chapter, except that any S corporation with an income year commencing on or after January 1, 1999, but before December 31, 2000, shall be eligible for the entire credit available under sections 8-395, 12-633, 12-634, 12-635 and 12-635a.

(d) The commissioner may adopt regulations in accordance with chapter 54, relating to mergers or consolidations of corporations providing for the deduction, by the surviving or new corporation provided for in the plan of consolidation, of operating losses that were incurred by a merging or consolidating corporation, respectively, before the merger or consolidation, respectively. Such regulations may follow the provisions of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, or the regulations thereunder.

(e) Where a combined group is required to file a combined unitary tax return pursuant to section 12-222, the combined group's net income shall be computed as provided in subsection (a) of section 12-218e.

(f) Where a combined group is required to file a combined unitary tax return pursuant to section 12-222, a taxable member's net operating loss apportioned to this state shall be deducted and carried over by the taxable member as provided in subsection (d) of section 12-218e.

(1949 Rev., S. 1898; 1949, S. 1093d; 1957, P.A. 560, S. 8; 1961, P.A. 428, S. 2; 1963, P.A. 651, S. 1; 1971, P.A. 461; June, 1971, P.A. 8, S. 28; 1972, P.A. 285, S. 12; P.A. 73-350, S. 8, 27; P.A. 77-16, S. 1, 2; 77-550, S. 1, 2; P.A. 80-483, S. 55, 186; P.A. 81-66, S. 1, 5; 81-245, S. 2, 4; 81-411, S. 1, 42; Nov. Sp. Sess. P.A. 81-7, S. 1, 3; P.A. 85-159, S. 1, 19; 85-469, S. 4, 6; P.A. 89-211, S. 23; 89-251, S. 22, 203; June Sp. Sess. P.A. 91-3, S. 100, 168; P.A. 93-74, S. 6, 67; 93-332, S. 9, 12, 42; 93-435, S. 64, 95; P.A. 96-175, S. 1, 5; 96-197, S. 4, 11; P.A. 97-119, S. 1, 2; 97-283, S. 1, 2; P.A. 99-83, S. 1, 2; 99-173, S. 39, 65; 99-235, S. 5, 7; P.A. 00-170, S. 24, 42; May 9 Sp. Sess. P.A. 02-1, S. 56; June Sp. Sess. P.A. 09-3, S. 95; June 19 Sp. Sess. P.A. 09-2, S. 4; P.A. 10-188, S. 2, 3; P.A. 11-140, S. 5; June 12 Sp. Sess. P.A. 12-1, S. 194; P.A. 15-244, S. 87, 143; June Sp. Sess. P.A. 15-5, S. 139, 482; Dec. Sp. Sess. P.A. 15-1, S. 38; June Sp. Sess. P.A. 17-2, S. 169; P.A. 18-26, S. 10; 18-49, S. 12, 13; 18-169, S. 41; P.A. 19-117, S. 376; P.A. 22-110, S. 14; P.A. 23-204, S. 379; P.A. 24-151, S. 112; P.A. 25-168, S. 353.)

History: 1961 act added Subdiv. (2); 1963 act extended exception in Subdiv. (2) to all taxpayers for year 1963 and thereafter; 1971 acts added provisions applicable to taxpayers whose income reported in consolidated return and changed 2.5% rate to 60% for banking institutions beginning in 1971 income year, deleting obsolete reference to January 1, 1962; 1972 act deleted mutual banks and trust companies in Subdiv. (2), included building and loan associations and increased 60% interest by 10% each year beginning in 1973 until 100% level reached; P.A. 73-350 changed 5% rate for other taxpayers to 90% in 1973 and 100% thereafter, added provisions re operating losses and net capital losses, added phrase re taxpayers who file as part of consolidated return with federal government but not with the state and added provision clarifying applicability of provisions to life insurance companies; P.A. 77-16 added provisions specially applicable to regulated investment companies, effective March 29, 1977, and applicable to income years commencing on and after January 1, 1977; P.A. 77-550 added provisions calling for consideration of excess of deductions allocated and apportioned to state under Sec. 12-218 as operating loss; P.A. 80-483 made technical changes; P.A. 81-66 eliminated Connecticut corporation business tax paid in the income year as a deduction from gross income in determining taxable income under said tax, effective May 4, 1981, and applicable to income years commencing on or after January 1, 1981; P.A. 81-245 added a deduction for the gross income attributable to an international banking facility, provided no expense or loss attributable to such facility shall be a deduction, effective upon adoption by the Board of Governors of the Federal Reserve System of amendments to Regulations D and Q pertaining to international banking facilities (adopted June 9, 1981, with an effective date of December 3, 1981); P.A. 81-411 allowed dividends received to be deducted from gross income and provided that net income be apportioned only, eliminating references to allocation, effective June 18, 1981, and applicable to income years commencing on or after December 28, 1980; Nov. Sp. Sess. P.A. 81-7 amended section to permit deductions for depreciation, adding Subpara. (2) of Subdiv. (1) in previously existing provisions designated as Subsec. (a) and Subsec. (b) detailing such deductions, effective January 27, 1982, and applicable to corporations' income years commencing on or after January 1, 1981; P.A. 85-159 provided for a depreciation deduction for income years commencing in 1985 of 88% of the amount of the deduction allowed for federal income tax purposes; P.A. 85-469 revised effective date of P.A. 85-159 but without affecting this section; P.A. 89-211 clarified reference to the Internal Revenue Code of 1986; P.A. 89-251 amended Subsec. (a) by adding to the list of items deductible from gross income in determining net income under the federal income tax which may not be so deducted for purposes of the Connecticut tax on net income of corporations, the following: Taxes in any state or political subdivision thereof imposed on or measured by the income or profits of a corporation, effective July 1, 1989, and applicable to income years commencing on or after January 1, 1989; June Sp. Sess. P.A. 91-3 amended Subsec. (b) to provide for the nondeductibility of 30% of dividends received from a domestic corporation in which the taxpayer owns less than 20% of the total voting power and value of the stock of such corporation and added Subsec. (c) concerning net income of S corporations, effective August 22, 1991, and applicable to income years of corporations commencing on or after January 1, 1991; P.A. 93-74 specified that with respect to nonlife insurance companies the unpaid loss reserve adjustment shall not be made, effective May 19, 1993, and applicable to taxable years commencing on or after January 1, 1993; P.A. 93-332 made technical change in language added in Sec. 6 of P.A. 93-74 to specify that with respect to nonlife insurance companies the unpaid loss reserve adjustment shall not be made and amended Subsec. (c) to prohibit any separate state adjustment to the net income of an S corporation with respect to the compensation of any officer or employee, effective June 25, 1993, and applicable to taxable years on or after January 1, 1993; P.A. 93-435 made a technical change in Subsec. (a), effective June 28, 1993; P.A. 96-175 amended Subsec. (c) by adding Subdiv. (2) re phase-out of net income, effective May 31, 1996, and applicable to income years commencing on or after January 1, 1997; P.A. 96-197 added Subsec. (d) to permit commissioner to adopt regulations relating to mergers and consolidations, effective June 3, 1996, and applicable to income years commencing on or after January 1, 1996; P.A. 97-119 added Subsec. (a)(3) re real estate investment trusts and made technical and renumbering changes, effective June 6, 1997, and applicable to income years commencing on or after January 1, 1997; P.A. 97-283 amended Subsec. (c) to make any S corporation subject to tax on net income eligible for credits against tax in the same percentage as net income subject to tax under chapter, effective June 26, 1997, and applicable to income years commencing on or after January 1, 1997; P.A. 99-83 amended Subsec. (c) to add exception for S corporations with income year commencing on or after January 1, 1999, but prior to December 31, 2000, effective June 3, 1999, and applicable to income years commencing on or after January 1, 1999; P.A. 99-173 amended Subsec. (a) to extend the net operating loss carry forward provision from five to twenty years applicable to losses incurred on or after January 1, 2000, and provide a deduction for gains realized from sale of open space land, effective June 23, 1999, and applicable to income years commencing on or after January 1, 1999; P.A. 99-235 amended Subsec. (a)(1)(E) to replace “watershed” with “water company”, effective June 29, 1999; P.A. 00-170 amended Subsec. (c) to allow S corporations to be eligible for credits under Sec. 8-395 for income years commencing on and after January 1, 1999, but before December 31, 2000, effective May 26, 2000, and applicable to income years commencing on or after January 1, 2000; May 9 Sp. Sess. P.A. 02-1 amended Subsec. (b) to delete former Subdivs. (1) and (2) and provide for a depreciation deduction to be determined as provided under the Internal Revenue Code, except that Section 168(k) of said code shall not apply, effective July 1, 2002, and applicable to property placed in service after September 10, 2001, in income years ending after said date; June Sp. Sess. P.A. 09-3 amended Subsec. (a)(1) by adding Subpara. (A)(iii) re qualified domestic production activities income, effective September 9, 2009, and applicable to income years commencing on or after January 1, 2009; June 19 Sp. Sess. P.A. 09-2 amended Subsec. (b) by designating existing provision as Subdiv. (1) and adding Subdiv. (2) re treatment of income from discharge of indebtedness, effective June 22, 2009, and applicable to taxable years ending after December 31, 2008; P.A. 10-188 amended Subsec. (a)(1) to add Subpara. (A)(iv) re deduction for dividends paid in the case of any captive real estate investment trust, and added Subsec. (a)(3)(C) re dividend received from a captive real estate investment trust, effective July 1, 2010, and applicable to income years commencing on or after January 1, 2010; P.A. 11-140 amended Subsec. (a)(1) to add Subpara. (F) re contribution to manufacturing reinvestment account, effective July 1, 2011, and applicable to income years commencing on or after January 1, 2012 (Revisor's note: An internal reference in P.A. 11-140, S. 5, to “section 5 of this act” was determined by the Revisors to properly refer to section 4 of said act and was therefore codified in Subsec. (a)(1)(F) as “section 32-9zz”); June 12 Sp. Sess. P.A. 12-1 amended Subsec. (a)(1)(F) by replacing “taxable” with “income” re year and adding “to the extent not deductible for federal income tax purposes”, effective June 15, 2012, and applicable to income years commencing on or after January 1, 2011; P.A. 15-244 amended Subsec. (a)(4)(A) to designate existing provisions re deduction limits as clause (i) for income years commencing prior to January 1, 2015, make technical changes, and add new clause (ii) re operating loss carry-over for income years commencing on or after January 1, 2015, effective June 30, 2015, and added Subsec. (e) re computing combined group's net income, and Subsec. (f) re deduction and carry-over of taxable member's net operating loss, effective June 30, 2015, and applicable to income years commencing on or after January 1, 2015; June Sp. Sess. P.A. 15-5 changed effective date of P.A. 15-244, S. 143, from June 30, 2015, and applicable to income years commencing on or after January 1, 2015, to January 1, 2016, and applicable to income years commencing on or after that date, effective June 30, 2015, and amended Subsec. (a)(4)(A) to add clause (iii) re optional operating loss carry-over limited to 50 per cent of unused operating losses incurred prior to income year commencing on or after January 1, 2015, and before January 1, 2016, for combined groups with unused operating losses in excess of $6 billion from income years beginning prior to January 1, 2013, effective June 30, 2015; Dec. Sp. Sess. P.A. 15-1 amended Subsec. (a)(4)(A) by replacing references to Sec. 12-218 with references to this chapter and Secs. 12-218e to 12-218g, replacing provision limiting deductible portion of operating loss carry-over to net income greater than zero in income year commencing on or after January 1, 2017, with provision limiting deductible portion of operating loss carry-over to amount required to reduce combined group's tax under this chapter and Secs. 12-218e to 12-218g, prior to surtax and application of credits, to $2.5 million in income year commencing on or after January 1, 2015, replacing “combined group's operating loss carry-over” with “combined group's remaining operating loss carry-over” re operating losses incurred prior to income years commencing January 1, 2015, adding “, or any member thereof,” re combined group election on return for income year beginning on or after January 1, 2015, and before January 1, 2016, replacing “the operating loss carry-over of said combined group, shall be limited to” with “the combined group shall relinquish” and adding provision re utilization of remaining operating loss carry-over in clause (iii), and making technical changes, effective December 29, 2015; June Sp. Sess. P.A. 17-2 amended Subsec. (a)(1) to add Subpara. (G) re deduction for amount paid by 7/7 participant for remediation of a brownfield, effective October 31, 2017, and applicable to income years commencing on or after January 1, 2017; P.A. 18-26 made a technical change in Subsec. (a)(3); P.A. 18-49 amended Subsec. (a) to add Subpara. (H) re deduction from gross income of amount of any contribution made on or after December 23, 2017, by the state or a political subdivision thereof in Subdiv. (1), amend Subdiv. (2) to designate existing provision re prohibited deduction for certain expenses related to dividends and for certain federal taxes on income or profits, losses and interest as Subpara. (A), add Subpara. (B) re rate of expenses related to dividends, and make conforming changes, add Subdiv. (6) re determination of business interest paid or accrued for purposes of determining net income for income years commencing on or after January 1, 2018, effective May 31, 2018, and applicable to income years commencing on or after January 1, 2017, and amended Subsec. (b)(2) to add Subpara. (C) re disallowance of 80 per cent of deduction claimed under Sec. 179 of Internal Revenue Code for income years commencing on or after January 1, 2018, and deduction in 4 succeeding income years, effective May 31, 2018; P.A. 18-169 made identical changes in Subsec. (a) as P.A. 18-49, effective June 14, 2018, and applicable to income years commencing on or after January 1, 2017; P.A. 19-117 amended Subsec. (a)(1) to delete former Subpara. (G) re deduction for amount paid by 7/7 participant for remediation of brownfield and redesignate existing Subpara. (H) as new Subpara. (G), effective June 26, 2019; P.A. 22-110 amended Subsec. (a)(3) to redefine “related person” and make technical changes; P.A. 23-204 amended Subsec. (a)(1) to add Subpara. (H) re deduction for ordinary and necessary expenses for taxpayer licensed under Ch. 420f or 420h, and made technical changes in Subsecs. (a)(1), (a)(4) and (c)(1), effective June 12, 2023, and applicable to income years commencing on or after January 1, 2023; P.A. 24-151 amended Subsec. (a)(4)(A) to extend the net operating loss carry forward provision from 20 years to 30 years for operating losses incurred in income years commencing on or after January 1, 2025, effective June 6, 2024 (Revisor's note: In Subsec. (a)(4)(A), the word “year” was added editorially by the Revisors after the words “such loss”, for accuracy); P.A. 25-168 amended Subsec. (a)(4)(A)(iii) to add references to income years beginning prior to January 1, 2025, delete provision re application of limitations prescribed in Subpara. (A)(ii) of subdivision, and add provisions re recalculation of remaining operating loss carry-over for income year commencing on or after January 1, 2025, and prior to January 1, 2026, and utilization of such recalculated remaining operating losses, effective June 30, 2025, and applicable to income years commencing on or after January 1, 2025.

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Sec. 12-217j. Tax credit for research and experimental expenditures. (a)(1) There shall be allowed as a credit against the tax imposed on any taxpayer under this chapter, with respect to income years of such taxpayer commencing on or after January 1, 1994, an amount equal to twenty per cent of the amount spent by such taxpayer directly on research and experimental expenditures, as defined in Section 174 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, which are conducted in this state and which exceeds the amount spent by such taxpayer during the preceding income year of such taxpayer for such expenditures.

(2) As used in this section, “taxpayer” means (A) a taxpayer, as defined in section 12-213, and (B) a single member limited liability company that (i) has more than three thousand employees in this state, and (ii) is engaged in manufacturing, with expertise in mechatronics, alignment and sensor technology and optical fabrication. For purposes of this section, if a single member limited liability company is disregarded as an entity separate from its owner for federal income tax purposes, the calculation of the total number of employees in this state of the limited liability company shall include both the employees of the limited liability company and the employees of such limited liability company's owner.

(b) (1) With respect to any income year commencing on or after January 1, 2000, a credit or any portion of a credit that is allowed under this section but that is not used by a taxpayer because the amount of the credit exceeds the tax due and owing by the taxpayer shall be carried forward to each of the successive income years until such credit, or applicable portion of the credit, is fully taken. In no case shall a credit, or any portion of a credit, that is not used by a taxpayer be carried forward for a period of more than fifteen years.

(2) (A) With respect to any income year commencing on or after January 1, 1997, and prior to January 1, 2000, a credit or any portion of a credit that is allowed under this section but that is not used by a biotechnology company because the amount of the credit exceeds the tax due and owing by the taxpayer shall be carried forward to each of the successive income years until such credit, or applicable portion of the credit, is fully taken. In no case shall a credit, or any portion of a credit, that is not used by a biotechnology company be carried forward for a period of more than fifteen years.

(B) For purposes of this subsection, “biotechnology company” means a company engaged in the business of applying technologies, such as recombinant DNA techniques, biochemistry, molecular and cellular biology, genetics and genetic engineering, biological cell fusion techniques, and new bioprocesses, using living organisms, or parts of organisms, to produce or modify products, to improve plants or animals, to develop microorganisms for specific uses, to identify targets for small molecule pharmaceutical development, or to transform biological systems into useful processes and products.

(3) If the taxpayer that pays or incurs research and experimental expenditures is a single member limited liability company that is disregarded as an entity separate from its owner, the credit may be claimed by such limited liability company's owner, provided such owner is subject to the tax imposed under this chapter.

(P.A. 92-193, S. 3, 8; P.A. 93-403, S. 1, 3; P.A. 96-252, S. 7, 8; P.A. 98-110, S. 22, 27; P.A. 03-225, S. 2; P.A. 25-165, S. 2; 25-168, S. 59.)

History: P.A. 92-193 effective July 1, 1992, and applicable to taxable years of corporations commencing on or after January 1, 1993 (Revisor's note: In codifying public act 92-193 the words “an amount” were inserted editorially by the Revisors in Subdiv. (1) after the words “January 1, 1994,” for consistency with Subdiv. (2)); P.A. 93-403 added requirement that research and experimental expenditures be conducted in the state, effective June 29, 1993, and applicable to taxable years commencing on and after January 1, 1993; P.A. 96-252 authorized tax credits which are not used by biotechnology companies to be carried forward and defined “biotechnology company”, effective July 1, 1996, and applicable to income years of corporations commencing on or after January 1, 1997; P.A. 98-110 expanded credit to all taxpayers, effective May 19, 1998, and applicable to income years commencing on or after January 1, 2000; P.A. 03-225 divided existing provisions into Subsecs. (a) and (b), amended Subsec. (a) to delete obsolete references and make technical changes, and amended Subsec. (b) to add provisions re credit for biotechnology companies after January 1, 1997, and make technical changes, effective July 9, 2003; P.A. 25-165 amended Subsec. (a) to designate existing provisions as Subdiv. (1) and therein replace “corporation” with “taxpayer” and to add Subdiv. (2) re definition of taxpayer and provision re calculation of total number of employees of single member limited liability company that is disregarded as entity separate from its owner, amended same to make conforming changes and amended Subsec. (b) to add Subdiv. (3) re single member limited liability company for which corporation is claiming credit, effective July 1, 2025, and applicable to income and taxable years commencing on or after January 1, 2025; P.A. 25-168 made identical changes as P.A. 25-165, effective June 30, 2025, and applicable to income and taxable years commencing on or after January 1, 2025.

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Sec. 12-217n. Rolling tax credit for research and development expenses. Carryforward limit. (a) There shall be allowed as a credit against the tax imposed by this chapter the amount determined under subsection (c) of this section in respect of the research and development expenses paid or incurred during any income year, subject to the limitations of this section.

(b) As used in this section:

(1) “Research and development expenses” means research or experimental expenditures deductible under Section 174 of the Internal Revenue Code of 1986, as in effect on May 28, 1993, determined without regard to Section 280C(c) thereof or any elections made by a taxpayer to amortize such expenses on its federal income tax return that were otherwise deductible, and basic research payments as defined under Section 41 of said Internal Revenue Code to the extent not deducted under said Section 174, provided: (A) Such expenditures and payments are paid or incurred for such research and experimentation and basic research conducted in this state; and (B) such expenditures and payments are not funded, within the meaning of Section 41(d)(4)(H) of said Internal Revenue Code, by any grant, contract, or otherwise by a person or governmental entity other than the taxpayer unless such other person is included in a combined return with the person paying or incurring such expenses;

(2) “Combined return” means a combined unitary tax return under section 12-222;

(3) “Commissioner” means the Commissioner of Economic and Community Development;

(4) “Qualified small business” means a taxpayer that (A) has gross income for the previous income year that does not exceed one hundred million dollars, and (B) has not, in the determination of the commissioner, met the gross income test through transactions with a related person, as defined in section 12-217w; and

(5) “Taxpayer” means (A) a taxpayer, as defined in section 12-213, and (B) a single member limited liability company that (i) has more than three thousand employees in this state, and (ii) is engaged in manufacturing, with expertise in mechatronics, alignment and sensor technology and optical fabrication. For purposes of this section, if a single member limited liability company is disregarded as an entity separate from its owner for federal income tax purposes, the calculation of the total number of employees in this state of the limited liability company shall include both the employees of the limited liability company and the employees of such limited liability company's owner.

(c) (1) The amount allowed as a credit in any income year shall be the tentative credit calculated under subdivision (2) of this subsection, modified as provided in subsection (e) or (f) of this section, if applicable, except that in the case of a qualified small business the tentative credit allowed for research and development expenses shall be equal to six per cent of such expenses or in the case of any business employing over two thousand five hundred people in the state of Connecticut with annual revenues in excess of three billion dollars and headquartered in an enterprise zone the tentative credit allowed for research and development expenses shall be equal to the greater of (A) the tentative credit calculated under subdivision (2), modified as provided in subsection (e) or (f) of this section, if applicable, or (B) three and one-half per cent of such expense.

(2) Where the research and development expenses paid or incurred in the income year equal: (A) Fifty million dollars or less, the tentative credit allowed shall be an amount equal to one per cent of such expenses; (B) more than fifty million dollars but not more than one hundred million dollars, the tentative credit allowed shall be equal to five hundred thousand dollars plus two per cent of the excess of such expenses over fifty million dollars; (C) more than one hundred million dollars but not more than two hundred million dollars, the tentative credit allowed shall be equal to one million five hundred thousand dollars plus four per cent of the excess of such expenses over one hundred million dollars; and (D) more than two hundred million dollars, the tentative credit allowed shall be equal to five million five hundred thousand dollars plus six per cent of the excess of such expenses over two hundred million dollars.

(d) (1) The credit provided for by this section shall be allowed for any income year commencing on or after January 1, 1993, provided any credits allowed for income years commencing on or after January 1, 1993, and prior to January 1, 1995, may not be taken until income years commencing on or after January 1, 1995, and, for the purposes of subdivision (2) of this subsection, shall be treated as if the credit for each such income year first became allowable in the first income year commencing on or after January 1, 1995.

(2) No more than one-third of the amount of the credit allowable for any income year may be included in the calculation of the amount of the credit that may be taken in that income year.

(3) The total amount of the credit under subdivision (1) of this subsection that may be taken for any income year may not exceed the greater of (A) fifty per cent of the taxpayer's tax liability or in the case of a combined return, fifty per cent of the combined tax liability, for such income year, determined without regard to any credits allowed under this section, and (B) the lesser of (i) two hundred per cent of the credit otherwise allowed under subsection (c) of this section for such income year, and (ii) ninety per cent of the taxpayer's tax liability or in the case of a combined return, ninety per cent of the combined liability for such income year, determined without regard to any credits allowed under this section.

(4) (A) Credits that are allowed under this section for income years commencing prior to January 1, 2021, that exceed the amount permitted to be taken in an income year pursuant to the provisions of subdivision (1), (2) or (3) of this subsection shall be carried forward to each of the successive income years until such credits, or applicable portion thereof, are fully taken.

(B) Credits that are allowed under this section for income years commencing on or after January 1, 2021, that exceed the amount permitted to be taken in an income year pursuant to the provisions of subdivision (1), (2) or (3) of this subsection shall be carried forward to each of the successive income years until such credits, or applicable portion thereof, are fully taken. No credit or portion thereof allowed under this section for income years commencing on or after January 1, 2021, shall be carried forward for a period of more than fifteen years.

(C) No credit allowed under this section shall be taken in any income year until the full amount of all allowable credits carried forward to such year from any prior income year, commencing with the earliest such prior year, that otherwise may be taken under subdivision (2) of this subsection in that income year, have been fully taken.

(D) If the taxpayer that pays or incurs research and development expenses is a single member limited liability company that is disregarded as an entity separate from its owner, the credit may be claimed by such limited liability company's owner, provided such owner is subject to the tax imposed under this chapter.

(e) In addition to the wage base test set forth in subsection (f) of this section, any aerospace company or in the case of a combined return, any combined group including an aerospace company, shall be subject to this subsection for any income year commencing on or after January 1, 1993, and prior to January 1, 1996. For purposes of this subsection, an aerospace company is any taxpayer, whether or not included in a combined return, engaged principally in the aerospace industry whose research and development expenses during each of the income years beginning on or after January 1, 1990, 1991 and 1992, respectively, exceeded two hundred million dollars. No aerospace company, or in the case of a combined return, a combined group including an aerospace company, shall be allowed any credit under this section for any income year to which this subsection applies in which the aggregate transfers by an aerospace company, if any, of historical economic base functions outside of this state, other than to a location outside the United States, since January 1, 1993, through the end of such income year, have materially reduced the historical economic base functions in this state. For purposes of this subsection, the historical economic base functions shall be those economic base functions conducted by an aerospace company, which need not be all economic base functions of the aerospace company, in this state on January 1, 1993, whose continuance in this state, as determined by the commissioner in his discretion, will further the policies set forth in section 32-221. Such historical economic base functions shall be set forth in a binding memorandum of understanding between the commissioner and an aerospace company that may be entered into at any time prior to the expiration of the first income year to which this subsection applies, with sufficient specificity to allow the commissioner and the aerospace company to determine in all income years subject to this subsection whether there has been such a reduction in said historical economic base functions. As a prerequisite to the allowance of any credit otherwise allowable under this section for any income year to which this subsection applies, each aerospace company shall obtain a certificate of eligibility issued by the commissioner to the aerospace company for such income year. The aerospace company shall not later than sixty days after the close of each income year to which this subsection applies certify to the commissioner that there has been no such aggregate material reduction in the historical economic base functions in this state for the income year just completed that otherwise has not been offset as provided below. Within sixty days thereafter, the commissioner shall review the certification and, if the commissioner determines that there has been no such net aggregate material reduction in the historical economic base functions in this state, the commissioner shall issue a certificate of eligibility for said income year. The following shall not constitute a material reduction in the historical economic base functions in this state: (1) A reduction of not more than two per cent of the historical economic base functions; (2) transfer of an historical economic base function to a person in this state; (3) transfer of a historical economic base function outside of the United States; or (4) reductions in historical economic base functions attributable to reductions in volume, productivity improvements or the discontinuance of operations due to obsolescence or the like. Any transfers that may otherwise be counted in determining if a material reduction occurred may be offset to the extent economic base functions listed in, or comparable to those listed in, the memorandum of understanding are increased in this state, transferred into this state, or established in this state. Any such increase, transfer or establishment made during an income year, or subsequent to such income year but prior to the filing of the return for such income year, shall be effective for such income year and all income years thereafter. The commissioner may issue or reissue a certificate of eligibility for the applicable income year following any such offset. The commissioner shall, upon request, provide a copy of the certificate of eligibility and memorandum of understanding to the Commissioner of Revenue Services.

(f) The tentative credit allowable to the taxpayer, or in the case of a combined return, the combined group, that pays or incurs research and development expenses in excess of two hundred million dollars for the income year shall be reduced for any income year in which the workforce reductions, if any, exceed the percentages set forth below. For purposes of this subsection, workforce reductions shall be reductions of the historical Connecticut wage base of the taxpayer, or in the case of a combined return, the combined group, as a result of the transfer outside of this state, other than to a location outside the United States, of work done by employees of the taxpayer, or in the case of a combined return, the combined group. Such reduction in the tentative credit shall be as follows: (1) If the historical Connecticut wage base for the income year is so reduced by not more than two per cent, the tentative credit allowable for the income year shall not be reduced; (2) if the historical Connecticut wage base for the income year is so reduced by more than two per cent but not more than three per cent, the tentative credit allowable for the income year shall be reduced by ten per cent; (3) if the historical Connecticut wage base for the income year is so reduced by more than three per cent but not more than four per cent, the tentative credit allowable for the income year shall be reduced by twenty per cent; (4) if the historical Connecticut wage base for the income year is so reduced by more than four per cent but not more than five per cent, the tentative credit allowable for the income year shall be reduced by forty per cent; (5) if the historical Connecticut wage base for the income year is so reduced by more than five per cent but not more than six per cent, the tentative credit allowable for the income year shall be reduced by seventy per cent; and (6) if the historical Connecticut wage base for the income year is so reduced by more than six per cent, no credit for the income year shall be allowed. The Connecticut wage base for any income year shall be the total wages assigned to Connecticut for such income year under section 12-218 excluding wages paid to the ten most highly-compensated executives of the taxpayer, or in the case of a combined return, the combined group, and any compensation that does not subject the recipient thereof to federal income tax thereon in said income year. The historical Connecticut wage base shall be the Connecticut wage base for the third full income year immediately preceding the current income year; provided the historical Connecticut wage base for the first three income years commencing on or after January 1, 1993, shall be the Connecticut wage base for May 1993, converted to an annual basis. The following shall not constitute a workforce reduction for any income year: (A) A reduction of wages attributable to the transfer of work done by a taxpayer, or in the case of a combined return, by the combined group, in this state to a party in this state; (B) a reduction of wages attributable to the transfer of work done by a taxpayer, or in the case of a combined return, by the combined group, outside the United States; or (C) a reduction in wages attributable to reductions in volume, productivity improvements or the discontinuance of operations due to obsolescence or the like. Solely for purposes of determining whether the allowable credit is to be reduced under this subsection for any income year, the Connecticut wages attributable to any new jobs or jobs moved into this state by the taxpayer, or in the case of a combined return, the combined group, during such income year or subsequent to such income year but prior to the filing of the return for such income year shall be an offset to any workforce reduction of a taxpayer, or in the case of a combined return, the combined group, for said income year. A new job shall be a job that did not exist in the business of a taxpayer, or in the case of a combined return, a member of the combined group, in this state at the end of the income year just completed. Notwithstanding subsection (g) of this section, a taxpayer may elect for any income year to separately compute its allowable tentative credit under this subsection for any one or more business units that had gross revenues for such income year in excess of one hundred million dollars. Any taxpayer subject to this subsection shall not later than sixty days after the close of each income year certify to the commissioner whether or not there has been any workforce reduction for the income year just completed, the amount thereof, and any offsets thereto as provided above. Not later than sixty days thereafter, the commissioner shall review the certification and, if the commissioner determines that there has been no more than a six per cent workforce reduction, net of any such offsets, the commissioner shall issue a certificate of eligibility stating the amount of net workforce reduction so determined for said income year, if any. The commissioner shall not issue a certificate of eligibility for any income year in which the commissioner determines that there has been more than a six per cent net workforce reduction. The commissioner shall, upon request, provide a copy of the certificate of eligibility to the Commissioner of Revenue Services.

(g) Where one or more taxpayers properly included in a combined return pays or incurs research and development expenses, all allowances and limitations under this section shall be made on an aggregate basis for all taxpayers included in such combined return, provided, the credit attributable to a qualified small business may be taken only against the combined tax liability attributable to such qualified small business. The amount of the combined tax for all corporations properly included in a combined corporation business tax return that is attributable to a qualified small business shall be in the same ratio to such combined tax that the net income apportioned to this state of the qualified small business bears to the net income, in the aggregate of all corporations included in such combined return. Solely for the purposes of computing such ratio, any net loss apportioned to this state by a corporation included in such combined return shall be disregarded.

(h) Any taxpayer, or in the case of a combined return, any combined group of taxpayers, that claims a credit under section 12-217j for any income year shall reduce the amount of research and development expenses that otherwise may be taken into account in computing the allowable credit under subsection (c) of this section for such income year by the amount of excess research and experimental expenditures, as computed under said section 12-217j, for which the credit thereunder is given.

(i) The commissioner may adopt regulations, in accordance with the provisions of chapter 54, to carry out the purposes of this section.

(P.A. 93-433, S. 1, 26; P.A. 95-250, S. 1; P.A. 96-211, S. 1, 5, 6; P.A. 98-110, S. 23, 27; June Sp. Sess. P.A. 98-1, S. 85, 121; P.A. 99-173, S. 40, 65; June Sp. Sess. P.A. 99-1, S. 28, 51; P.A. 06-159, S. 8; P.A. 13-232, S. 13; P.A. 14-122, S. 91; P.A. 15-244, S. 144; June Sp. Sess. P.A. 15-5, S. 139; June Sp. Sess. P.A. 21-2, S. 427; P.A. 25-165, S. 1; 25-168, S. 58.)

History: P.A. 93-433 effective July 1, 1993; P.A. 95-250 and P.A. 96-211 replaced Commissioner and Department of Economic Development with Commissioner and Department of Economic and Community Development; P.A. 98-110 expanded credit to qualified small businesses and defined the term, effective May 19, 1998, and applicable to income years commencing on or after January 1, 2000; June Sp. Secs. P.A. 98-1 amended Subsec. (b)(4) to change reference to Sec. 12-217m to Sec. 12-217w, effective June 24, 1998; P.A. 99-173 amended Subsec. (c)(1) to increase the credit for companies who employ over 2,500 people in the state, have in excess of $3,000,000,000 in revenue and are located in an enterprise zone, effective June 23, 1999, and applicable to income years commencing on or after January 1, 1999; June Sp. Sess. P.A. 99-1 amended Subsec. (c)(1) to change tentative credit for research and development expenses for businesses employing over 2,500 people with annual revenues in excess of $3,000,000,000 and headquartered in an enterprise zone from 3.5% of such expense to the greater of the tentative credit calculated under Subdiv. (2), modified as provided in Subsec. (e) or (f), if applicable, or 3.5% of such expense, effective July 1, 1999; P.A. 06-159 amended Subsecs. (e) and (f) to make technical changes, delete provision re treatment of information as provided in Sec. 32-11a(k) and require commissioner, rather than combined group or taxpayer, to provide copy of certificate of eligibility to Commissioner of Revenue Services, effective June 6, 2006, and applicable to income years commencing on or after January 1, 2006; P.A. 13-232 amended Subsec. (h) to delete provision re credit claimed under Sec. 12-217l, effective July 1, 2013; P.A. 14-122 made a technical change in Subsec. (b)(2); P.A. 15-244 redefined “combined return” in Subsec. (b)(2), effective June 30, 2015, and applicable to income years commencing on or after January 1, 2015; June Sp. Sess. P.A. 15-5 changed effective date of P.A. 15-244, S. 144, from June 30, 2015, and applicable to income years commencing on or after January 1, 2015, to January 1, 2016, and applicable to income years commencing on or after that date, effective June 30, 2015; June Sp. Sess. P.A. 21-2 amended Subsec. (d)(4) to redesignate existing provisions re credits carryforward and the order of taking allowable credits carried forward as Subparas. (A) and (C), add Subpara. (B) re 15 year limit for credit carryforwards for credits allowed for income years commencing on or after January 1, 2021, and make technical changes, effective June 23, 2021, and applicable to income years commencing on or after January 1, 2021; P.A. 25-165 amended Subsec. (b) to replace “company” with “taxpayer” in Subdiv. (4), to add Subdiv. (5) re definition of “taxpayer” and provision re calculation of total number of employees of single member limited liability company that is disregarded as entity separate from its owner and amended same to make a conforming and technical change, and amended Subsec. (d)(4) to add Subpara. (D) re single member limited liability company for which corporation is claiming credit, effective July 1, 2025, and applicable to income and taxable years commencing on or after January 1, 2025; P.A. 25-168 made identical changes as P.A. 25-165, effective June 30, 2025, and applicable to income and taxable years commencing on or after January 1, 2025.

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Sec. 12-217ee. Refund of unused credits under sections 12-217j and 12-217n. (a)(1) Any taxpayer that (A) is a qualified small business, (B) qualifies for a credit under section 12-217j or section 12-217n, and (C) cannot take such credit in the taxable year in which the credit could otherwise be taken as a result of having no tax liability under this chapter may elect to carry such credit forward under this chapter or may apply to the commissioner as provided in subsection (b) of this section to exchange such credit with the state for a credit refund as follows: For a biotechnology company, equal to ninety per cent of the value of the credit and for all other companies, equal to sixty-five per cent of the value of the credit.

(2) Any amount of credit refunded under this section shall be refunded to the taxpayer under the provisions of this chapter, except that such credit refund shall not be subject to the provisions of section 12-227. Payment of the capital base tax under section 12-219 for an income year commencing on or after January 1, 2002, in which year the taxpayer reports no net income, as defined in section 12-213, or payment of the minimum tax of two hundred fifty dollars under section 12-219 or 12-223c for any income year, shall not be considered a tax liability for purposes of this section.

(b) An application for refund of such credit amount shall be made to the Commissioner of Revenue Services, at the same time such taxpayer files its return for the income year on or before the original due date or, if applicable, the extended due date of such year's return, on such forms and containing such information as prescribed by said commissioner. No application for refund of such credit amount may be made after the due date or extended due date, as the case may be, of such return.

(c) If the commissioner determines that the taxpayer qualifies for a credit refund under this section, the commissioner shall notify, no later than one hundred twenty days from receipt of the application for such credit refund, the State Comptroller of the name of the eligible taxpayer, and the State Comptroller shall draw an order on the State Treasurer. The amount of the credit refund shall be limited as follows:

(1) In the case of an application for such credit refund filed by the taxpayer for income years beginning during 2000 or 2001 where such credit refund has not been paid as of July 1, 2002, the taxpayer shall be entitled to receive no more than one million dollars during the state's fiscal year in which the initial refund is paid, with any remaining unpaid balance to be paid in two equal installments during the state's next two succeeding fiscal years; and

(2) In the case of an application for such credit refund filed by the taxpayer for the income years beginning during 2002 or thereafter, the taxpayer shall be entitled to receive no more than one million five hundred thousand dollars for any one such income year.

(d) The Commissioner of Revenue Services may disallow the credit refund of any credit otherwise allowable for a taxable year under this section if the company claiming the exchange has any amount of taxes due and unpaid to the state including interest, penalties, fees and other charges related thereto for which a period in excess of thirty days has elapsed following the date on which such taxes were due and which are not the subject of a timely filed administrative appeal to the commissioner or of a timely filed appeal pending before any court of competent jurisdiction. Before any such disallowance, the commissioner shall send written notice to the company, stating that it may pay the amount of such delinquent tax or enter into an agreement with the commissioner for the payment thereof, by the date set forth in said notice, provided, such date shall not be less than thirty days after the date of such notice. Failure on the part of the company to pay the amount of the delinquent tax or enter into an agreement to pay the amount thereof by said date shall result in a disallowance of the credit refund being claimed.

(e) For purposes of this section, (1) “qualified small business” means a company that (A) has gross income for the previous income year that does not exceed seventy million dollars, and (B) has not, in the determination of the commissioner, met the gross income test through transactions with a related person, as defined in section 12-217w, and (2) “biotechnology company” has the same meaning as provided in subsection (b) of section 12-217j.

(P.A. 99-173, S. 38, 65; June Sp. Sess. P.A. 01-6, S. 11, 85; May 9 Sp. Sess. P.A. 02-1, S. 60; May 9 Sp. Sess. P.A. 02-4, S. 19; P.A. 03-120, S. 1; June 30 Sp. Sess. P.A. 03-1, S. 89; P.A. 04-235, S. 1; P.A. 25-168, S. 358.)

History: P.A. 99-173 effective June 23, 1999, and applicable to taxable years commencing on or after January 1, 2000; June Sp. Sess. P.A. 01-6 amended Subsec. (a) to add reference to the application for a credit refund under Subsec. (b), to change “cash payment” to “credit refund”, and to provide that amounts refunded under this section are not subject to Sec. 12-227, and amended Subsecs. (b) and (c) to change “payment” and “exchange” to “credit refund”, effective July 1, 2001; May 9 Sp. Sess. P.A. 02-1 amended Subsec. (b) to provide for the application for refund on or before the due date of the return, or extended due date of the return, redesignated a portion of existing Subsec. (b) as new Subsec. (c) and added provisions therein re limit on the amount of credit refund and redesignated existing Subsecs. (c) and (d) as Subsecs. (d) and (e), effective July 1, 2002; May 9 Sp. Sess. P.A. 02-4 amended Subsec. (a) to provide that payment of the minimum tax shall not be considered a tax liability for purposes of section, effective August 15, 2002, and applicable to income years commencing on or after January 1, 2002; P.A. 03-120 amended Subsec. (a) to add provision re effect of tax liability for payment of tax under Sec. 12-219 for the income year commencing January 1, 2002, and make conforming changes, effective June 18, 2003, and applicable to income years commencing on or after January 1, 2002; June 30 Sp. Sess. P.A. 03-1 amended Subsec. (a) to allow participation in program for certain capital base taxpayers through the 2004 income year, effective August 16, 2003, and applicable to income years commencing on or after January 1, 2002; P.A. 04-235 amended Subsec. (a) to eliminate January 1, 2005, end date for consideration of income years under the exchange program, effective June 8, 2004, and applicable to income years commencing on or after January 1, 2002; P.A. 25-168 amended Subsec. (a) to redesignate provision re taxpayer qualifications as Subdiv. (1) and amend same to add 90 per cent refund value for biotechnology companies, and redesignate provisions re amount of credit refunded under section and payments not considered a tax liability under section as Subdiv. (2), amended Subsec. (e) to add definition of “biotechnology company”, and made technical and conforming changes, effective July 1, 2025, and applicable to income years commencing on or after January 1, 2025.

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Sec. 12-217jj. Film production tax credit. Regulations. (a) As used in this section:

(1) “Commissioner” means the Commissioner of Revenue Services.

(2) “Department” means the Department of Economic and Community Development.

(3) (A) “Qualified production” means entertainment content created in whole or in part within the state, including motion pictures, except as otherwise provided in this subparagraph; documentaries; long-form, specials, mini-series, series, sound recordings, videos and music videos and interstitials television programming; interactive television; relocated television production; interactive games; videogames; commercials; any format of digital media, including an interactive web site, created for distribution or exhibition to the general public; and any trailer, pilot, video teaser or demo created primarily to stimulate the sale, marketing, promotion or exploitation of future investment in either a product or a qualified production via any means and media in any digital media format, film or videotape, provided such program meets all the underlying criteria of a qualified production. For state fiscal years ending on or after June 30, 2014, “qualified production” shall not include a motion picture that has not been designated as a state-certified qualified production prior to July 1, 2013, and no tax credit voucher for such motion picture may be issued for such motion picture, except, for state fiscal years ending on or after June 30, 2015, “qualified production” shall include a motion picture for which twenty-five per cent or more of the principal photography shooting days are in this state at a facility that receives not less than twenty-five million dollars in private investment and opens for business on or after July 1, 2013, and a tax credit voucher may be issued for such motion picture.

(B) “Qualified production” shall not include any ongoing television program created primarily as news, weather or financial market reports; a production featuring current events, other than a relocated television production, sporting events, an awards show or other gala event; a production whose sole purpose is fundraising; a long-form production that primarily markets a product or service; a production used for corporate training or in-house corporate advertising or other similar productions; or any production for which records are required to be maintained under 18 USC 2257, as amended from time to time, with respect to sexually explicit content.

(4) “Eligible production company” means a corporation, partnership, limited liability company, or other business entity engaged in the business of producing qualified productions on a one-time or ongoing basis, and qualified by the Secretary of the State to engage in business in the state.

(5) “Production expenses or costs” means all expenditures clearly and demonstrably incurred in the state in the preproduction, production or postproduction costs of a qualified production, including:

(A) Expenditures incurred in the state in the form of either compensation or purchases including production work, production equipment not eligible for the infrastructure tax credit provided in section 12-217kk, production software, postproduction work, postproduction equipment, postproduction software, set design, set construction, props, lighting, wardrobe, makeup, makeup accessories, special effects, visual effects, audio effects, film processing, music, sound mixing, editing, location fees, soundstages and any and all other costs or services directly incurred in connection with a state-certified qualified production;

(B) Expenditures for distribution, including preproduction, production or postproduction costs relating to the creation of trailers, marketing videos, commercials, point-of-purchase videos and any and all content created on film or digital media, including the duplication of films, videos, CDs, DVDs and any and all digital files now in existence and those yet to be created for mass consumer consumption; the purchase, by a company in the state, of any and all equipment relating to the duplication or mass market distribution of any content created or produced in the state by any digital media format which is now in use and those formats yet to be created for mass consumer consumption; and

(C) “Production expenses or costs” does not include the following: (i) On and after January 1, 2008, compensation in excess of fifteen million dollars paid to any individual or entity representing an individual, for services provided in the production of a qualified production and on or after January 1, 2010, compensation subject to Connecticut personal income tax in excess of twenty million dollars paid in the aggregate to any individuals or entities representing individuals, for star talent provided in the production of a qualified production; (ii) media buys, promotional events or gifts or public relations associated with the promotion or marketing of any qualified production; (iii) deferred, leveraged or profit participation costs relating to any and all personnel associated with any and all aspects of the production, including, but not limited to, producer fees, director fees, talent fees and writer fees; (iv) costs relating to the transfer of the production tax credits; (v) any amounts paid to persons or businesses as a result of their participation in profits from the exploitation of the qualified production; and (vi) any expenses or costs relating to an independent certification, as required by subsection (h) of this section, or as the department may otherwise require, pertaining to the amount of production expenses or costs set forth by an eligible production company in its application for a production tax credit.

(6) “Sound recording” means a recording of music, poetry or spoken-word performance, but does not include the audio portions of dialogue or words spoken and recorded as part of a motion picture, video, theatrical production, television news coverage or athletic event.

(7) “State-certified qualified production” means a qualified production produced by an eligible production company that (A) is in compliance with regulations adopted pursuant to subsection (l) of this section, (B) is authorized to conduct business in this state, and (C) has been approved by the department as qualifying for a production tax credit under this section.

(8) “Interactive web site” means a web site, the production expenses or costs of which (A) exceed five hundred thousand dollars per income year, and (B) is primarily (i) interactive games or end user applications, or (ii) animation, simulation, sound, graphics, story lines or video created or repurposed for distribution over the Internet. An interactive web site does not include a web site primarily used for institutional, private, industrial, retail or wholesale marketing or promotional purposes, or which contains obscene content.

(9) “Post-certification remedy” means the recapture, disallowance, recovery, reduction, repayment, forfeiture, decertification or any other remedy that would have the effect of reducing or otherwise limiting the use of a tax credit provided by this section.

(10) “Compensation” means base salary or wages and does not include bonus pay, stock options, restricted stock units or similar arrangements.

(11) “Relocated television production” means:

(A) An ongoing television program all of the prior seasons of which were filmed outside this state, and may include current events shows, except those referenced in subparagraph (B)(i) of this subdivision.

(B) An eligible production company's television programming in this state that (i) is not a general news program, sporting event or game broadcast, and (ii) is created at a qualified production facility that has had a minimum investment of twenty-five million dollars made by such eligible production company on or after January 1, 2012, at which facility the eligible production company creates ongoing television programming as defined in subparagraph (A) of this subdivision, and creates at least two hundred new jobs in Connecticut on or after January 1, 2012. For purposes of this subdivision, “new job” means a full-time job, as defined in section 12-217ii, that did not exist in this state prior to January 1, 2012, and is filled by a new employee, and “new employee” includes a person who was employed outside this state by the eligible production company prior to January 1, 2012, but does not include a person who was employed in this state by the eligible production company or a related person, as defined in section 12-217ii, with respect to the eligible production company during the prior twelve months.

(C) A relocated television production may be a state-certified qualified production for not more than ten successive income years, after which period the eligible production company shall be ineligible to resubmit an application for certification.

(b) (1) The Department of Economic and Community Development shall administer a system of tax credit vouchers within the resources, requirements and purposes of this section for eligible production companies producing a state-certified qualified production in the state.

(2) Any eligible production company incurring production expenses or costs shall be eligible for a credit (A) for income years commencing on or after January 1, 2010, but prior to January 1, 2018, against the tax imposed under chapter 207 or this chapter, (B) for income years commencing on or after January 1, 2018, but prior to January 1, 2022, against the tax imposed under chapter 207 or 211 or this chapter, and (C) for income years commencing on or after January 1, 2022, against the tax imposed under chapter 207, 211, 219 or this chapter, as follows: (i) For any such company incurring such expenses or costs of not less than one hundred thousand dollars, but not more than five hundred thousand dollars, a credit equal to ten per cent of such expenses or costs, (ii) for any such company incurring such expenses or costs of more than five hundred thousand dollars, but not more than one million dollars, a credit equal to fifteen per cent of such expenses or costs, and (iii) for any such company incurring such expenses or costs of more than one million dollars, a credit equal to thirty per cent of such expenses or costs.

(c) No eligible production company incurring an amount of production expenses or costs that qualifies for such credit shall be eligible for such credit unless on or after January 1, 2010, such company conducts (1) not less than fifty per cent of principal photography days within the state, or (2) expends not less than fifty per cent of postproduction costs within the state, or (3) expends not less than one million dollars of postproduction costs within the state. The provisions of this subsection shall not apply to an eligible production company that produces an interactive Internet web site created for distribution or exhibition to the general public.

(d) For income years commencing on or after January 1, 2010, no expenses or costs incurred outside the state and used within the state shall be eligible for a credit, and one hundred per cent of such expenses or costs shall be counted toward such credit when incurred within the state and used within the state.

(e) (1) On and after July 1, 2006, and for income years commencing on or after January 1, 2006, any credit allowed pursuant to this section may be sold, assigned or otherwise transferred, in whole or in part, to one or more taxpayers, provided (A) no credit, after issuance, may be sold, assigned or otherwise transferred, in whole or in part, more than three times, (B) in the case of a credit allowed for the income year commencing on or after January 1, 2011, but prior to January 1, 2012, any entity that is not subject to tax under chapter 207 or this chapter may transfer not more than fifty per cent of such credit in any one income year, and (C) in the case of a credit allowed for an income year commencing on or after January 1, 2012, any entity that is not subject to tax under chapter 207 or this chapter may transfer not more than twenty-five per cent of such credit in any one income year.

(2) Notwithstanding the provisions of subdivision (1) of this subsection, any entity that is not subject to tax under this chapter or chapter 207 shall not be subject to the limitations on the transfer of credits provided in subparagraphs (B) and (C) of said subdivision (1), provided such entity owns not less than fifty per cent, directly or indirectly, of a business entity, as defined in section 12-284b.

(3) Notwithstanding the provisions of subdivision (1) of this subsection, any qualified production that is created in whole or in significant part, as determined by the Commissioner of Economic and Community Development, at a qualified production facility shall not be subject to the limitations of subparagraph (B) or (C) of said subdivision (1). For purposes of this subdivision, “qualified production facility” means a facility (A) located in this state, (B) intended for film, television or digital media production, and (C) that has had a minimum investment of three million dollars, or less if the Commissioner of Economic and Community Development determines such facility otherwise qualifies.

(4) (A) For the income year commencing on or after January 1, 2018, but prior to January 1, 2019, any credit that is sold, assigned or otherwise transferred, in whole or in part, to one or more taxpayers pursuant to subdivision (1) of this subsection may be claimed against the tax imposed under chapter 211 only if there is common ownership of at least fifty per cent between such taxpayer and the eligible production company that sold, assigned or otherwise transferred such credit. Such taxpayer may only claim ninety-two per cent of the amount of such credit entered by the department on the production tax credit voucher.

(B) For income years commencing on or after January 1, 2019, any credit that is sold, assigned or otherwise transferred, in whole or in part, to one or more taxpayers pursuant to subdivision (1) of this subsection, which credit is claimed against the tax imposed under chapter 211, shall be subject to the following limits:

(i) The taxpayer may only claim ninety-five per cent of the amount of such credit entered by the department on the production tax credit voucher; and

(ii) If there is common ownership of at least fifty per cent between such taxpayer and the eligible production company that sold, assigned or otherwise transferred such credit, such taxpayer may only claim ninety-two per cent of the amount of such credit entered by the department on the production tax credit voucher.

(5) (A) For income years commencing on or after January 1, 2022, but prior to January 1, 2024, and on or after January 1, 2026, any credit that is claimed against the tax imposed under chapter 219 shall be subject to the following limits:

(i) Any credit that is sold, assigned or otherwise transferred, in whole or in part, to one or more taxpayers pursuant to subdivision (1) of this subsection may be claimed against the tax imposed under chapter 219 only if there is common ownership of at least fifty per cent between such taxpayer and the eligible production company that sold, assigned or otherwise transferred such credit; and

(ii) The eligible production company or taxpayer claiming the credit against the tax imposed under chapter 219 may only claim seventy-eight per cent of the amount of such credit entered by the department on the production tax credit voucher.

(B) For income years commencing on or after January 1, 2024, but prior to January 1, 2026, any credit that is claimed against the tax imposed under chapter 219 shall be subject to the following limits:

(ii) The eligible production company or taxpayer claiming the credit against the tax imposed under chapter 219 may only claim ninety-two per cent of the amount of such credit entered by the department on the production tax credit voucher.

(f) (1) On and after July 1, 2006, and for income years commencing on or after January 1, 2006, but prior to January 1, 2015, all or part of any such credit allowed under this section may be claimed against the tax imposed under chapter 207 or this chapter for the income year in which the production expenses or costs were incurred, or in the three immediately succeeding income years.

(2) For production tax credit vouchers issued on or after July 1, 2015, but prior to January 1, 2018, all or part of any such credit may be claimed against the tax imposed under chapter 207 or this chapter, for the income year in which the production expenses or costs were incurred, or in the five immediately succeeding income years.

(3) For production tax credit vouchers issued on or after July 1, 2018, but prior to January 1, 2022, all or part of any such credit may be claimed against the tax imposed under chapter 207 or 211 or this chapter, for the income year in which the production expenses or costs were incurred, or in the five immediately succeeding income years.

(4) For production tax credit vouchers issued on or after January 1, 2022, all or part of any such credit may be claimed against the tax imposed under chapter 207, 211, 219 or this chapter, for the income year in which the production expenses or costs were incurred, or in the five immediately succeeding income years.

(g) Any production tax credit allowed under this section shall be nonrefundable.

(h) (1) An eligible production company shall apply to the department for a tax credit voucher on an annual basis, but not later than ninety days after the first production expenses or costs are incurred in the production of a qualified production, and shall provide with such application such information as the department may require to determine such company's eligibility to claim a credit under this section. No production expenses or costs may be listed more than once for purposes of the tax credit voucher pursuant to this section or section 12-217kk, and if a production expense or cost has been included in a claim for a credit, such production expense or cost may not be included in any subsequent claim for a credit.

(2) Not later than ninety days after the end of the annual period, or after the completion of the independent certification, an eligible production company shall apply to the department for a production tax credit voucher, and shall provide with such application (A) a report that includes the number of full-time jobs and the number of part-time jobs created by the eligible production company during the annual period, a description of each such job and an explanation of what the eligible production company considers to be job creation for purposes of the report, and (B) such information and independent certification as the department may require pertaining to the amount of such company's production expenses or costs. Such independent certification shall be provided by an audit professional chosen from a list compiled by the department. If the department determines that such company is eligible to be issued a production tax credit voucher, the department shall enter on the voucher the amount of production expenses or costs that has been established to the satisfaction of the department and the amount of such company's credit under this section. The department shall provide a copy of such voucher to the commissioner, upon request.

(3) The department shall charge a reasonable and nonrefundable administrative fee sufficient to cover the department's costs to analyze applications submitted under this section.

(i) If an eligible production company sells, assigns or otherwise transfers a credit under this section to another taxpayer, the transferor and transferee shall jointly submit written notification of such transfer to the department not later than thirty days after such transfer. If such transferee sells, assigns or otherwise transfers a credit under this section to a subsequent transferee, such transferee and such subsequent transferee shall jointly submit written notification of such transfer to the department not later than thirty days after such transfer. The notification after each transfer shall include the credit voucher number, the date of transfer, the amount of such credit transferred, the tax credit balance before and after the transfer, the tax identification numbers for both the transferor and the transferee, and any other information required by the department. Failure to comply with this subsection will result in a disallowance of the tax credit until there is full compliance on the part of the transferor and the transferee, and for a second or third transfer, on the part of all subsequent transferors and transferees. The department shall provide a copy of the notification of assignment to the commissioner upon request.

(j) Any eligible production company that submits information to the department that it knows to be fraudulent or false shall, in addition to any other penalties provided by law, be liable for a penalty equal to the amount of such company's credit entered on the production tax credit voucher issued under this section.

(k) No tax credits transferred pursuant to this section shall be subject to a post-certification remedy, and the department and the commissioner shall have no right, except in the case of possible material misrepresentation or fraud, to conduct any further or additional review, examination or audit of the expenditures or costs for which such tax credits were issued. The sole and exclusive remedy of the department and the commissioner shall be to seek collection of the amount of such tax credits from the entity that committed the fraud or misrepresentation.

(l) The department, in consultation with the commissioner, may adopt regulations, in accordance with the provisions of chapter 54, as may be necessary for the administration of this section.

(P.A. 06-83, S. 20; 06-186, S. 83; 06-187, S. 79; P.A. 07-236, S. 1; June Sp. Sess. P.A. 07-4, S. 69, 70; June Sp. Sess. P.A. 07-5, S. 13; P.A. 08-142, S. 1; June Sp. Sess. P.A. 09-3, S. 97; Sept. Sp. Sess. P.A. 09-8, S. 1–3; P.A. 10-107, S. 1; June Sp. Sess. P.A. 10-1, S. 61; P.A. 11-6, S. 77; 11-61, S. 37; Oct. Sp. Sess. P.A. 11-1, S. 53; P.A. 13-184, S. 75; 13-247, S. 129; P.A. 15-244, S. 86; June Sp. Sess. P.A. 15-5, S. 431; June Sp. Sess. P.A. 17-2, S. 626; P.A. 19-117, S. 339; June Sp. Sess. P.A. 21-2, S. 429; P.A. 23-204, S. 352; P.A. 25-165, S. 3; 25-168, S. 64.)

History: P.A. 06-83 effective July 1, 2006, and applicable to income years commencing on or after January 1, 2006; P.A. 06-186 amended Subsec. (a) to redefine “qualified production” by deleting exception and changing reference to obscene material and to redefine “production expenses or costs” by eliminating requirement that they be in cash, requiring intellectual property to be produced primarily in state, requiring expenditures to be incurred within state rather than paid to persons authorized to do business in state, eliminating provision allowing commissioner to determine other production expenses or costs, exempting talent fees and making technical changes, amended Subsec. (b) by replacing former provisions with provisions allowing any eligible production company to receive 30% credit and allowing a three-year carryforward, eliminated former Subsec. (c) re wage tax credit, redesignated existing Subsec. (d) as new Subsec. (c) and made conforming changes therein, eliminated former Subsec. (e) re carryforward period, inserted new Subsec. (d) re procedure upon transfer of credit, and redesignated existing Subsec. (f) as new Subsec. (e) and amended same to require the commission, in consultation with the commissioner, to adopt regulations, effective July 1, 2006, and applicable to income years commencing on or after January 1, 2006; P.A. 06-187 amended Subsec. (f) to require the commission, in consultation with the commissioner, to adopt regulations, effective July 1, 2006 (Revisor's note: In Subsec. (a)(6)(A), a reference to “subsection (f) of this section” was changed editorially by the Revisors to “subsection (e) of this section”, for accuracy); P.A. 07-236 amended Subsec. (a) to redefine “qualified production” and “production expenses or costs” and add definitions of “sound recording”, “interactive web site” and “post-certification remedy”, amended Subsec. (b) to divide existing provisions into Subdivs. (1) to (3) and, in Subdiv. (1), to apply credit to taxes due under chapter 207 and add Subpara. (A) re expenses or costs on and after January 1, 2009, and Subpara. (B) re expenses or costs on and after January 1, 2012, and, in Subdiv. (2), to limit credit transfers to three times, amended Subsec. (c) to add provisions in Subdiv. (1) to prohibit limit on listing expenses or costs on a tax credit voucher more than one once, to add new Subdiv. (2) re requirements for applying for tax credit vouchers, and to redesignate existing Subdiv. (2) as Subdiv. (3), amended Subsec. (d) to add provisions re second or third transfers, added new Subsec (e) re submission of false or fraudulent information and Subsec. (f) re post-certification remedy, redesignated existing Subsec. (e) as Subsec. (g) and made conforming changes throughout, effective July 1, 2007, and applicable to income years commencing on or after January 1, 2007; June Sp. Sess. P.A. 07-4 amended Subsec. (a) by making a technical change in Subdiv. (3)(A) and inserting “in the state” re expenditures incurred in Subdiv. (5), effective July 1, 2007, and applicable to income years commencing on or after January 1, 2007, and amended Subsec. (c) by inserting “and independent certification” in Subdivs. (2) and (3), effective July 1, 2007; June Sp. Sess. P.A. 07-5 amended Subsec. (f) to substitute “commission” for “commissioner” re issuance of tax credit voucher and make technical changes, effective October 6, 2007; P.A. 08-142 amended Subsec. (b) by changing eligibility date in Subdiv. (1) from income years commencing on or after January 1, 2007, to income years commencing on or after January 1, 2006, and amending Subdivs. (2) and (3) to specify that provisions are applicable on and after July 1, 2006, for income years commencing on or after January 1, 2006, effective June 5, 2008; June Sp. Sess. P.A. 09-3 made changes throughout to transfer responsibility for program from Commission on Culture and Tourism to Department of Economic and Community Development, amended Subsec. (a) by deleting infomercials from definition of “qualified production” in Subdiv. (3)(A) and removing compensation in excess of $20,000,000 and costs of independent certification from definition of “production expenses or costs” in Subdiv. (5)(C), amended Subsec. (b)(1) by designating existing provisions re income years on or after January 1, 2006, as new Subpara. (A), amending same to make applicable prior to January 1, 2010, and replacing former Subparas. (A) and (B) with new Subparas. (B) to (D) re spending and in-state work required to qualify for credit, amended Subsec. (c) by deleting former Subdiv. (2) re interim voucher, redesignating existing Subdiv. (3) as Subdiv. (2), amending same to add provision re independent certification provided by audit professional chosen from list, and adding new Subdiv. (3) re administrative fee, amended Subsec. (e) by deleting “wilfully” re submission of information, and amended Subsec. (f) by replacing former provisions with provisions re post-certification remedy, effective September 9, 2009, and applicable to income years commencing on or after January 1, 2010; Sept. Sp. Sess. P.A. 09-8 amended Subsec. (b) by replacing “not less than five hundred thousand one dollars” with “more than five hundred thousand dollars” in Subdiv. (1)(B)(ii), adding provision re postproduction costs in Subdiv. (1)(C) and inserting “all or part of” re credit in Subdiv. (3), effective October 5, 2009; P.A. 10-107 amended Subsec. (a) by deleting “development” from definition of “production expenses or costs” in Subdiv. (5) and adding Subdiv. (10) defining “compensation”, redesignated existing Subsec. (b)(1) as Subsec. (b) and made technical changes therein, redesignated existing Subsec. (b)(1)(C) as new Subsec. (c) and amended same by changing principal photography days requirement from 50% to 25% and adding “or (C) expends not less than one million dollars of postproduction costs within the state” and redesignated existing Subsecs. (b)(1)(D) to (g) as Subsecs. (d) to (k), effective July 1, 2010, and applicable to income years commencing on or after January 1, 2010; June Sp. Sess. P.A. 10-1 made technical changes in Subsec. (c), effective July 1, 2010, and applicable to income years commencing on or after January 1, 2010 (Revisor's note: In 2011, internal references to “subsection (c) of this section” in Subsec. (a)(5)(C)(vi) and “subsection (g) of this section” in Subsec. (a)(7)(A) were changed editorially by the Revisors to “subsection (g) of this section” and “subsection (k) of this section”, respectively, to reflect changes made by P.A. 10-107); P.A. 11-6 amended Subsec. (c) by increasing from 25% to 50% the required principal photography days within the state, and amended Subsec. (e) by designating existing provisions as Subdiv. (1) and amending same to add Subparas. (B) and (C) re limits on transfer of credits and by adding Subdiv. (2) re exception to transfer limits, effective May 4, 2011, and applicable to income years commencing on or after January 1, 2011; P.A. 11-61 amended Subsec. (e) by adding new Subdiv. (2) re exception to limitations on transfer for certain entities, redesignating existing Subdiv. (2) as Subdiv. (3), and specifying in Subdiv. (3)(C) that determination is by the Commissioner of Economic and Community Development, effective July 1, 2011; Oct. Sp. Sess. P.A. 11-1 amended Subsec. (a) by adding references to relocated television production in definition of “qualified production”, and adding Subdiv. (11) defining “relocated television production”, effective October 27, 2011; P.A. 13-184 amended Subsec. (a)(3) by excluding “motion picture” from the definition of “qualified production” for fiscal years ending June 30, 2014, and June 30, 2015, effective July 1, 2013, and applicable to tax credits issued on or after that date; P.A. 13-247 amended Subsec. (a)(3) by excluding “motion picture” from the definition of “qualified production” for fiscal years ending June 30, 2014, and June 30, 2015, and specified that the exclusion applies to motion picture not designated as a state-certified qualified production prior to July 1, 2013, effective July 1, 2013, and applicable to tax credits issued on or after that date; P.A. 15-244 amended Subsec. (a)(3)(A) to extend provisions re motion pictures under definition of “qualified production” to fiscal years ending June 30, 2016, and June 30, 2017, effective June 30, 2015; June Sp. Sess. P.A. 15-5 amended Subsec. (f) by adding provision re tax credit vouchers issued on or after July 1, 2015, to be claimed in the income year the production expenses or costs were incurred, or in the five immediately succeeding income years, effective June 30, 2015; June Sp. Sess. P.A. 17-2 amended Subsec. (a)(3)(A) by replacing “For the state fiscal years ending June 30, 2014, June 30, 2015, June 30, 2016, and June 30, 2017,” with “For state fiscal years ending on or after June 30, 2014”, replacing “during said years” with “for such motion picture”, and replacing “for the state fiscal years ending June 30, 2015, June 30, 2016, and June 30, 2017” with “for state fiscal years ending on or after June 30, 2015”, amended Subsec. (b) by deleting former Subdiv. (1) re income years commencing prior to January 1, 2010, and designating existing provision re tax credit voucher system administration as new Subdiv. (1), substantially amending Subdiv. (2) including by adding provision re credit use for income years commencing on or after January 1, 2018, against tax imposed under Ch. 211, amended Subsec. (d) by deleting former Subdiv. (1) re production expenses or costs for income years commencing on or after January 1, 2009, but prior to January 1, 2010, and redesignating existing Subdiv. (2) as new Subsec. (d), amended Subsec. (e) by adding Subdiv. (4) re use of credit that is sold, assigned or otherwise transferred, amended Subsec. (f) by adding Subdiv. designators (1) to (3) and replacing “shall” with “may” re claiming credit and adding Subpara. (B) re income years commencing on or after January 1, 2018, in Subdiv. (2), and made technical and conforming changes, effective October 31, 2017; P.A. 19-117 amended Subsec. (e)(2) by replacing “subject to tax under” with “, as defined in” re reference to Sec. 12-284b, effective January 1, 2020; June Sp. Sess. P.A. 21-2 amended Subsec. (b)(2) by adding Subpara. (C) re income years commencing on or after January 1, 2022, amended Subsec. (e) by adding Subdiv. (5) re credit use for income years commencing on or after January 1, 2022, against tax imposed under Ch. 219, substantially revised Subsec. (f) re production tax credit vouchers and redesignated Subdiv. (3) as new Subsec. (g), redesignated former Subsecs. (g) to (k) as Subsecs. (h) to (l), and made technical and conforming changes, effective January 1, 2022; P.A. 23-204 amended Subsec. (e) by making a technical change in Subdiv. (1), replacing “commencing January 1, 2018,” with “commencing on or after January 1, 2018, but prior to January 1, 2019,” in Subdiv. (4)(A), redesignating existing provisions of Subdiv. (5) as Subpara. (A) and amending same to add “but prior to January 1, 2024, and on or after January 1, 2026,” and make conforming changes, and adding new Subpara. (B) re credit claimed against tax imposed under Ch. 219 for income years commencing on or after January 1, 2024, but prior to January 1, 2026, and amended Subsec. (h)(2) by adding Subpara. (A) re report inclusion with production tax credit voucher application and redesignating existing provision re information and independent certification as department may require as Subpara. (B), effective January 1, 2024; P.A. 25-165 amended Subsec. (a)(8) by adding “expenses or” after “production”, amended Subsec. (c) by adding provision re eligibility for tax credit by production company that produces interactive Internet web site created for distribution or exhibition to general public, amended Subsec. (h)(1) to delete reference to Sec. 12-217ll which was repealed by the same act, amended Subsec. (h)(2) to revise existing provision re when an eligible production company shall apply for a production tax credit voucher, amended Subsec. (h)(3) by adding “and nonrefundable” after “reasonable” and amended subsection (l) to change “shall” to “may” re adoption of regulations, effective July 1, 2025, and applicable to applications open or filed on or after July 1, 2025; P.A. 25-168 made an identical change in Subsec. (h)(1) as P.A. 25-165, effective June 30, 2025.

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Sec. 12-217kk. Tax credit for infrastructure projects in the entertainment industry. Regulations. (a) As used in this section:

(1) “Commissioner” means the Commissioner of Revenue Services.

(2) “Department” means the Department of Economic and Community Development.

(3) “Infrastructure project” means a capital project to provide basic buildings, facilities or installations needed for the functioning of the digital media and motion picture industry in this state.

(4) “State-certified project” means an infrastructure project undertaken in this state by an entity that (A) is in compliance with regulations adopted pursuant to subsection (e) of this section, (B) is authorized to conduct business in this state, (C) is not in default on a loan made by the state or a loan guaranteed by the state, nor has ever declared bankruptcy under which an obligation of the entity to pay or repay public funds was discharged as a part of such bankruptcy, and (D) has been approved by the department as qualifying for an infrastructure tax credit under this section.

(5) “Post-certification remedy” means the recapture, disallowance, recovery, reduction, repayment, forfeiture, decertification or any other remedy that would have the effect of reducing or otherwise limiting the use of a tax credit provided by this section.

(b) (1) (A) For income years commencing prior to January 1, 2010, there shall be allowed a state-certified project credit against the tax imposed under chapter 207 or this chapter to any taxpayer that invests in a state-certified project. Such credit may be in the following amounts: (i) For state-certified projects costing greater than fifteen thousand dollars and less than one hundred fifty thousand dollars, each taxpayer may be allowed a tax credit of ten per cent of the investment made by such taxpayer; (ii) for state-certified projects costing one hundred fifty thousand dollars or more, but less than one million dollars, each taxpayer may be allowed a tax credit of fifteen per cent of the investment made by such taxpayer; and (iii) for state-certified projects costing one million dollars or more, each taxpayer may be allowed a tax credit of twenty per cent of the investment made by such taxpayer.

(B) For income years commencing on or after January 1, 2010, there shall be allowed a state-certified project credit against the tax imposed under chapter 207 or this chapter to any taxpayer that invests three million dollars or more in a state-certified project in an amount equal to twenty per cent of the investment made by such taxpayer.

(2) Eligible expenditures pursuant to this section shall include the following: All expenditures for a capital project to provide buildings, facilities or installations, whether a capital lease or purchase, together with necessary equipment for a film, video, television, digital production facility or digital animation production facility; project development, including design, professional consulting fees and transaction costs; development, preproduction, production, post-production and distribution equipment and system access; and fixtures and other equipment.

(3) Any credit allowed pursuant to this section may be sold, assigned or otherwise transferred, in whole or in part, to one or more taxpayers, and such taxpayers may sell, assign or otherwise transfer, in whole or in part, such credit.

(4) All or part of any credit allowed pursuant to this section shall be claimed against the tax imposed under chapter 207 or this chapter for the income year in which expenditures were made for the infrastructure project, or in the three immediately succeeding income years.

(5) Any tax credit earned under this section shall be nonrefundable.

(c) (1) An entity undertaking an infrastructure project shall apply to the department for an eligibility certificate not later than ninety days after the first expenses or costs are incurred, and shall provide with such application such information as the department may require to determine such infrastructure project's eligibility as a state-certified project.

(2) Each application for an eligibility certificate shall include: (A) A detailed description of the infrastructure project; (B) a preliminary budget; (C) estimated completion date; and (D) such other information as the department may require. The department may require an independent audit of all project costs and expenditures prior to certification. If the department determines that such project is eligible to be a state-certified project, the department shall indicate the amount of costs or expenditures that has been established to the satisfaction of the department, and issue to such entity a tax credit certification letter for investors indicating the amount of tax credits available under this section. The department shall provide a copy of such letter to the commissioner, upon request.

(3) Prior to the issuance of a state-certified project tax credit voucher to a taxpayer based upon the tax credit certification letter issued pursuant to subdivision (2) of this subdivision, the entity undertaking such infrastructure project shall provide the department with a description of the progress on such project and an estimated completion date. The department may require an independent audit of all project costs and expenditures prior to issuance of such tax credit voucher to a taxpayer. No such tax credit voucher may be issued prior to such time as such state-certified project is shown to be one hundred per cent complete.

(4) The department shall charge a reasonable and nonrefundable administrative fee sufficient to cover the department's costs to analyze applications submitted under this section.

(d) If a taxpayer sells, assigns or otherwise transfers a credit under this section to another taxpayer, the transferor and transferee shall jointly submit written notification of such transfer to the department not later than thirty days after such transfer. The notification shall include the credit certificate number, the date of transfer, the amount of such credit transferred, the tax credit balance before and after the transfer, the tax identification numbers for both the transferor and the transferee and any other information required by the commissioner. After the initial issuance of a tax credit, such credit may be sold, assigned or otherwise transferred not more than three times. Failure to comply with this subsection will result in a disallowance of the tax credit until there is full compliance on both the part of the transferor and the transferee, and all subsequent transferors and transferees. The department shall provide a copy of the notification of assignment to the commissioner upon request.

(e) No tax credits transferred pursuant to this section shall be subject to a post-certification remedy, and the department and the commissioner shall have no right, except in the case of possible material misrepresentation or fraud, to conduct any further or additional review, examination or audit of the expenditures or costs for which such tax credits were issued. The sole and exclusive remedy of the department and the commissioner shall be to seek collection of the amount of such tax credits from the entity that committed the fraud or misrepresentation.

(f) The department, in consultation with the commissioner, may adopt regulations, in accordance with the provisions of chapter 54, as may be necessary for the administration of this section.

(P.A. 07-236, S. 2; June Sp. Sess. P.A. 07-5, S. 14; June Sp. Sess. P.A. 09-3, S. 98; P.A. 10-107, S. 2; Oct. Sp. Sess. P.A. 11-1, S. 55; P.A. 13-232, S. 10; P.A. 25-165, S. 4.)

History: P.A. 07-236 effective July 1, 2007, and applicable to income years commencing on or after January 1, 2007; June Sp. Sess. P.A. 07-5 amended Subsec. (e) to substitute “commission” for “commissioner” re issuance of tax credit voucher and make technical changes, effective October 6, 2007; June Sp. Sess. P.A. 09-3 made changes throughout to transfer responsibility for program from Commission on Culture and Tourism to Department of Economic and Community Development, amended Subsec. (b)(1) by designating existing provisions as Subpara. (A), making conforming changes therein and adding Subpara. (B) re $3,000,000 threshold to qualify for credit on or after January 1, 2010, amended Subsec. (c) by changing completion amount required in Subdiv. (3) from 60% to 100% and adding Subdiv. (4) re administrative fee, and amended Subsec. (e) by replacing former provisions with provisions re post-certification remedy, effective September 9, 2009, and applicable to income years commencing on or after January 1, 2010; P.A. 10-107 amended Subsec. (b)(2) by replacing “leased or purchased” with “a capital lease or purchase”, effective July 1, 2010, and applicable to income years commencing on or after January 1, 2010; Oct. Sp. Sess. P.A. 11-1 amended Subsec. (b)(4) to specify that all or part of credit must be claimed in the income year in which expenditures were made, or in the three immediately succeeding income years and to delete provision re amount of allowable credit exceeding sum of taxes due, effective October 27, 2011; P.A. 13-232 amended Subsec. (b)(3) by eliminating requirement that credit be claimed in same year expenditures were made, effective June 25, 2013; P.A. 25-165 amended Subsec. (c)(4) by adding “and nonrefundable” after “reasonable” and amended subsection (f) to change “shall” to “may” re adoption of regulations, effective July 1, 2025.

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Sec. 12-217ll. Tax credit for digital animation production companies. Regulations. Section 12-217ll is repealed, effective June 30, 2025.

(P.A. 07-236, S. 3; June Sp. Sess. P.A. 07-4, S. 71; June Sp. Sess. P.A. 07-5, S. 15; June Sp. Sess. P.A. 09-3, S. 99; Sept. Sp. Sess. P.A. 09-8, S. 4, 5; P.A. 25-168, S. 68.)

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Sec. 12-217rr. Tax credits for cash contributions to youth development organizations. Sunset. (a) As used in this section, “youth development organization” means a nonprofit organization in this state that is exempt from taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, and that (1) provides evidence-supported interventions to high-risk youth to improve school and family engagement, and (2) offers skills development, transitional employment and job placement and support to assist young adults to be employed and self-sufficient.

(b) (1) There shall be allowed, for the income or taxable years commencing on or after January 1, 2024, and prior to January 1, 2026, a credit against the tax imposed by this chapter or chapter 229, other than the liability imposed by section 12-707, for cash contributions made to a youth development organization to fund programs such as after-school tutoring, mentoring programs and workforce preparedness training.

(2) The amount of the credit allowed shall be fifty per cent of the contribution made for an income or taxable year, as applicable, and shall not exceed (A) one hundred thousand dollars for any income year for any taxpayer subject to the tax imposed by this chapter, or (B) twenty thousand dollars for any taxable year for any taxpayer subject to the tax imposed under chapter 229.

(3) If the taxpayer that made the contribution is an S corporation or an entity treated as a partnership for federal income tax purposes, the credit may be claimed by the taxpayer's shareholders or partners. If such taxpayer is a single member limited liability company that is disregarded as an entity separate from its owner, the credit may be claimed by such limited liability company's owner, provided such owner is subject to the tax imposed under this chapter or chapter 229.

(c) (1) Any entity or individual subject to the tax imposed by this chapter or chapter 229 may apply to the Office of Policy and Management, in such form and manner as prescribed by the Secretary of the Office of Policy and Management, to reserve an allocation for a credit in the amount of the contribution such entity or individual intends to make. The application shall contain such information as the secretary deems necessary to administer the provisions of this section.

(2) The secretary shall approve applications on a first-come, first-served basis and shall notify the entity or individual in writing not later than thirty days after the date of receipt of an application of the secretary's approval or rejection of the application. Any entity or individual that is approved shall make the intended contribution to the youth development organization not later than one hundred twenty days after the date such entity or individual receives notice of the secretary's approval.

(3) The total amount of credits that may be reserved under this subsection shall not exceed two million five hundred thousand dollars in any one fiscal year.

(d) After an entity or individual has made the contribution, such entity or individual shall apply to the Secretary of the Office of Policy and Management for a tax credit voucher and shall provide with the application such documentation and independent certification as the secretary may require pertaining to the amount of the contribution and certifying that such contribution was actually made to the youth development organization. If the secretary determines that such entity or individual is eligible to be issued a tax credit voucher, the secretary shall enter on the voucher the amount of the credit allowed. The secretary shall provide a copy of such voucher to the Commissioner of Revenue Services upon request. The credit allowed under this section shall be claimed for the income or taxable year in which the contribution was made.

(e) Any entity or individual that submits information to the Secretary of the Office of Policy and Management that such entity or individual knows to be fraudulent or false shall, in addition to any other penalties provided by law, be liable for a penalty equal to the amount of such entity's or individual's credit allowed under this section.

(f) The Secretary of the Office of Policy and Management and the Commissioner of Revenue Services may, for purposes of determining the correctness of any credit claimed pursuant to this section, examine any books, papers and records relating to the documentation provided with an application for a tax credit voucher under this section.

(g) Not later than March 1, 2025, and March 1, 2026, the Secretary of the Office of Policy and Management shall submit a report, in accordance with the provisions of section 11-4a, to the joint standing committees of the General Assembly having cognizance of matters relating to commerce and finance, revenue and bonding. Such report shall include information for the preceding calendar year regarding (1) the number of applications the secretary received to reserve a credit under this section and the number of such applications that were approved and were rejected, (2) the total number of tax credit vouchers approved and the amount of each such voucher, (3) the number of entities subject to the tax imposed by this chapter (A) whose applications were approved, and (B) who received a tax credit voucher, (4) the number of individuals subject to the tax imposed by chapter 229 (A) whose applications were approved, and (B) who received a tax credit voucher, (5) the youth development organizations to which contributions were made pursuant to this section, and (6) any other information or data the secretary deems relevant to evaluating the effectiveness of the credit under this section.

(P.A. 23-205, S. 161; P.A. 25-168, S. 54.)

History: P.A. 23-205 effective January 1, 2024; P.A. 25-168 amended Subsec. (a) by adding “in this state” re youth development organization, effective June 30, 2025, and applicable to applications filed on or after said date.

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Sec. 12-217uu. Tax credit for employer contributions to employee CHET accounts. (a)(1) There shall be allowed a credit against the tax imposed under chapter 207, this chapter or chapter 229, other than the liability imposed by section 12-707, for contributions made by an employer into a CHET account, as defined in section 3-22f, of an employee of such employer, provided such employee is not an owner, member or partner of such employer or a family member of an owner, member or partner of such employer.

(2) The amount of the credit shall be equal to twenty-five per cent of the amount of the contributions made by the employer into the CHET accounts of employees of such employer for the income or taxable year, provided the amount of the credit allowed for any income or taxable year with respect to a specific employee shall not exceed five hundred dollars.

(b) If the employer is an S corporation or an entity treated as a partnership for federal income tax purposes, the credit may be claimed by the shareholders or partners of the employer. If the employer is a single member limited liability company that is disregarded as an entity separate from its owner, the credit may be claimed by such limited liability company's owner, provided such owner is a person subject to the tax imposed under chapter 207, this chapter or chapter 229.

(P.A. 25-168, S. 374.)

History: P.A. 25-168 effective July 1, 2025, and applicable to income and taxable years commencing on or after January 1, 2025.

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Sec. 12-217vv. Tax credit for farm investment property. (a) As used in this section:

(1) “Eligible farmer” means a taxpayer in this state whose federal gross income from farming for the income or taxable year is at least two-thirds of excess federal gross income;

(2) “Excess federal gross income” means the amount of federal gross income from all sources for the income or taxable year in excess of thirty thousand dollars;

(3) “Agricultural production” has the same meaning as provided in subdivision (63) of section 12-412;

(4) “Farm investment property” means machinery and equipment that are acquired by purchase by an eligible farmer on or after January 1, 2026, and buildings and structural components of buildings that are acquired, constructed, reconstructed or erected by an eligible farmer and placed in service on or after January 1, 2026, and (A) are situated in this state, (B) have a class life of more than four years, as described in Section 168(e) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, (C) are acquired by an eligible farmer from a person other than a related person, (D) are not acquired to be leased, and are not leased, to another person or persons during the twelve full months following their acquisition or placement in service, and (E) will be held and used in this state by the eligible farmer in the ordinary course of agricultural production for not less than five full years following the date of acquisition of such machinery and equipment or the date of placement in service of such buildings;

(5) “Related person” means (A) a corporation, limited liability company, partnership, association or trust controlled by the taxpayer, (B) an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer, (C) a corporation, limited liability company, partnership, association or trust controlled by an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer, or (D) a member of the same controlled group as the taxpayer; and

(6) “Control” means (A) with respect to a corporation, ownership, directly or indirectly, of stock possessing fifty per cent or more of the total combined voting power of all classes of the stock of such corporation entitled to vote, or (B) with respect to a trust, ownership, directly or indirectly, of fifty per cent or more of the beneficial interest in the principal or income of such trust. The ownership (i) of stock in a corporation, (ii) of a capital or profits interest in a partnership or association, or (iii) of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in Section 267(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, other than paragraph (3) of said section.

(b) A taxpayer, in determining income eligibility for purposes of this section, may use for any income or taxable year the average of the taxpayer's federal gross income from farming for such income or taxable year and the two consecutive income or taxable years immediately preceding.

(c) (1) There shall be allowed a credit against the tax imposed under this chapter or chapter 229, other than the liability imposed by section 12-707, of twenty per cent of the amount paid or incurred during an income or a taxable year for farm investment property by a taxpayer that is an eligible farmer.

(2) If the taxpayer is an S corporation or an entity treated as a partnership for federal income tax purposes, the credit may be claimed by the taxpayer's shareholders or partners. If the taxpayer is a single member limited liability company that is disregarded as an entity separate from its owner, the credit may be claimed by such limited liability company's owner, provided such owner is subject to the tax imposed under this chapter or chapter 229.

(3) If the amount of the credit allowed pursuant to this section exceeds the taxpayer's liability for the tax imposed under this chapter or chapter 229, the Commissioner of Revenue Services shall treat such excess as an overpayment and, except as provided in section 12-739 or 12-742, shall refund the amount of such excess, without interest, to such taxpayer.

(4) No taxpayer claiming the credit under this section with respect to the acquisition of farm investment property may claim a credit against any tax under any other provision of the general statutes with respect to the same acquisition.

(d) If the farm investment property for which a taxpayer has claimed the credit allowed under this section is not held and used in this state in the ordinary course of agricultural production in this state for three full years following its acquisition, the taxpayer shall recapture one hundred per cent of the amount of the credit allowed under this section on its tax return required to be filed for the income or taxable year immediately succeeding the income or taxable year during which such three-year period expires. If the farm investment property for which a taxpayer has claimed the credit allowed under this section is not held and used in this state in the ordinary course of agricultural production in this state for five full years following its acquisition, the taxpayer shall recapture fifty per cent of the amount of the credit allowed under this section on its tax return required to be filed for the income or taxable year immediately succeeding the income or taxable year during which such five-year period expires. The provisions of this subsection shall not apply if the property that is the subject of the credit under this section is replaced, provided such replacement property shall not be eligible for the credit under this section. If any amount of credit required to be recaptured has not been paid to the commissioner on or before the first day of the fourth month next succeeding the end of the income year immediately succeeding the income year during which the three-year or five-year period, as the case may be, expires, such amount shall bear interest at the rate of one per cent per month or fraction thereof from such date to the date of payment.

(P.A. 25-168, S. 373.)

History: P.A. 25-168 effective January 1, 2026, and applicable to income and taxable years commencing on or after January 1, 2026.

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Sec. 12-217ww. Tax credit for farm investment property. (a) As used in this section:

(1) “Eligible farmer” means a taxpayer in this state whose federal gross income from farming for the income or taxable year is at least two-thirds of excess federal gross income;

(2) “Excess federal gross income” means the amount of federal gross income from all sources for the income or taxable year in excess of thirty thousand dollars;

(3) “Agricultural production” has the same meaning as provided in subdivision (63) of section 12-412 and includes the production of: (A) Wine from a farm winery licensed pursuant to section 30-16, (B) Christmas trees, whether dug for transplanting or cut from the stump, and (C) apple juice and cider by a farmer who holds both an apple juice and cider manufacturing permit and a farmer tax exemption permit issued pursuant to section 12-412;

(d) If the farm investment property for which a taxpayer has claimed the credit allowed under this section is not held and used in this state in the ordinary course of agricultural production in this state for three full years following its acquisition, the taxpayer shall recapture one hundred per cent of the amount of the credit allowed under this section on its tax return required to be filed for the income or taxable year immediately succeeding the income or taxable year during which such three-year period expires. If the farm investment property for which a taxpayer has claimed the credit allowed under this section is not held and used in this state in the ordinary course of agricultural production in this state for five full years following its acquisition, the taxpayer shall recapture fifty per cent of the amount of the credit allowed under this section on its tax return required to be filed for the income or taxable year immediately succeeding the income or taxable year during which such five-year period expires. The provisions of this subsection shall not apply if the property that is the subject of the credit under this section is replaced. If any amount of credit required to be recaptured has not been paid to the commissioner on or before the first day of the fourth month next succeeding the end of the income year immediately succeeding the income year during which the three-year or five-year period, as the case may be, expires, such amount shall bear interest at the rate of one per cent per month or fraction thereof from such date to the date of payment.

(P.A. 25-152, S. 5.)

History: P.A. 25-152 effective January 1, 2026, and applicable to income and taxable years commencing on or after January 1, 2026.

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Sec. 12-217xx. Credits for employer contributions to first-time homebuyer savings accounts. (a)(1) For the taxable or income year commencing on January 1, 2027, but prior to January 1, 2028, there shall be allowed a credit against the tax imposed under this chapter or chapter 229, other than the liability imposed by section 12-707, for contributions deposited by the employer of an account holder in a first-time homebuyer savings account established pursuant to subsection (c) of section 12-724b during the taxable or income years commencing on or after January 1, 2026, but prior to January 1, 2028, provided such account holder was employed by such employer at the time such contributions were made.

(2) For the taxable or income year commencing on January 1, 2028, and each taxable or income year thereafter, there shall be allowed a credit against the tax imposed under this chapter or chapter 229, other than the liability imposed by section 12-707, for contributions deposited by the employer of an account holder in a first-time homebuyer savings account established pursuant to subsection (c) of section 12-724b during the taxable or income year, provided such account holder was employed by such employer at the time such contributions were made.

(3) The amount of the credit allowed under subdivisions (1) and (2) of this subsection shall be equal to ten per cent of the amount of the contributions made by the taxpayer into the first-time homebuyer savings accounts of account holders of such accounts during the income or taxable year, provided the amount of the credit allowed for any income or taxable year with respect to a specific account holder shall not exceed two thousand five hundred dollars.

(b) If the taxpayer is an S corporation or an entity treated as a partnership for federal income tax purposes, the credit may be claimed by the shareholders or partners of the taxpayer. If the taxpayer is a single member limited liability company that is disregarded as an entity separate from its owner, the credit may be claimed by such limited liability company's owner, provided such owner is a person subject to the tax imposed under this chapter or chapter 229. Any taxpayer claiming the credit shall provide to the Department of Revenue Services documentation supporting such claim in the form and manner prescribed by the Commissioner of Revenue Services.

(Nov. Sp. Sess. P.A. 25-1, S. 3.)

History: Nov. Sp. Sess. P.A. 25-1 effective January 1, 2026.

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Sec. 12-217zz. Limit on credits under this chapter. (a) Except as otherwise provided in subsection (b) of this section and sections 10a-109aaa, 12-217aaa and 12-217bbb, the amount of tax credit or credits otherwise allowable against the tax imposed under this chapter shall be as follows:

(1) For any income year commencing on or after January 1, 2002, and prior to January 1, 2015, the amount of tax credit or credits otherwise allowable shall not exceed seventy per cent of the amount of tax due from such taxpayer under this chapter with respect to any such income year of the taxpayer prior to the application of such credit or credits;

(2) For any income year commencing on or after January 1, 2015, the amount of tax credit or credits otherwise allowable shall not exceed fifty and one one-hundredths per cent of the amount of tax due from such taxpayer under this chapter with respect to any such income year of the taxpayer prior to the application of such credit or credits;

(3) Notwithstanding the provisions of subdivision (2) of this subsection, any taxpayer that possesses excess credits may utilize the excess credits as follows:

(A) For income years commencing on or after January 1, 2016, and prior to January 1, 2017, the aggregate amount of tax credits and excess credits allowable shall not exceed fifty-five per cent of the amount of tax due from such taxpayer under this chapter with respect to any such income year of the taxpayer prior to the application of such credit or credits;

(B) For income years commencing on or after January 1, 2017, and prior to January 1, 2018, the aggregate amount of tax credits and excess credits allowable shall not exceed sixty per cent of the amount of tax due from such taxpayer under this chapter with respect to any such income year of the taxpayer prior to the application of such credit or credits;

(C) For income years commencing on or after January 1, 2018, and prior to January 1, 2019, the aggregate amount of tax credits and excess credits allowable shall not exceed sixty-five per cent of the amount of tax due from such taxpayer under this chapter with respect to any such income year of the taxpayer prior to the application of such credit or credits;

(D) For purposes of this subdivision, “excess credits” means any remaining credits available under section 12-217j, 12-217n or 32-9t after tax credits are utilized in accordance with subdivision (2) of this subsection;

(4) Notwithstanding the provisions of subdivision (2) of this subsection, the aggregate amount allowable of tax credits and any remaining credits available under section 12-217j or 12-217n after tax credits are utilized in accordance with said subdivision shall not exceed (A) for income years commencing on or after January 1, 2022, and prior to January 1, 2023, sixty per cent of the amount of tax due from such taxpayer under this chapter with respect to any such income year of the taxpayer prior to the application of such credit or credits, and (B) for income years commencing on or after January 1, 2023, and prior to January 1, 2024, seventy per cent of the amount of tax due from such taxpayer under this chapter with respect to any such income year of the taxpayer prior to the application of such credit or credits;

(5) Notwithstanding the provisions of subdivision (2) of this subsection, for income years commencing on or after January 1, 2024, the aggregate amount allowable of tax credits and any remaining credits available under section 12-217j or 12-217n or subparagraph (B) of subdivision (4) of subsection (b) of section 12-217x, after tax credits are utilized in accordance with subdivision (2) of this subsection, shall not exceed seventy per cent of the amount of tax due from such taxpayer under this chapter with respect to any such income year of the taxpayer prior to the application of such credit or credits.

(b) The amount of the rebate computed under section 32-7t shall be treated as a credit and may exceed the amount specified in subsection (a) of this section. If the amount of the rebate allowed pursuant to section 32-7t exceeds the taxpayer's liability for the tax imposed under this chapter, the commissioner shall treat such excess as an overpayment and shall refund the amount of such excess, without interest, to the taxpayer.

(May 9 Sp. Sess. P.A. 02-1, S. 59; P.A. 11-6, S. 78; P.A. 15-244, S. 88; Dec. Sp. Sess. P.A. 15-1, S. 29; June Sp. Sess. P.A. 17-2, S. 703; P.A. 19-117, S. 349; June Sp. Sess. P.A. 21-2, S. 426; P.A. 22-118, S. 423; P.A. 23-204, S. 351; P.A. 24-151, S. 95; P.A. 25-39, S. 9; 25-168, S. 385.)

History: May 9 Sp. Sess. P.A. 02-1 effective July 1, 2002, and applicable to income years commencing on or after January 1, 2002; P.A. 11-6 designated existing provisions as Subsec. (a) and amended same to add exception re Subsec. (b) provisions, and added Subsec. (b) re allowable credit for average monthly net employee gain in income years 2011 and 2012, effective May 4, 2011, and applicable to income years commencing on or after January 1, 2011; P.A. 15-244 amended Subsec. (a) to designate 70 per cent limit as Subdiv. (1) and amend same to limit to income years commencing on or after January 1, 2002, and prior to January 1, 2015, and add Subdiv. (2) re 50.01 per cent limit for income years commencing on or after January 1, 2015, effective June 30, 2015; Dec. Sp. Sess. P.A. 15-1 amended Subsec. (a) by adding Subdiv. (3) re use of excess credits by taxpayer possessing excess credits for income years commencing on or after January 1, 2016, January 1, 2017, January 1, 2018, and January 1, 2019, and adding Subdiv. (4) defining “excess credits”, effective December 29, 2015; June Sp. Sess. P.A. 17-2 amended Subsec. (a) by adding reference to Secs. 12-217aaa and 12-217bbb, effective October 31, 2017; P.A. 19-117 amended Subsec. (a) by deleting Subdiv. (3)(D) re aggregate amount of tax credits for income years commencing on or after January 1, 2019, and made a technical change, effective June 26, 2019, and applicable to income years commencing on or after January 1, 2019; June Sp. Sess. P.A. 21-2 amended Subsec. (a) by deleting reference to notwithstanding any other provision of law, redesignating existing Subdiv. (4) as Subdiv. (3)(D), and adding new Subdiv. (4) re aggregate amount of tax credits for income years commencing on or after January 1, 2022, and made technical and conforming changes, effective June 23, 2021; P.A. 22-118 amended Subsec. (b) by deleting existing provisions and adding provisions re JobsCT tax rebates computed under Sec. 32-7t, effective July 1, 2022, and applicable to taxable years commencing on or after January 1, 2023; P.A. 23-204 amended Subsec. (a) by adding “and prior to January 1, 2024,” in Subdiv. (4) and adding Subdiv. (5) re aggregate amount of tax credits for income years commencing on or after January 1, 2024, effective January 1, 2024; P.A. 24-151 amended Subsec. (a)(5) by replacing “said subdivision” with “subdivision (2) of this subsection”; P.A. 25-39 made technical changes in Subsec. (a)(4) and (5); P.A. 25-168 amended Subsec. (a) by adding reference to Sec. 10a-109aaa, effective June 30, 2025, and applicable to income years commencing on or after January 1, 2025.

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Sec. 12-218e. Combined group's net income. Apportionment percentage. Net operating loss. Carryover. Additional tax base. Nexus combined base tax. (a) For purposes of this chapter, the combined group's net income shall be the aggregate net income or loss of each taxable member and nontaxable member of the combined group derived from a unitary business, which shall be determined as follows:

(1) For any member incorporated in the United States, included in a consolidated federal corporate income tax return and filing a federal corporate income tax return, the income to be included in calculating the combined group's net income shall be such member's gross income, less the deductions provided under section 12-217, as if the member were not consolidated for federal tax purposes.

(2) For any member not included in a consolidated federal corporate income tax return but required to file its own federal corporate income tax return, the income to be included in calculating the combined group's net income shall be such member's gross income, less the deductions provided under section 12-217.

(3) For any member not incorporated in the United States, not included in a consolidated federal corporate income tax return and not required to file its own federal corporate income tax return, the income to be included in the combined group's net income shall be determined from a profit and loss statement that shall be prepared for each foreign branch or corporation in the currency in which the books of account of the branch or corporation are regularly maintained, adjusted to conform it to the accounting principles generally accepted in the United States for the presentation of such statements and further adjusted to take into account any book-tax differences required by federal or Connecticut law. The profit and loss statement of each such member of the combined group and the apportionment factors related thereto, whether United States or foreign, shall be translated into or from the currency in which the parent company maintains its books and records on any reasonable basis consistently applied on a year-to-year or entity-by-entity basis. Income shall be expressed in United States dollars. In lieu of these procedures and subject to the determination of the commissioner that the income to be reported reasonably approximates income as determined under this chapter, income may be determined on any reasonable basis consistently applied on a year-to-year or entity-by-entity basis.

(4) (A) If the unitary business has income from an entity that is treated as a pass-through entity, the combined group's net income shall include its member's direct and indirect distributive share of the pass-through entity's unitary business income.

(B) The distributive share of income received by a limited partner from an investment partnership shall not be considered to be derived from a unitary business unless the general partner of such investment partnership and such limited partner have common ownership. To the extent that the limited partner is otherwise carrying on or doing business in Connecticut, it shall apportion its distributive share of income from an investment partnership in accordance with subdivision (2) of subsection (g) of section 12-218. If the limited partner is not otherwise carrying on or doing business in Connecticut, its distributive share of income from an investment partnership is not subject to tax under this chapter.

(5) All dividends paid by one member to another member of the combined group shall be eliminated from the income of the recipient.

(6) The principles set forth in the Treasury regulations promulgated under Section 1502 of the Internal Revenue Code, including the principles relating to deferrals, eliminations, and exclusions, shall apply to the extent consistent with the Connecticut combined group membership and combined unitary reporting principles. Upon the occurrence of either of the following events, deferred business income resulting from an intercompany transaction among members of a combined group shall be restored to the income of the seller and shall be included in the combined group's net income as if the seller had earned the income immediately before the event:

(A) The object of a deferred intercompany transaction is: (i) Resold by the buyer to an entity that is not a member of the combined group, (ii) resold by the buyer to an entity that is a member of the combined group for use outside the unitary business in which the buyer and seller are engaged, or (iii) converted by the buyer to a use outside the unitary business in which the buyer and seller are engaged; or

(B) The buyer and seller are no longer members of the same combined group, regardless of whether the members remain unitary.

(7) A charitable expense incurred by a member of a combined group shall, to the extent allowable as a deduction pursuant to Section 170 of the Internal Revenue Code, be subtracted first from the combined group's net income, subject to the income limitations of said section applied to the entire business income of the group. Any charitable deduction disallowed under the foregoing rule, but allowed as a carryover deduction in a subsequent year, shall be treated as originally incurred in the subsequent year by the same member and the rules of this section shall apply in the subsequent year in determining the allowable deduction for that year.

(8) Gain or loss from the sale or exchange of capital assets, property described by Section 1231(a)(3) of the Internal Revenue Code and property subject to an involuntary conversion shall be removed from the net income of each member of a combined group and shall be included in the combined group's net income as follows:

(A) For each class of gain or loss, whether short-term capital, long-term capital, Section 1231 of the Internal Revenue Code gain or loss, or gain or loss from involuntary conversions, all members' business gain and loss for the class shall be combined, without netting among such classes, and each class of net business gain or loss shall be apportioned to each member under subsection (b) of this section; and

(B) Any resulting income or loss apportioned to this state, as long as the loss is not subject to the limitations of Section 1211 of the Internal Revenue Code, of a taxable member produced by the application of subparagraph (A) of this subdivision shall then be applied to all other income or loss of that member apportioned to this state. Any resulting loss of a member apportioned to this state that is subject to the limitations of said Section 1211 shall be carried forward by that member and shall be treated as short-term capital loss apportioned to this state and incurred by that member for the year for which the carryover applies.

(9) Any expense of any member of the combined group that is directly or indirectly attributable to the income of any member of the combined group, which income this state is prohibited from taxing pursuant to the laws or Constitution of the United States, shall be disallowed as a deduction for purposes of determining the combined group's net income.

(b) A taxable member of a combined group shall determine its apportionment percentage as follows:

(1) Each taxable member shall determine its apportionment percentage based on the otherwise applicable apportionment formula provided in this chapter. In computing its denominators for all factors, the taxable member shall use the combined group's denominator for that factor. In computing the numerator of its receipts factor, each taxable member shall add to such numerator its share of receipts of nontaxable members assignable to this state, as provided in subdivision (3) of this subsection.

(2) The combined group shall determine its property and payroll factor denominators using the factors from all members, whether or not a member would otherwise apportion its income using such property and payroll factors.

(3) Receipts assignable to this state of each nontaxable member shall be determined based upon the apportionment formula that would be applicable to such member if it were a taxable member and shall be aggregated. Each taxable member of the combined group shall include in the numerator of its receipts factor a portion of the aggregate receipts assignable to this state of nontaxable members based on a ratio, the numerator of which is such taxable member's receipts assignable to this state, without regard to this subsection, and the denominator of which is the aggregate receipts assignable to this state of all the taxable members of the combined group, without regard to this subsection.

(4) In determining the numerator and denominator of the apportionment factors of taxable members, transactions between or among members of such combined group shall be eliminated.

(5) If any member of a combined group required to file a combined unitary tax return pursuant to section 12-222 is taxable without this state, or is a financial service company, as defined in section 12-218b, each taxable member shall be entitled to apportion its net income in accordance with this section.

(c) To calculate each taxable member's net income or loss apportioned to this state, each taxable member shall apply its apportionment percentage, as determined pursuant to subsection (b) of this section, to the combined group's net income.

(d) After calculating its net income or loss apportioned to this state, pursuant to subsection (c) of this section, each taxable member of a combined group required to file a combined unitary tax return pursuant to section 12-222 may deduct a net operating loss from its net income apportioned to this state as follows:

(1) For income years beginning on or after January 1, 2016, if the computation of a combined group's net income results in a net operating loss, a taxable member of such group may carry over its net loss apportioned to this state, as calculated under subsection (c) of this section, derived from the unitary business in a future income year to the extent that the carryover and deduction is otherwise consistent with subparagraph (A) of subdivision (4) of subsection (a) of section 12-217. Any taxable member that has more than one operating loss carryover shall apply the carryovers in the order that the operating loss was incurred, with the oldest carryover to be deducted first.

(2) Where a taxable member of a combined group has an operating loss carryover derived from a loss incurred by a combined group in an income year beginning on or after January 1, 2016, then the taxable member may share the operating loss carryover with other taxable members of the combined group if such other taxable members were members of the combined group in the income year that the loss was incurred. Any amount of operating loss carryover that is deducted by another taxable member of the combined group shall reduce the amount of operating loss carryover that may be carried over by the taxable member that originally incurred the loss.

(3) Where a taxable member of a combined group has an operating loss carryover derived from a loss incurred in an income year beginning prior to January 1, 2016, or derived from an income year during which the taxable member was not a member of such combined group, the carryover shall remain available to be deducted by that taxable member or other group members that, in the year the loss was incurred, were part of the same combined group as such taxable member under section 12-223a or same unitary group as such taxable member under subsection (d) of section 12-218d of the general statutes, revision of 1958, revised to January 1, 2015. Such carryover shall not be deductible by any other members of the combined group.

(e) Each taxable member shall multiply its income or loss apportioned to this state, as calculated under subsection (c) of this section and as further modified by subsection (d) of this section, by the tax rate set forth in section 12-214.

(f) The additional tax base of taxable and nontaxable members of a combined group required to file a combined unitary tax return pursuant to section 12-222 shall be calculated as follows:

(1) Except as otherwise provided in subdivision (2) of this subsection, members of the combined group shall calculate the combined group's additional tax base by aggregating their separate additional tax bases under subsection (a) of section 12-219 provided (A) intercorporate stockholdings in the combined group shall be eliminated, (B) no deduction shall be allowed under subparagraph (B)(ii) of subdivision (1) of subsection (a) of section 12-219, for such intercorporate stockholdings, and (C) assets and liabilities attributable to transactions with another member of the combined group, including, but not limited to, a financial service company, as defined in section 12-218b, shall be eliminated. In calculating the combined group's additional tax base, the separate additional tax bases of nontaxable members shall be included, as if those nontaxable members were taxable members. The amount calculated under this subdivision shall be apportioned to those members pursuant to subdivision (1) of subsection (g) of this section.

(2) Members of the combined group that are financial service companies, as defined in section 12-218b, shall not be included in the calculation of the combined group's additional tax base set forth in subdivision (1) of this subsection. Financial service companies that are taxable members shall calculate their additional tax liability under subsection (d) of section 12-219.

(g) A taxable member of a combined group required to file a combined unitary tax return pursuant to section 12-222 shall determine its apportionment percentage under section 12-219a as follows:

(1) A taxable member whose separate additional tax base is included in the calculation of the combined group's additional tax base under subdivision (1) of subsection (f) of this section shall apportion the combined group's additional tax base using the otherwise applicable apportionment formula provided in section 12-219a. However, the denominator of such apportionment fraction shall be the sum of subdivisions (1) and (2) of subsection (a) of said section 12-219a for all members whose separate additional tax bases are included in the calculation of the combined group's additional tax base under subdivision (1) of subsection (f) of this section. The numerator of such apportionment fraction shall be the sum of subparagraph (A) of subdivision (1) of subsection (a) of said section 12-219a and subparagraph (A) of subdivision (2) of subsection (a) of said section 12-219a for such taxable member.

(2) Taxable members of the combined group that are financial service companies, as defined in section 12-218b, shall each have an additional tax liability as described in subdivision (2) of subsection (h) of this section.

(h) (1) A taxable member whose separate additional tax base is included in the calculation of the combined group's additional tax base under subdivision (1) of subsection (f) of this section shall multiply the combined group's additional tax base, as calculated under subdivision (1) of subsection (f) of this section, by such member's apportionment fraction determined in subdivision (1) of subsection (g) of this section, by the tax rate set forth in subsection (a) of section 12-219. In no event shall the aggregate tax so calculated for all members of the combined group exceed one million dollars, nor shall a tax credit allowed against the tax imposed by this chapter reduce a taxable member's tax calculated under this subsection to an amount less than two hundred fifty dollars.

(2) Taxable members of the combined group that are financial service companies, as defined in section 12-218b, shall each have an additional tax liability of two hundred fifty dollars. In no event shall a tax credit allowed against the tax imposed by this chapter reduce a financial service company's tax calculated under this subsection to an amount less than two hundred fifty dollars.

(3) To the extent that the aggregate amount of tax calculated on each taxable member's additional tax base exceeds one million dollars, each taxable member will prorate its tax, in proportion to the group's tax calculated without regard to the one-million-dollar cap, such that the group's aggregate additional tax equals one million dollars.

(i) If the aggregate amount of tax calculated on each taxable member's apportioned net income under subsection (e) of this section equals or exceeds the aggregate amount of tax calculated on each taxable member's apportioned additional tax base under subsection (h) of this section, each taxable member shall be subject to tax on its net income. If the aggregate amount of tax calculated on each taxable member's apportioned additional tax base under subsection (h) of this section exceeds the aggregate amount of tax calculated on each taxable member's apportioned net income under subsection (e) of this section, each taxable member shall be subject to tax on its additional tax base.

(j) (1) Each taxable member of a combined group required to file a combined unitary tax return pursuant to section 12-222 shall separately apply the provisions of sections 12-217ee and 12-217zz in determining the amount of tax credit available to such member.

(2) If a taxable member of a combined group earns a tax credit in an income year beginning on or after January 1, 2016, then the taxable member may share the credit with other taxable members of the combined group. Any amount of credit that is utilized by another taxable member of the combined group shall reduce the amount of credit carryover that may be carried over by the taxable member that originally earned the credit. If a taxable member of a combined group has a tax credit carryover derived from an income year beginning on or after January 1, 2016, then the taxable member may share the carryover credit with other taxable members of the combined group, if such other taxable members were members of the combined group in the income year in which the credit was earned.

(3) If a taxable member of a combined group has a tax credit carryover derived from an income year beginning prior to January 1, 2016, or derived from an income year during which the taxable member was not a member of such combined group, the credit carryover shall remain available to be utilized by such taxable member or other group members which, in the year the credit was earned, were part of the same combined group as such taxable member under section 12-223a or the same unitary group as such taxable member under subsection (d) of section 12-218d of the general statutes, revision of 1958, revised to January 1, 2015.

(4) To the extent a taxable member has more than one corporation business tax credit that it may utilize in an income year, whether such credits were earned by said member or are available to said member in accordance with subdivisions (2) and (3) of this subsection, the credits shall be claimed in the same order as provided in section 12-217aa.

(k) (1) For income years beginning prior to January 1, 2025, in no event shall the tax calculated for a combined group on a combined unitary basis, prior to surtax and application of credits, exceed the nexus combined base tax described in subdivision (2) of this subsection by more than two million five hundred thousand dollars.

(2) (A) The nexus combined base tax equals the tax measured on the sum of the separate net income or loss of each taxable member or the minimum tax base of each taxable member as if such members were not required to file a combined unitary tax return, but only to the extent that such income, loss or minimum tax base of any taxable member is separately apportioned to Connecticut in accordance with the applicable provisions of section 12-218, 12-218b, 12-219a or 12-244. In computing such net income or loss, intercorporate dividends shall be eliminated, and in computing the combined additional tax base, intercorporate stockholdings shall be eliminated.

(B) In computing such net income or loss, any intangible expenses and costs, as defined in section 12-218c, any interest expenses and costs, as defined in section 12-218c, and any income attributable to such intangible expenses and costs or to such interest expenses and costs shall be eliminated, provided the corporation that is required to make adjustments under section 12-218c for such intangible expenses and costs or for such interest expenses and costs, and the related member or members, as defined in section 12-218c, are both taxable members of the combined group. If any such income and any such expenses and costs are eliminated as provided in this subparagraph, the intangible property, as defined in section 12-218c, of the corporation eliminating such income shall not be taken into account in apportioning under the provisions of section 12-219a the tax calculated under subsection (a) of section 12-219, of such corporation.

(i) Intercompany rents shall not be included in the computation of the value of property rented if the lessor and lessee are both taxable members in the combined unitary tax return; and

(ii) Intercompany business receipts, receipts by a taxable member included in a combined unitary tax return from any other taxable member included in such return, shall not be included.

(P.A. 15-244, S. 139; June Sp. Sess. P.A. 15-5, S. 139, 142, 143; Dec. Sp. Sess. P.A. 15-1, S. 36; P.A. 25-168, S. 354.)

History: P.A. 15-244 effective June 30, 2015, and applicable to income years commencing on or after January 1, 2015; June Sp. Sess. P.A. 15-5 changed effective date of P.A. 15-244, S. 139, from June 30, 2015, and applicable to income years commencing on or after January 1, 2015, to January 1, 2016, and applicable to income years commencing on or after that date, effective June 30, 2015, and amended Subsec. (d) by making Subdivs. (1) and (2) applicable to income years beginning on or after January 1, 2016, and Subdiv. (3) applicable to operating loss carryover derived from loss incurred in income year beginning prior to January 1, 2016, and amended Subsec. (j) by making Subdiv. (2) applicable to tax credit earned in income year beginning on or after January 1, 2016, and to tax credit carryover derived from income year beginning on or after January 1, 2016, and by making Subdiv. (3) applicable to tax credit carryover derived from income year beginning prior to January 1, 2016, and to refer to same unitary group as taxable member under Sec. 12-218d(d), effective January 1, 2016, and applicable to income years commencing on or after that date; Dec. Sp. Sess. P.A. 15-1 amended Subsec. (a) by designating existing provision as Subpara. (A) and adding Subpara. (B) re consideration of distributive share of income received by limited partner from investment partnership in Subdiv. (4), and replacing provision re deferral of business income from intercompany transaction among members of same combined group to be similar to deferral under 26 CFR 1.1502-13 with provision re application of principles set forth in Treasury regulations promulgated under Sec. 1502 of Internal Revenue Code in Subdiv. (6), amended Subsec. (b) by adding reference to Secs. 12-218e to 12-218g in Subdiv. (1) and adding reference to financial service company in Subdiv. (5), amended Subsec. (f) by adding Subpara. designators (A) and (B) and adding Subpara. (C) re elimination of assets and liabilities attributable to transactions with another member of combined group in Subdiv. (1), and rewriting provisions re calculation of additional tax liability re financial services companies in Subdiv. (2), amended Subsec. (h) by adding reference to Secs. 12-218e to 12-218g in Subdivs. (1) and (2), and added Subsec. (k) re calculation of and cap on nexus combined base tax, effective January 1, 2016, and applicable to income years commencing on or after that date; P.A. 25-168 amended Subsec. (k)(1) by specifying that subdivision applies to income years beginning prior to January 1, 2025, effective June 30, 2025.

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Sec. 12-218h. Valuation allowance. Deductions. (a) For purposes of this section, “valuation allowance” means the portion of a deferred tax asset for which it is more likely than not that a tax benefit will not be realized, as determined in accordance with generally accepted accounting principles.

(b) (1) Any combined group that is described under subsection (b) of section 12-218g, is claiming the deduction under subsection (d) of said section and did not include in the computation of such deduction the impact of any valuation allowance arising from the enactment of sections 12-218e and 12-218f shall be eligible for the deduction under this subsection.

(2) If the provisions of sections 12-218e and 12-218f resulted in an aggregate decrease in the amount of net operating losses or tax credits a combined group's members may realize in the state and a valuation allowance was reported in accordance with generally accepted accounting principles, the combined group shall be entitled to a deduction as determined under this subsection.

(3) For the thirty-year period beginning with a combined group's first income year that begins in 2026, a combined group entitled to a deduction under this subsection shall deduct from combined group net income an amount equal to one-thirtieth of the amount necessary to offset the increase in the valuation allowance against net operating losses and tax credits in the state, as computed in accordance with generally accepted accounting principles, that resulted from the enactment of sections 12-218e and 12-218f. Such increase in valuation allowance shall be computed based on the change in valuation allowance that was reported in the combined group's financial statements for the income year commencing on or after January 1, 2015, but prior to January 1, 2016.

(c) The deduction computed under subsection (b) of this section shall not be reduced as a result of any events happening subsequent to such computation, including, but not limited to, any disposition or abandonment of assets. Such deduction shall not alter the tax basis of any asset. If the deduction under subsection (b) of this section is greater than the combined group net income, any excess deduction shall be carried forward and applied as a deduction to combined group net income in future income years until fully utilized.

(d) Any combined group intending to claim a deduction under this section shall file a statement with the Commissioner of Revenue Services on or before July 1, 2025, specifying the total amount of the deduction the combined group claims. The statement shall be made on such form and in such manner as prescribed by the commissioner and shall contain such information or computations as the commissioner may specify. No deduction shall be allowed under this section for any income year except to the extent claimed on or before July 1, 2025, in the manner prescribed. Nothing in this subsection shall limit the authority of the commissioner to review or redetermine the proper amount of any deduction claimed, whether on the statement required under this subsection or on a tax return for any income year.

(P.A. 24-151, S. 137; P.A. 25-168, S. 392.)

History: P.A. 24-151 effective January 1, 2025; P.A. 25-168 amended Subsec. (b)(3) by replacing “January 1, 2016” with “January 1, 2015” and “January 1, 2017” with “January 1, 2016” re applicable income year for financial statement, effective June 30, 2025.

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Sec. 12-219. Capital base tax. Phase-out. Surcharge. (a)(1) Each company subject to the provisions of this part shall pay for the privilege of carrying on or doing business within the state, the larger of the tax, if any, imposed by section 12-214 and the tax calculated under this subsection. The tax calculated under this section shall be a tax of (A) three and one-tenth mills per dollar for income years commencing prior to January 1, 2024, (B) two and six-tenths mills per dollar for the income year commencing on or after January 1, 2024, and prior to January 1, 2025, (C) two and one-tenth mills per dollar for the income year commencing on or after January 1, 2025, and prior to January 1, 2026, (D) one and six-tenths mills per dollar for the income year commencing on or after January 1, 2026, and prior to January 1, 2027, (E) one and one-tenth mills per dollar for the income year commencing on or after January 1, 2027, and prior to January 1, 2028, and (F) zero mills per dollar for income years commencing on or after January 1, 2028, of the amount derived (i) by adding (I) the average value of the issued and outstanding capital stock, including treasury stock at par or face value, fractional shares, scrip certificates convertible into shares of stock and amounts received on subscriptions to capital stock, computed on the balances at the beginning and end of the taxable year or period, the average value of surplus and undivided profit computed on the balances at the beginning and end of the taxable year or period, and (II) the average value of all surplus reserves computed on the balances at the beginning and end of the taxable year or period, (ii) by subtracting from the sum so calculated (I) the average value of any deficit carried on the balance sheet computed on the balances at the beginning and end of the taxable year or period, and (II) the average value of any holdings of stock of private corporations including treasury stock shown on the balance sheet computed on the balances at the beginning and end of the taxable year or period, and (iii) by apportioning the remainder so derived between this and other states under the provisions of section 12-219a, provided in no event shall the tax so calculated exceed one million dollars or be less than two hundred fifty dollars.

(2) For purposes of this subsection, in the case of a new domestic company, the balances at the beginning of its first fiscal year or period shall be the balances immediately after its organization or immediately after it commences business operations, whichever is earlier; and in the case of a foreign company, the balances at the beginning of its first fiscal year or period in which it becomes liable for the filing of a return in this state shall be the balances as established at the beginning of the fiscal year or period for tax purposes. In the case of a domestic company dissolving or limiting its existence, the balances at the end of the fiscal year or period shall be the balances immediately prior to the final distribution of all its assets; and in the case of a foreign company filing a certificate of withdrawal, the balances at the end of the fiscal year or period shall be the balances immediately prior to the withdrawal of all of its assets. When a taxpayer has carried on or had the right to carry on business within the state for eleven months or less of the income year, the tax calculated under this subsection shall be reduced in proportion to the fractional part of the year during which business was carried on by such taxpayer. The tax calculated under this subsection shall, in no case, be less than two hundred fifty dollars for each income year. The taxpayer shall report the items set forth in this subsection at the amounts at which such items appear upon its books; provided, when, in the opinion of the Commissioner of Revenue Services, the books of the taxpayer do not disclose a reasonable valuation of such items, the commissioner may require any additional information which may be necessary for a reasonable determination of the tax calculated under this subsection and shall, on the basis of the best information available, calculate such tax and notify the taxpayer thereof.

(3) No tax credit allowed against the tax imposed by this chapter shall reduce a company's tax calculated under this subsection to an amount less than two hundred fifty dollars.

(b) (1) With respect to income years commencing on or after January 1, 2006, and prior to January 1, 2007, the additional tax imposed on any company and calculated in accordance with subsection (a) of this section shall, for each such income year, except when the tax so calculated is equal to two hundred fifty dollars, be increased by adding thereto an amount equal to twenty per cent of the additional tax so calculated for such income year, without reduction of the tax so calculated by the amount of any credit against such tax. The increased amount of tax payable by any company under this section, as determined in accordance with this subsection, shall become due and be paid, collected and enforced as provided in this chapter.

(2) (A) With respect to income years commencing on or after January 1, 2009, and prior to January 1, 2012, the additional tax imposed on any company and calculated in accordance with subsection (a) of this section shall, for each such income year, except when the tax so calculated is equal to two hundred fifty dollars, be increased by adding thereto an amount equal to ten per cent of the additional tax so calculated for such income year, without reduction of the tax so calculated by the amount of any credit against such tax. The increased amount of tax payable by any company under this section, as determined in accordance with this subsection, shall become due and be paid, collected and enforced as provided in this chapter.

(B) Any company whose gross income for the income year was less than one hundred million dollars shall not be subject to the additional tax imposed under subparagraph (A) of this subdivision. This exception shall not apply to companies filing a combined return for the income year under section 12-223a or a unitary return under subsection (d) of section 12-218d.

(3) (A) With respect to income years commencing on or after January 1, 2012, and prior to January 1, 2018, the additional tax imposed on any company and calculated in accordance with subsection (a) of this section shall, for each such income year, except when the tax so calculated is equal to two hundred fifty dollars, be increased by adding thereto an amount equal to twenty per cent of the additional tax so calculated for such income year, without reduction of the tax so calculated by the amount of any credit against such tax. The increased amount of tax payable by any company under this section, as determined in accordance with this subsection, shall become due and be paid, collected and enforced as provided in this chapter.

(B) Any company whose gross income for the income year was less than one hundred million dollars shall not be subject to the additional tax imposed under subparagraph (A) of this subdivision. With respect to income years commencing on or after January 1, 2012, and prior to January 1, 2016, this exception shall not apply to companies filing a combined return for the income year under section 12-223a or a unitary return under subsection (d) of section 12-218d. With respect to income years commencing on or after January 1, 2016, and prior to January 1, 2018, this exception shall not apply to taxable members of a combined group that files a combined unitary tax return.

(4) (A) With respect to income years commencing on or after January 1, 2018, and prior to January 1, 2028, the additional tax imposed on any company and calculated in accordance with subsection (a) of this section shall, for such income year, except when the tax so calculated is equal to two hundred fifty dollars, be increased by adding thereto an amount equal to ten per cent of the additional tax so calculated for such income year, without reduction of the tax so calculated by the amount of any credit against such tax. The increased amount of tax payable by any company under this section, as determined in accordance with this subsection, shall become due and be paid, collected and enforced as provided in this chapter.

(c) The tax imposed by this section shall be assessed and collected and be first applicable at the time or times herein provided for the tax measured by net income. This section shall not apply to insurance companies, real estate investment trusts, regulated investment companies, interlocal risk management agencies formed pursuant to chapter 113a or, except as otherwise provided by subsection (d) of this section, financial service companies, as defined in section 12-218b.

(d) Each financial service company, as defined in section 12-218b, shall pay for the privilege of carrying on or doing business within the state, the larger of the tax, if any, imposed by section 12-214 and the tax calculated under this subsection. For each such financial service company, the tax calculated under this subsection shall be two hundred fifty dollars for each income year. No tax credit allowed against the tax imposed by this chapter shall reduce a financial service company's tax calculated under this subsection to an amount less than two hundred fifty dollars.

(e) The additional tax base of taxable and nontaxable members of a combined group required to file a combined unitary tax return pursuant to section 12-222 shall be calculated as provided in subsection (f) of section 12-218e.

(1949 Rev., S. 1900; 1951, 1953, June, 1955, S. 1096d; 1957, P.A. 560, S. 2; 649, S. 2; 1959, P.A. 394, S. 2; 1961, P.A. 428, S. 3; 604, S. 3; 1963, P.A. 141; February, 1965, P.A. 461, S. 8; June, 1969, P.A. 1, S. 15; 1971, P.A. 683, S. 2; June, 1971, P.A. 5, S. 112; 1972, P.A. 126, S. 1; 285, S. 7; P.A. 73-350, S. 11, 27; P.A. 75-213, S. 2, 53; P.A. 77-614, S. 139, 610; P.A. 78-121, S. 106, 113; P.A. 80-483, S. 56, 186; P.A. 81-66, S. 2, 5; 81-255, S. 22, 37; 81-411, S. 8, 42; Nov. Sp. Sess. P.A. 81-4, S. 30, 32; P.A. 82-325, S. 3, 7; P.A. 84-546, S. 32, 33, 173; P.A. 85-159, S. 2, 19; 85-469, S. 4, 6; P.A. 86-124, S. 1, 2; 86-132; 86-403, S. 131, 132; P.A. 89-16, S. 2, 31; 89-251, S. 21, 203; P.A. 90-174, S. 1, 3; June Sp. Sess. P.A. 91-3, S. 101, 168; P.A. 93-74, S. 8, 59, 67; May Sp. Sess. P.A. 94-4, S. 7, 85; P.A. 95-160, S. 64, 69; P.A. 96-197, S. 6, 11; P.A. 98-110, S. 19, 27; May 9 Sp. Sess. P.A. 02-1, S. 57; P.A. 03-2, S. 34; June 30 Sp. Sess. P.A. 03-1, S. 88; P.A. 05-251, S. 63; P.A. 06-186, S. 67; June Sp. Sess. P.A. 09-3, S. 102; P.A. 11-6, S. 79; P.A. 13-184, S. 74; P.A. 15-244, S. 84, 153; June Sp. Sess. P.A. 15-5, S. 139, 141; P.A. 19-117, S. 340, S. 342; June Sp. Sess. P.A. 21-2, S. 423, 424; P.A. 22-110, S. 13; P.A. 23-204, S. 348; P.A. 25-168, S. 357.)

History: 1959 act applied tax to each income year, added reference to deferred and unrealized profits in Subdiv. (B)(a)(3) and to treasury stock in Subdiv. (B)(b)(2); 1961 acts raised alternative tax rate from 1.9 mills to 2.5 mills, added exception to minimum tax for banking and financial corporations, and changed technical language; 1963 act added exception for small business investment companies; 1965 act set deadline for 2.5 mill rate to years beginning before January 1, 1966, and raised mill rate to two and five-eighths thereafter, set same deadline for $25 minimum tax, raised to $30 thereafter and set same deadline for 2% tax re banking institutions, raised to 2.1% thereafter; 1969 act for two years, January 1, 1969, to January 1, 1971, changed rates above to four mills, $45 and 3.2% respectively; 1971 acts divided section into Subsecs. and made basis for payments, the difference between tax imposed in Sec. 12-214 and tax calculated under Subdivs. (A) and (B) and changed ending dates for temporary increases in rates from 1971 to 1973; 1972 acts included maximum tax for income years beginning on or after January 1, 1972, for “any company, except companies subject to the gross earnings taxes under chapters 211 and 212, which, in arriving at net income … is entitled to a deduction under section 12-217 for dividends as defined in the federal corporation income tax law” and made temporary increased tax rates the permanent rates; P.A. 73-350 made provisions applicable to years beginning on or after January 1, 1973, increased mill rate from 4 to 4.25 mills and specifically excluded regulated investment companies and real estate investment trusts, deleted par or face value of indebtedness and deferred and unrealized profits from calculation of taxable amount and set maximum and minimum charges of $100,000 and $50, respectively, and changed provisions formerly applicable to companies, “except companies subject to the gross earnings taxes under chapters 211 and 212” applicable to regulated investment companies or real estate investment trusts, set forth process for deriving amount subject to tax and established $50 minimum tax for such companies, increased figures in Subsec. (2)(B) from $45 to $50, changed rate for computation of interest and dividends from 2% to one-eighth of 1% and excluded insurance companies from provisions of section; P.A. 75-213 changed mill rate for companies other than regulated investment companies and real estate investment trusts from 0.25 mill to 0.31 mill and for regulated investment companies and real estate investment trusts from 0.4 to 0.5 mill, effective July 1, 1975, and applicable to income years commencing on or after January 1, 1975; P.A. 77-614 substituted commissioner of revenue services for tax commissioner, effective January 1, 1979; P.A. 78-121 deleted reference to private banks in Subsec. (1)(A); P.A. 80-483 deleted reference to building and loan associations in Subsec. (1)(A) and (2)(B); P.A. 81-66 raised mill rate in (1)(A) from 0.31 mill to 3.1 mills per dollar and increased minimum tax from $50 to $100, effective May 4, 1981, and applicable to income years commencing on or after January 1, 1981; P.A. 81-255 added the alternative computation of tax under Subdiv. (B) and increased the minimum tax to $250, effective July 1, 1981, and applicable to income years commencing on or after January 1, 1981; P.A. 81-411 added consideration of a loss for the income year in the alternative tax base under Subdiv. (B), and deleted provisions allowing deductions for contributions to retirement plan in determining salaries and other compensation, effective June 18, 1981, and applicable to income years commencing on or after January 1, 1981; Nov. Sp. Sess. P.A. 81-4 deleted Subsec. (1)(B) re alternative tax (if higher than that in Subdiv. (a)) consisting of 50% of corporation's net income or loss plus salaries and other compensation paid to elected or appointed corporation officers or to shareholders owning more than 1% of stock at rate of 5%, amending section accordingly, effective January 27, 1982, and applicable to income years commencing on or after January 1, 1983; P.A. 82-325 changed effective date of Nov. Sp. Sess. P.A. 81-4, but without affecting this section; P.A. 84-546 made technical change, substituting “scrip” for “script” in Subsec. (1); P.A. 85-159 reduced minimum tax to $100 for income years of corporations commencing on or after January 1, 1985; P.A. 85-469 revised effective date of P.A. 85-159 but without affecting this section; P.A. 86-124 revised section to conform to the style of the general statutes and amended Subsec. (a)(1)(C) to increase the maximum tax from $100,000 to $500,000, effective May 8, 1986, and applicable to income years of corporations commencing on or after January 1, 1986; P.A. 86-132 deleted provision limiting the types of regulated investment companies or real estate investment trusts to which the provisions concerning those types of companies and trusts applied; P.A. 86-403 changed effective date of P.A. 86-132 from October 1, 1986, to May 23, 1986, and applicable to income years of corporations commencing on or after January 1, 1986; P.A. 89-16 increased the minimum tax from $100 to $250 in Subsecs. (a) and (b), and amended Subsec. (c) to impose an additional tax as a percentage of the tax calculated under Subsec. (a) or Subsec. (b), effective March 23, 1989, and applicable to income years of corporations commencing on or after January 1, 1989; P.A. 89-251 increased the tax imposed under Subsec. (c), as amended by P.A. 89-16, as a percentage of the additional tax calculated under Subsec. (a) or Subsec. (b) from 15% to 20% of the additional tax, effective July 1, 1989, and applicable to income years commencing on or after January 1, 1989; P.A. 90-174 amended Subsec. (a)(2) to provide for a maximum tax under said subdivision of $50,000, effective July 1, 1990, and applicable to income years of corporations commencing on or after January 1, 1991; June Sp. Sess. P.A. 91-3 amended Subsec. (a)(1)(C) to increase the maximum tax from $500,000 to $1,000,000 and Subsec. (c) to provide that the 20% additional tax would be applicable with respect to income years commencing prior to January 1, 1992, and to impose a 10% additional tax applicable with respect to income years commencing on or after January 1, 1992, and prior to January 1, 1993, effective August 22, 1991, and applicable to income years of corporations commencing on or after January 1, 1991; P.A. 93-74 deleted Subsec. (a)(2) with respect to regulated investment company or real estate investment trusts, renumbering Subdiv. (3) accordingly and amended Subsec. (d) to exclude real estate investment trusts and regulated investment trusts from provisions of section, effective May 19, 1993, and applicable to taxable years commencing on and after January 1, 1993; May Sp. Sess. P.A. 94-4 in Subsec. (d) exempted interlocal risk management agencies formed pursuant to chapter 113a, effective June 9, 1994, and applicable to income years commencing on or after January 1, 1980; P.A. 95-160 revised effective date of May Sp. Sess. P.A. 94-4 but without affecting this section; P.A. 96-197 amended Subsecs. (a) and (b) to clarify that out-of-state businesses carrying on or doing business in the state are subject to the tax on the capital base and made technical changes, effective June 3, 1996, and applicable to income years commencing on or after January 1, 1996; P.A. 98-110 deleted Subsec. (b) re certain banks, trusts, investment and financing entities, relettered existing Subsecs., excluded financial service companies and made technical changes, effective May 19, 1998, and applicable to income years commencing on or after January 1, 1999; May 9 Sp. Sess. P.A. 02-1 added Subsec. (a)(3) re the effect of tax credits on the minimum tax, amended Subsec. (c) by adding “except as otherwise provided by subsection (d) of this section” and added Subsec. (d) re a minimum tax for financial services companies, effective July 1, 2002, and applicable to income years commencing on or after January 1, 2002; P.A. 03-2 added Subsec. (b)(3) re a surcharge for the 2003 income year, effective February 28, 2003, and applicable to income years commencing on or after January 1, 2003; June 30 Sp. Sess. P.A. 03-1 amended Subsec. (b) to include in surcharge provided under Subdiv. (3) amounts calculated under Sec. 91 of P.A. 03-1 of the June 30 special session and to add Subdiv. (4) re surcharge for the 2004 income year, effective August 16, 2003, and applicable to income years commencing on or after January 1, 2003; P.A. 05-251 amended Subsec. (b) by deleting references to Sec. 91 of June 30 Sp. Sess. P.A. 03-1 in Subdivs. (3) and (4) and by adding Subdivs. (5) and (7) re surcharge in income years 2006 and 2007, respectively, effective June 30, 2005, and applicable to income years commencing on or after January 1, 2006; P.A. 06-186 amended Subsec. (b) to eliminate former Subdiv. (6) re surcharge in income year commencing on or after January 1, 2007, and prior to January 1, 2008, effective July 1, 2006, and applicable to income years commencing on or after January 1, 2006; June Sp. Sess. P.A. 09-3 amended Subsec. (b) by adding Subdiv. (6) re surcharge of 10% for income years on or after January 1, 2009, and exemption for companies with gross income less than $100,000,000, effective September 9, 2009, and applicable to income years commencing on or after January 1, 2009; P.A. 11-6 amended Subsec. (b) to add Subdiv. (7) re 20% surcharge for 2012 and 2013 income years and exemption for companies with gross income less than $100,000,000, effective May 4, 2011, and applicable to income years commencing on or after January 1, 2011; P.A. 13-184 amended Subsec. (b)(7) to extend surcharge to income years prior to January 1, 2016, effective June 18, 2013; P.A. 15-244 amended Subsec. (b)(7)(A) to extend surcharge to income years prior to January 1, 2018, amended Subsec. (b)(7)(B) to provide that for income years commencing on or after January 1, 2015, and prior to January 1, 2018, exception shall not apply to taxable members of combined group filing a combined unitary tax return, added Subsec. (b)(8)(A) re surcharge for income year commencing on or after January 1, 2018, added Subsec. (b)(8)(B) re exemption for companies with gross income less than $100,000,000, and added Subsec. (e) re calculation of additional tax base of taxable and nontaxable members of combined group required to file combined unitary tax return, effective June 30, 2015, and applicable to income years commencing on or after January 1, 2015; June Sp. Sess. P.A. 15-5 changed effective date of P.A. 15-244, S. 84 and 153, from June 30, 2015, and applicable to income years commencing on or after January 1, 2015, to January 1, 2016, and applicable to income years commencing on or after that date, effective June 30, 2015, and amended Subsec. (b)(7)(B) to provide that exception not apply to companies filing combined return or unitary return with respect to income years commencing prior to January 1, 2016, rather than January 1, 2015, and exception not apply to taxable members of a combined group that files a combined unitary tax return with respect to income years commencing on or after January 1, 2016, rather than January 1, 2015, and amended Subsec. (b)(8)(A) to provide that additional tax apply to income years commencing on or after January 1, 2018, and prior to January 1, 2019, effective January 1, 2016, and applicable to income years commencing on or after that date; P.A. 19-117 amended Subsec. (a)(1) by designating existing provisions re amount of tax as new Subpara. (A) and amended same by adding provisions phasing out tax over 3 years commencing January 1, 2021, redesignating existing Subparas. (A) and (B) as new clauses (i) and (ii), redesignating existing clauses (i) and (ii) as subclauses (I) and (II), and made a conforming change, effective June 26, 2019, and amended Subsec. (b)(8) by replacing “January 1, 2019” with “January 1, 2021”, effective June 26, 2019, and applicable to income years commencing on or after January 1, 2019; June Sp. Sess. P.A. 21-2 amended Subsec. (a)(1) by delaying commencement dates of tax phaseout in Subparas. (A) to (C) by 3 years, adding new Subpara. (D) to add phaseout rate of 1.6 mills per dollar for income year commencing on or after January 1, 2026, redesignating existing Subparas. (D) and (E) as Subparas. (E) and (F) and amending same to delay commencement dates of tax phaseout by 4 years, and amended Subsec. (b)(8) by replacing “January 1, 2021” with “January 1, 2023”, effective June 23, 2021; P.A. 22-110 amended Subsec. (b) by deleting former Subdivs. (1) to (4) re income years commencing prior to January 1, 2005, and redesignating existing Subdivs. (5) to (8) as Subdivs. (1) to (4); P.A. 23-204 amended Subsec. (b)(4)(A) by replacing “January 1, 2023” with “January 1, 2026”, effective June 12, 2023, and applicable to income years commencing on or after January 1, 2023; P.A. 25-168 amended Subsec. (b)(4)(A) by replacing “January 1, 2026” with “January 1, 2028”, effective June 30, 2025.

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