The bill, designated as Substitute House Bill No. 6584 with File No. 741, proposes the establishment of a research and development (R&D) expenses tax credit for pass-through entities, effective January 1, 2024, and applicable to taxable years commencing on or after that date. The tax credit would be equal to six percent of the R&D expenses paid or incurred by a taxpayer during the taxable year, with "research and development expenses" defined as in section 12-217n of the general statutes. The credit can be claimed by shareholders or partners if the taxpayer is an S corporation or an entity treated as a partnership for federal income tax purposes, or by the owner if the taxpayer is a single-member limited liability company disregarded as an entity separate from its owner.

The bill also includes provisions for the Commissioner of Revenue Services to adopt regulations to implement this section. The fiscal impact statement indicates that there will be an indeterminate annual General Fund revenue loss beginning in FY 25 and a one-time cost of up to $75,000 to the Department of Revenue Services in FY 25 for system updates and form modifications. The bill acknowledges the lack of current data on R&D expenses by pass-through entities in Connecticut, which makes it impossible to estimate the immediate fiscal cost of the proposed tax credit. The bill's effective date is January 1, 2024, and it applies to tax years beginning on or after this date.