Substitute House Bill No. 7166 proposes significant revisions to tax credit statutes as recommended by the Department of Economic and Community Development. The bill repeals subsection (b) of section 12-217n and replaces it with new definitions and criteria for "research and development expenses," specifying that these expenses must be incurred for research conducted within the state and not funded by external grants unless the funder is part of a combined return. It also updates the definition of "qualified small business" to include companies with gross income not exceeding one hundred million dollars and introduces a new category for limited liability companies engaged in manufacturing with specific expertise. Additionally, the bill modifies section 12-217jj to expand the definition of "qualified production" to encompass a wider range of entertainment content created in the state while excluding certain productions like news or fundraising events.

The bill further introduces new definitions and eligibility criteria for production companies to receive tax credits based on their production expenses, with varying percentages of credit depending on the amount spent. It allows for the transferability of tax credits under specific conditions and mandates annual applications from eligible production companies, including detailed reports on job creation and production expenses. The bill also establishes a nonrefundable administrative fee for application processing and introduces penalties for non-compliance regarding credit transfers. Key changes include the replacement of "shall" with "may" concerning the department's regulatory authority, and the effective date for these provisions is set for July 1, 2025. Overall, the bill aims to streamline the tax credit process while enhancing accountability and ensuring that tax credits are accurately claimed and reported.

Statutes affected:
Raised Bill: 12-217jj, 12-217kk
CE Joint Favorable Substitute Change of Reference: 12-217jj, 12-217kk
FIN Joint Favorable: 12-217jj, 12-217kk
File No. 885: 12-217jj, 12-217kk