Substitute House Bill No. 7166, now Public Act No. 25-165, significantly revises the tax credit provisions for research and development expenses in Connecticut, effective January 1, 2025. The bill repeals the existing Section 12-217n and introduces new definitions, including aligning "research and development expenses" with the Internal Revenue Code and redefining "company" to "taxpayer." A specific definition for "taxpayer" is added for single-member limited liability companies engaged in manufacturing with over 3,000 employees, allowing these companies to claim credits if they are disregarded as separate entities for tax purposes. The bill establishes a tiered credit system based on the amount of research and development expenses incurred, with limitations on the credits that can be claimed in any income year and provisions for carrying forward excess credits for up to fifteen years.

Additionally, the bill introduces new eligibility and certification processes for aerospace companies seeking tax credits, requiring a memorandum of understanding with the commissioner regarding their historical economic base functions. It also outlines a framework for calculating tentative tax credits for companies with significant research and development expenses, incorporating workforce changes into the credit calculations. The bill further amends tax credit provisions for production expenses incurred by state-certified productions, specifying eligible expenditures and establishing a tax credit system administered by the Department of Economic and Community Development. Notably, it includes provisions for a new workforce incentive program for employers hiring individuals with intellectual disabilities and modifies the tax credit structure to clarify limits and eligibility criteria, ultimately aiming to enhance economic growth and support various sectors within the state.

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
Public Act No. 25-165: 12-217n, 12-217j, 12-217jj, 12-217kk, 32-7v, 32-5a, 12-217ll