The proposed legislation, General Assembly Raised Bill No. 5319, aims to establish a research and development tax credit specifically for small businesses in Connecticut, effective for taxable years starting January 1, 2026. The bill defines "research and development expenses" in accordance with the Internal Revenue Code and outlines eligibility criteria for "qualified small businesses," which include partnerships and S corporations with gross income not exceeding seventy million dollars. The Department of Economic and Community Development will administer a system of tax credit vouchers, allowing these businesses to earn a credit equal to six percent of their research and development expenses, provided they apply for and receive a voucher.

Additionally, the bill stipulates that qualified small businesses can reserve a credit allocation based on anticipated research and development expenses, with a cap of one million five hundred thousand dollars per business and a total limit of twenty-five million dollars for all businesses in any taxable year. The legislation also allows for the credit to be claimed by shareholders or partners of S corporations and partnerships, and it provides a mechanism for taxpayers to exchange excess credits for refunds. The commissioner is empowered to adopt regulations to implement the provisions of this act.