An Act Concerning A Research And Development Expenses Tax Credit For Pass-through Entities.
Summary
HB 7008 creates a new Connecticut income tax credit for research and development expenses paid or incurred by a taxpayer, equal to 6% of qualifying R&D expenses. The credit applies to the personal income tax under chapter 229, but not to the liability imposed by section 12-707, and uses the same definition of “research and development expenses” found in existing law. The bill is effective January 1, 2026, and applies to taxable years beginning on or after that date.
The bill specifically extends the benefit to pass-through businesses. If the taxpayer is an S corporation or a partnership for federal tax purposes, the credit may be claimed by the shareholders or partners. If the taxpayer is a disregarded single-member LLC, the credit may be claimed by the owner, so long as the owner is subject to the chapter 229 income tax. The Commissioner of Revenue Services is authorized to adopt regulations to implement the credit.
Impact
The bill would add a new section to the General Statutes creating a state personal income tax credit tied to R&D spending by pass-through entities and their owners. It would affect taxpayers filing under chapter 229, particularly owners of S corporations, partnerships, and certain single-member LLCs, and would cap the total annual credits at $5 million statewide. The Department of Revenue Services would be responsible for administering the credit and could issue regulations to carry out the law.
Sentiment
The available voting history shows strong bipartisan or at least unanimous committee support, with a 18-0 vote in the Commerce Committee and a 52-0 vote in the Finance Committee. There are no transcript excerpts provided showing debate or opposition, so the overall sentiment appears favorable and noncontroversial in committee. The bill advanced with no recorded dissent in the available votes.
Contention
No specific points of contention are documented in the provided materials. Based on the text, any potential concerns would likely center on the fiscal cost of the credit, the $5 million annual cap, and whether the incentive is targeted effectively to encourage in-state research and development. The bill’s design to pass the credit through to owners of S corporations, partnerships, and disregarded LLCs may also be a technical issue for tax administration, but no opposition is shown in the record provided.