Connecticut Incentives and Workforce Development Guide

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For a list of Connecticut economic development agencies that can help with the site selection process, visit our Online Site Seekers’ Guide.

 

FINANCING & GRANTS

Connecticut Innovation’s (CI) Pre-Seed Fund: CI’s Pre-Seed Fund supports the formation of new Connecticut technology companies by providing the funding, mentoring and resources needed to turn ideas into an early-stage technology company. In addition to providing equity, CI’s experienced, entrepreneur-friendly team works with each pre-seed company to offer advice, support and introductions to powerful connections that help develop a commercially viable business. This holistic thinking has led CI to become one of the most active early-stage investors in the country. Funding amount is up to $150,000 for pre-seed expenses; at least a 50% match is required from private sources.

Economic and Manufacturing Assistance Act (MAA): Incentive-driven direct loans for projects when there is a strong economic development potential. Eligible uses include:

  • Planning, including but not limited to: feasibility studies, engineering, appraisals, market studies and related activities
  • Acquisition of real property, machinery or equipment or any combination, provided such assistance does not exceed the fair market value
  • Construction of site and infrastructure improvements relating to a municipal or business development project
  • Construction/renovation/demolition of buildings
  • Relocation expenses for the purpose of assisting manufacturing or other economic-based businesses to locate, construct, renovate or acquire a facility
  • Working capital in conjunction with a business development project
  • Business support services such as labor training, day care, energy conservation, pollution control, recycling and the like, in conjunction with other state agencies

First Five Program: Governor Malloy’s First Five jobs initiative allows for substantial financial assistance for large-scale business projects to encourage business expansion, relocation and job creation. The assistance under this program may include up to 100% funding under the Manufacturing Assistance Act (MAA) and additional business tax credits.

  • An eligible business development project under the program must commit to (1) create not less than 200 jobs within 24 months from the date the application is approved or (2) invest not less than $25 million and create not less than 200 new jobs not later than five years after the date an application is approved.

  • The Commissioner of the Department of Economic and Community Development (DECD) may give preference to a business development project that is a redevelopment project if the Commissioner believes the project will create jobs sooner than either 24 months from the date of application if the company creates not less than 200 jobs or within five years from the date of application if the investment is not less than $25 million.

  • The DECD Commissioner may waive existing statutory caps on the amount of tax credits insurers may claim against the insurance premium tax.

  • The written consent of the Governor is required for financial assistance awarded through the program. Prior to the Governor’s approval, the DECD Commissioner must certify that the business development project applicant has satisfied all criteria in the program.

  • In order to expedite the approval process, eligible First Five projects are exempt from current laws requiring legislative approval for financial assistance or tax credits above the present statutorily specified amounts required for approval.

Small Business Express Program (EXP): Provides loans and grants to Connecticut’s small businesses to spur job creation and growth.

 

TAX INCENTIVES

Angel Investor Tax Credit Program: Angels are people who invest in startups in exchange for equity. Vital to the entrepreneurial scene, angels provide entrepreneurs with seed capital, which is notoriously difficult to raise. They’re also often entrepreneurs themselves, or industry experts with a personal interest in helping the company succeed. Certain Connecticut businesses may qualify to participate in the Angel Investor Tax Credit Program if their principal place of business is in Connecticut and they are engaged in bioscience, advanced materials, photonics, clean tech or IT. They must also have:

  • Gross revenues under $1 million in the most recent income year
  • Fewer than 25 employees, including shareholders, members or active partners, 75% of whom are Connecticut residents
  • Operated in Connecticut for less than seven consecutive years
  • Received less than $2 million in eligible investments from angel investors

Digital Animation Tax Credit (Conn. Gen. Stat. §12-217ll): A tax credit available to state-certified digital animation production companies that engage in digital animation production activities on an on-going basis. This tax credit is administered by the Connecticut Department of Economic and Community Development (DECD). This tax credit may be applied to the taxes imposed under Chapter 207 and Chapter 208 of the Connecticut General Statutes. Any digital animation production company receiving a digital animation tax credit shall not be eligible for or receive the film production tax credit. The tax credit is equal to:

  • 10% for production expenses or costs of $100,000 to $500,000;
  • 15% for production expenses or costs of more than $500,000 to $1 million; and
  • 30% for production expenses or costs of $1 million or more.

Digital Media & Motion Picture Tax Credit: A tax credit program to encourage the production of digital media and motion pictures in the State of Connecticut. The legislation makes it possible for eligible production companies to receive a tax credit of up to 30% of qualified digital media and motion picture production, pre-production and post production expenses incurred in the state.

Fixed Capital Investment Tax Credit (Conn. Gen. Stat. §12-217w): A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes for amounts paid or incurred by a corporation for fixed capital. Fixed capital means any new tangible personal property that meets all of the following criteria:

  • It must have a class life of more than four years;
  • It must have been purchased from someone other than a related person;
  • It is not leased or acquired to be leased to another person within 12 months of purchase; and
  • It will be held and used in Connecticut by a corporation in the ordinary course of the corporation’s trade or business in Connecticut for a period of not less than five full years following its purchase.

Fixed capital does not include inventory, land, buildings or structures or mobile transportation property.

Green Buildings Tax Credit (Conn. Gen. Stat. §12-217x): A tax credit is available for eligible construction, renovation or rehabilitation projects. The tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes. The eligible projects must use Energy Star equipment and appliances, if applicable, and must have energy use that does not exceed:

  • 70% of the energy use allowed by the state energy code for new construction eligible projects; or
  • 80% of the energy used allowed by the state energy code for renovation or rehabilitation eligible projects.

Historic Structures Rehabilitation Tax Credit (Conn. Gen. Stat. §10-416a): A tax credit administered by the Connecticut Department of Economic and Community Development (DECD) is available to an owner rehabilitating a certified historic structure for residential use or to a taxpayer named by the owner as contributing to the rehabilitation. This tax credit may be applied against the taxes imposed under Chapters 207, 208, 209, 210, 211, or 212 of the Connecticut General Statutes. This tax credit may be assigned, transferred or conveyed. The tax credit is equal to the lesser of the tax credit reserved upon certification of the rehabilitation plan or 25% of the actual qualified rehabilitation expenditures not exceeding $2.7 million. The amount of the tax credit that may be claimed will be entered on the tax credit voucher issued by DECD.

Human Capital Investment Tax Credit (Conn. Gen. Stat. §12-217x): A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes for expenditures made by a corporation for human capital investment. The tax credit is equal to 5% of the amount paid or incurred by the corporation for a human capital investment. No corporation claiming this tax credit shall claim any other credit against any tax with respect to the same investment. Human capital investment means:

  • In-state job training of persons employed in Connecticut;
  • Work education programs in Connecticut;
  • Worker training and education of persons employed in Connecticut provided by Connecticut institutions of higher education;
  • Donations or capital contributions to institutions of higher education in Connecticut for improvements or advancement of technology, including physical plant improvements;
  • Planning, sit preparation, construction, renovation, or acquisition of facilities in Connecticut for the purpose of establishing a day care facility to be used primarily by the children of employees who are employed in Connecticut;
  • Child care subsidies paid to employees employed in Connecticut for child care provided in Connecticut; or
  • Contributions made to the Individual Development Account Reserve Fund administered by the Connecticut Department of Labor.

Insurance Reinvestment Tax Credit Program: Provides a 100% insurance premiums tax credit to insurance companies that invest with approved fund managers who will provide financing to eligible Connecticut businesses, including 25% committed to green technology businesses and 3% to pre-seed investments.

Machinery and Equipment Expenditure Tax Credit (Conn. Gen. Stat. §12-217o): A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes for expenditures in machinery and equipment by corporations that have no more than 800 full-time, permanent employees in Connecticut. The tax credit is based on a percentage of the amount spent on machinery and equipment acquired for and installed in a facility in Connecticut that exceeds the amount spent for such machinery and equipment in the preceding income year. The incremental increase in machinery and equipment is calculated by including all the prior year’s expenditures on machinery and equipment without regard to whether or not the expenditures were claimed against this tax credit in the prior year. The expenditure for machinery and equipment is the sum of the cash paid plus any consideration received for an asset that is traded in.

  • A tax credit equal to 5% of the incremental increase in expenditure for machinery and equipment is available if the corporation employed between 251 and 800 full-time, permanent employees whose wages, salaries, or other compensation is paid in Connecticut.

  • A tax credit equal to 10% of the incremental increase in expenditures for machinery and equipment is available if the corporation employed not more than 250 full-time, permanent employees whose wages, salaries, or other compensation is paid in Connecticut.

Research and Development (Nonincremental) Expenses Tax Credit (Conn. Gen. Stat. §12-217n): A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes for R&D expenses incurred in Connecticut. A qualified small business is entitled to a tentative tax credit equal to 6% of its research and development expenses. All other companies calculate their tax credit as provided in the chart below:

Research and

Development Expenses

Tentative Tax

Credit Percentage

$50 million or less

1%

More than $50 million
but not more than $100 million

$500,000 + 2%
over $50 million

More than $100 million
but not more than $200 million

$1,500,000 + 4%

over $100 million

More than $200 million

$5,500,000 + 6%

over $200 million

If it results in a greater tentative tax credit, companies headquartered in an Enterprise Zone, with revenues in excess of $3 billion, employing more than 2,500 employees, shall multiply their research and development expenses by 3.5% instead of using the tax credit percentage listed above.

Research and Experimental (Incremental) Expenditures Tax Credit (Conn. Gen. Stat. §12-217j): A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes for the incremental increase in research and experimental expenditures conducted in Connecticut. Multiply by 20% the excess of the research and experimental expenditures conducted in Connecticut during the current income year over the amount spent on such expenditures during the preceding income year for tax credit amount.

Service and Manufacturing Facilities Tax Credit (Conn. Gen. Stat. §12-217e): A tax credit may be applied against the portion of the tax imposed under Chapter 208 of the Connecticut General Statutes that is allocable to a Manufacturing Facility or Service Facility that meets certain employment criteria. The amount of the tax credit varies depending on the location of the facility and the number of employees. This tax credit is administered by the DECD. The tax credit period is 10 years and begins with the first full income year of issuance of the eligibility certificate and continues for the following nine income years. If within the 10 year period the facility ceases to qualify as a Manufacturing Facility or Service Facility or the taxpayer ceases to occupy the property, the entitlement to the tax credit terminates and there is no pro-rata application of the tax credit during the income year in which the entitlement or occupancy terminates. To calculate the tax credit allowed, a Service Facility or Manufacturing Facility shall multiply the applicable tax credit percentage by: 1) the corporation business tax imposed on the taxpayer, and 2) the arithmetical mean of the property fraction and the wages fraction.

Urban and Industrial Sites Reinvestment Tax Credit Program: Created under Public Act 00-170 and later modified by Public Acts: 05-276; 06-184;06-187 and 06-189. This program is a powerful economic development tool designed to drive investment to the state’s urban centers and other economically distressed communities without depleting valuable state bond dollars. Under the program, the state may provide up to $100 million in tax credits over a 10-year period to support projects that create significant jobs and capital investment in these under served areas. Total expenditures for the program are capped at $500 million. The amount of credits offered is based on the department’s extensive due diligence process, which includes a comprehensive financial review and an impact analysis using the REMI econometric model. The commissioner must submit any requests for credits over $20 million to the legislature for their review.

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