Hartford Business Journal

15 HARTFORDBUSINESS.COM | JULY 12, 2021 bankatpeoples.com/businessteam Simple ways to prevent fraud. Member FDIC/Member DIF Smarter ways to do business. We've got businesses covered with services like Positive Pay, which automatically prevents unauthorized transactions from posting to your account. in Massachusetts, where the Cambridge area has grown into a dense life sciences hub over the decades, helping it poach a few companies from Connecticut, including the headquarters of Alexion in 2017 (the rare drug maker has maintained a New Haven presence since its move and is now being acquired by AstraZeneca). So while incentives aren't everything, Pescatello still worries about losing ground in future budget sessions. He's well aware that approximately $6 billion in federal COVID-19 recovery funding helped lawmakers avoid having to make as many tough choices in this session's budget deliberations. They could be hacking at various line items in order to close a deficit soon enough. "And every time that happens, they talk about the R&D tax credit," he said. Stockpiling credits Connecticut's R&D tax credits range from 1% to 6% of a company's total R&D investment in a given year. Companies can claim those credits against their state income tax liability, or if the value of the credits exceeds their tax liability, they can carry the credits forward into future tax years, while smaller companies can sell them back to the state at 65% of their value. Using R&D credits, Connecticut corporate tax filers have reduced their state income tax bills by nearly $60 million over the past decade, according to data from the Department of Revenue Services. Companies are carrying a much larger stockpile for future use, nearly $1.8 billion as of 2018, according to the most recent available data. In 2017, lawmakers created a program that would allow holders of those so-called "stranded" credits to enter into agreements with the state to exchange some of them — up to $50 million total — if they pledge to invest in hiring and expansions. The program was modeled after a custom deal the legislature approved for Pratt & Whitney in 2014, allowing the jet-engine maker to use $400 million in stranded credits to build a new headquarters in East Hartford, in exchange for staying there for at least 15 years. Since 2017, only one company — ASML US LLC — has used the program, according to an early 2020 report from the Office of Legislative Research. The chip-making equipment manufacturer inked a deal with the state in 2018 related to an approximately $93 million project in Wilton that includes a new parking garage and facilities expansion and renovation. Under its agreement with the state, ASML was allowed to use $6 million in stranded credits toward the project, which also received other state incentives. Number Amount 2018 266 $8.9M $1.7B 2017 162 $6.8M $1.8B 2016 159 $6.3M $1.7B 2015 162 63.9M $1.7B 2014 162 $8.4M $1.8B 2013 163 $7M $1.8B 2012 145 $5.4M $1.5B 2011 134 $4.9M $1.4B 2010 153 $4.6M $1.2B 2009 155 $5.8M $1.1B Income year Credits claimed Credits carried forward R&D tax credits claimed and carried forward, 2009-2018 Source: Dept. of Revenue Services, Office of Legislative Research Paul Pescatello, executive director of the Connecticut Business & Industry Association's Connecticut Bioscience Growth Council, said the expansion of the state's R&D tax credit will boost the life sciences sector. PHOTO | HBJ FILE

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