Hartford Business Journal

16 Hartford Business Journal • January 8, 2018 • www.HartfordBusiness.com By Matt Pilon mpilon@HartfordBusiness.com I n 2014, Connecticut agreed to let United Technologies Corp. use up to $400 million in "stranded" research and development tax credits to keep and expand the presence of its Pratt & Whitney subsidiary in East Hartford. Allowing a company to extract value from tax credits it already earned, but hadn't been able to use, was a significant shift in the state's economic development strategy, compared to its more common practice of handing out grants or favorable loans in exchange for company pledges to create or retain jobs and invest in new facilities and equipment. Now, the legislature wants to expand on the concept. Slipped into the latest state budget is a provision that opens up the use of stranded tax credits to a broad array of companies — albeit on a smaller scale than the UTC deal (the program is capped at $50 million). Starting this year, the Department of Economic and Community Development (DECD) will accept applications from other companies that want to use their stranded credits in exchange for making major investments in buildings, infrastruc- ture and Connecticut-based venture funds. Projects that are accepted into the pro- gram will be required to show that their investment generated enough economic opportunity to make the state whole on the future tax revenue it's foregoing by allowing the credits to be used. "So many times in economic develop- ment, you're promising to do things in the future," said Paul Pescatello, executive director of the Connecticut Bioscience Growth Council. "Here, you only earn the credit after you've made the investment." The bioscience sector is expected to be one of the biggest beneficiaries of the pro- gram because the industry spends heavily on research and development. Economic impact The policy was a response to the fact that some Connecticut companies have accumulated significant tax credits, par- ticularly R&D credits, they haven't been able to use. That's because the value of some companies' tax credits exceed their relative corporate income tax liability and there are state-imposed limits on what portion of a tax liability a company can Cashing In Connecticut has adopted a new stranded tax credit program that aims to unleash millions in private investment Paul Pescatello, executive director of the Connecticut Bioscience Growth Council, says the industry is grateful for a new tax-credit program allowing firms to cash in R&D tax credits. Pratt & Whitney's new East Hartford headquarters (top photo) was financed with stranded tax credits, a deal DECD Commissioner Catherine Smith (bottom photo) helped put together. HBJ PHOTO | STEVE LASCHEVER PHOTOS | HBJ FILE

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