Finance Committee bill weakens
R&D in state

(March 31, 2006) Research and development is absolutely vital to the future of Connecticut’s economy, especially since many leading-edge R&D facilities are located here. But the legislature’s Finance Committee is considering a bill that would undermine the state’s position as a national leader in R&D.

CBIA is opposing a section of SB-669 that would significantly narrow the state’s research and development tax credit and the research and develop-ment tax credit exchange by changing the definition of what constitutes research and development expenditures.

The state’s R&D tax credit and tax credit exchange have been key to helping Connecticut rank third in the nation in R&D as a percentage of the overall state economy. Through the incentives, Connecticut has succeeded in maintaining R&D facilities in the state, expanding jobs at those facilities, and attracting new R&D facilities to Connecticut.

Many small and midsize biotech companies perform R&D operations in Connecticut, and several larger corporations actually locate their national or international R&D facilities here. The state’s burgeoning biotechnology industry, as well as other manufacturing and aerospace businesses, depends heavily on R&D.

What’s more, most of Connecticut’s growth in these industries took place after the legislature adopted the tax incentives. Weakening them makes little sense as the state’s economy continues to struggle to add jobs.

Lawmakers can help the state’s economy by rejecting the harmful part of SB-669 and enacting other measures to bring tax relief to employers in the state. For example:
• Lawmakers could go far to improve Connecticut’s business climate and boost the competitiveness of manufacturers in the state by exempting manufacturing machinery and equipment from local property taxes, as is proposed in SB-1.
• Repealing the 20% corporate tax surcharge is another step that would improve the state’s business climate.

Connecticut needs tax policies that encourage investments in new equipment and technology and that foster innovation and productivity. These investments in turn will lead to the development of new products and services — and help the state bring in other businesses and jobs.

For more information, contact CBIA’s Bonnie Stewart at 860-244-1900 or stewartb@cbia.com.