R&D Tax Credit Expansion Draws Strong Support
Connecticut lawmakers are again taking steps to expand access to the state’s research and development tax credit.
The legislature’s Commerce Committee unanimously referred HB 5319, which allows thousands of small business to use the incentive, to the Finance, Revenue, and Bonding Committee March 5.
The proposal is also featured in SB 84—Gov. Ned Lamont’s budget adjustment bill—which is also before the Finance Committee.
Under the bills, businesses with less than $70 million in annual gross income can claim tax credits—beginning in the 2026 tax year—through a voucher program administered by the Department of Economic and Community Development.
Eligible companies can claim a credit equal to 6% of their research and development expenses, with the credit capped at $1.5 million per company annually.
“We hear and appreciate your advocacy on this longstanding piece of legislation and look forward to moving it forward,” Commerce Committee co-chair Sen. Joan Hartley (D-Waterbury) said during a March 3 public hearing.
Competitive Disadvantage
For years, Connecticut’s R&D tax credit has largely been available only to C-corporations that pay the corporation business tax.
That leaves many small businesses—particularly pass-through entities such as partnerships, S-corporations, and LLCs—at a competitive disadvantage.
“You cannot do manufacturing without research and development.”
EAMA’s Anthony Benoit
Supporters argue that this gap overlooks the important role small businesses play driving innovation, particularly in sectors like advanced manufacturing, life sciences, and technology.
“You cannot do manufacturing without research and development,” Eastern Advanced Manufacturing Alliance Regional Sector Partnership director Anthony Benoit said at the public hearing.
“This small subsidy to small businesses to improve research and development makes companies more competitive.”
Growth Opportunities
CBIA’s Paul Amarone and Jenna Grasso both spoke in support of HB 5319, highlighting its potential impact on the state’s manufacturing and bioscience sectors.
A number of CBIA member companies also shared opportunities for expanding operations and growing jobs.
“Some of our own R&D expenditures include innovating our tooling department,” said Alison Carey-Lynch, VP of operations at Carey Manufacturing, a small business primarily focused on making fasteners and case hardware.
“This will be approximately a $500,000 investment which will include job creation, machinery purchases, and the adoption of advanced technology.
“The passage of this legislation would allow us to move up the project timeline. This will help with offsetting costs, including training and material expenses.”
Strengthens Innovation
The bill has drawn strong interest from business groups, manufacturers, and the state’s growing biotech sector, which argue that expanding the credit will help Connecticut remain competitive with neighboring states.
Supporters say the measure would strengthen the state’s innovation ecosystem and encourage companies to keep research activities—and the jobs they support—within Connecticut.
“The passage of this legislation will allow us to continue to invest in the development of materials critical to the information age,” said Kate Hampford Donahue, president and CEO of Hampford Research, a maker of specialty chemicals.
“This will enable us to hire more employees and invest in more equipment.”
Hampford Research’s Kate Hampford Donahue
“This will help expand our customer base, which will enable us to hire more employees and invest in more equipment.”
As the bill moves through the legislative process, businesses across the state will be closely watching its progress as a potential step toward leveling the playing field for Connecticut’s small and mid-sized innovators.
HB 5319 represents one of the most significant expansions of Connecticut’s R&D tax credit program in years, opening the door for many small businesses to access an incentive historically limited to larger corporations.
For more information, contact CBIA’s Paul Amarone (860.244.1978).
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