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Machinery and Equipment Expenditure Credit

An employee is any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee.

Description

A credit against the Connecticut corporation business tax for expenditures in machinery and equipment is available to corporations that have no more than 800 full-time, permanent employees in Connecticut. The amount of the credit is based upon a percentage of the incremental increase in expenditures for machinery and equipment acquired for and installed in a facility in Connecticut that exceeds the amount spent for such expenditures in the prior income year.

The credit percentage available depends on the number of the corporation’s full-time, permanent employees whose wages, salaries, or other compensation is paid in Connecticut.

A full-time employee is any employee whose wages, salaries, or other compensation is paid in Connecticut and whose employment requires an average of 35 hours or more of service each week for at least eight consecutive weeks.

Facility means any plant, building, or other real property improvement used by the corporation in its trade or business.

Credit Percentage 5% credit

A credit equal to 5% of the incremental increase in expenditures for machinery and equipment is available if the corporation employed between 251 and 800 full-time, permanent employees in Connecticut.

10% credit

Definitions

Machinery is the basic machine itself, including all of its component parts such as belts, pulleys, shafts, moving parts, operating structures, replacement and repair parts, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayer or another related party; and all equipment or devices used or required to control, regulate, or operate the machinery, including without limitation computers and data processing equipment. Furniture and fixtures, automobiles, or other property used for transportation are not machinery.

The term also includes all replacement and repair parts, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the taxpayer or another related party.

A 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 in Connecticut.

How to Compute the Credit

Calculate the credit by multiplying the appropriate percentage (5% or 10%) by the incremental increase in machinery and equipment expenditures during the income year over the expenditures incurred during 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 credit in the prior year.

Carryback/Carryforward Limitation

Equipment is a device separate from machinery but essential to the business. Repair and replacement parts for equipment also qualify for the credit under the same terms as provided for parts purchased for machinery. Furniture and fixtures, automobiles, construction equipment, or other property used for transportation are not equipment.

No carryforward or carryback is allowed.

Informational Publication 2006(15), Guide to Connecticut Business Tax Credits Issued: 04/24/07

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