Short answer. Connecticut has two rates that stack: 20 percent of the increase in research spending under the RC credit, plus a 1 to 6 percent rate on total research spending under the RDC credit. A qualified small business with no Connecticut tax can exchange unused credit for cash worth 65 percent of its value, or 90 percent for a small biotechnology company.
Key facts
| RC credit (incremental) | 20% of the increase in Connecticut QRE |
|---|---|
| RDC credit (non-incremental) | 1% to 6% of total Connecticut QRE, by gross income |
| Refundable | 65% cash exchange for QSBs (90% for small biotech) |
| Carryforward | 15 years (credits earned 2021 on) |
| Forms | CT-1120 RC and CT-1120 RDC |
The two rates, and how they stack
Connecticut runs two research credits in parallel, under two statutes.
The RC credit under Conn. Gen. Stat. 12-217j is 20 percent of the increase in your qualified research expenses over the prior year. It is the incremental piece, structurally like the federal Regular credit but at a higher rate.
The RDC credit under 12-217n is non-incremental: it applies to total Connecticut research spending at a tiered rate from 1 to 6 percent that depends on the company's gross income. The two coordinate so you do not double-count, because expenses used in the RC computation reduce the RDC base for the same year. Each credit works on a different slice of your spending.
Cash for a company with no tax
The rate matters more here because a qualified small business can take it as cash.
A qualified small business, meaning gross income of $100 million or less in the prior year, with no Connecticut corporation business tax liability, can exchange unused RC and RDC credits for a cash refund worth 65 percent of the credit amount. For a small biotechnology company, 2025's H.B. 7287 raised that to 90 percent. A $1.5 million annual cap applies.
For a pre-profit Connecticut software company, the practical pattern is to compute both credits, claim them on Forms CT-1120 RC and CT-1120 RDC, and elect the cash exchange rather than carrying the credit forward.
What the rate applies to
Two rules shape the base the rate sits on.
Only research conducted in Connecticut counts. The Connecticut qualified research expense definition follows federal Section 41, so the wages, contract research, and supplies that support your federal claim also support the Connecticut credit, limited to the in-state portion.
Unused credit that you do not exchange for cash carries forward. Credits earned in income years beginning on or after January 1, 2021 carry forward 15 years; older credits carry forward until used.
More on Connecticut's R&D credit
The full state overview, the federal Section 41 work it builds on, and related state guides:
Sources
Every claim on this page traces to a primary authority. Each source below is independent and verifiable.
- Connecticut DRS, Research and Development Nonincremental Expenses Tax Credit guidance (Conn. Gen. Stat. 12-217j and 12-217n) - Connecticut Department of Revenue Services
- Connecticut Form CT-1120 RDC (2025) - Connecticut Department of Revenue Services
- 26 U.S.C. ยง 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the Connecticut state workpaper from one engagement, both built to survive an exam.