AN ACT ESTABLISHING A TAX CREDIT FOR QUALIFIED OPERATORS AND A WORKING GROUP TO EXAMINE MARKET-BASED SOURCING FOR CERTAIN INVESTMENT ASSETS INCOME AND CONCERNING THE ANGEL INVESTOR TAX CREDIT AND THE DEFINITIONS FOR CERTAIN TAX CREDITS.

House of Representatives
sHB5571 / File No. 686 1

General Assembly File No. 686
February Session, 2026 Substitute House Bill No. 5571

House of Representatives, April 20, 2026

The Committee on Finance, Revenue and Bonding reported
through REP. HORN of the 64th Dist., Chairperson of the
Committee on the part of the House, that the substitute bill
ought to pass.

AN ACT ESTABLISHING A TAX CREDIT FOR QUALIFIED
OPERATORS AND A WORKING GROUP TO EXAMINE MARKET-
BASED SOURCING FOR CERTAIN INVESTMENT ASSETS INCOME
AND CONCERNING THE ANGEL INVESTOR TAX CREDIT AND THE
DEFINITIONS FOR CERTAIN TAX CREDITS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:

Section 1. (NEW) ( Effective from passage and applicable to income and 1
taxable years commencing on or after January 1, 2026 ) (a) As used in this 2
section, "qualified operator" means a party to a facility management 3
agreement with the Capital Region Development Authority established 4
pursuant to section 32 -601 of the general statutes to operate the civic 5
center and coliseum complex in the city of Hartford known as 6
PeoplesBank Arena and "qualified agreement" means an agreement 7
between a qualified operator and a state agency, as defined in section 4-8
37e of the general statutes, in which the state agency commits to 9
schedule and host a minimum of fifteen events annually at the 10
PeoplesBank Arena for a term of not less than fifteen years and the 11
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qualified operator agrees to operate and promote each such event at the 12
facility during the term of the agreement. 13
(b) For income and taxable years commencing on or after January 1, 14
2026, there shall be allowed a credit against the tax imposed by chapter 15
208, 228z or 229 of the general statutes, other than the liability imposed 16
by section 12-707 of the general statutes, for any income or taxable year 17
in which the qualified operator is a party to a qualified agreement on 18
the last day of the income or taxable year. The amount of the credit shall 19
not exceed five million dollars for any income or taxable year. The 20
aggregate amount of the credits allowed under this section shall not 21
exceed ten million dollars. 22
(c) Any qualified operator that is subject to a tax imposed under 23
chapter 208, 228z or 229 of the general statutes may apply to the 24
Department of Revenue Services, in such form and manner as 25
prescribed by the Commissioner of Revenue Services, to reserve an 26
allocation for a credit under this section. The application shall contain 27
such information as the commissioner deems necessary to verify a 28
qualified operator's eligibility for the credit under this section. If the 29
commissioner approves such application, the commissioner shall 30
provide a voucher to the qualified operator for the amount allocated. 31
(d) If the amount of the credit allowed pursuant to this section 32
exceeds the taxpayer's liability for the tax imposed under chapter 208, 33
228z or 229 of the general statutes, the Commissioner of Revenue 34
Services shall treat such excess as an overpayment and, except as 35
provided in section 12-739 or 12-742 of the general statutes, shall refund 36
the amount of such excess, without interest, to such taxpayer. 37
(e) If the taxpayer is an S corporation or an entity treated as a 38
partnership for federal income tax purposes, the credit may be claimed 39
by the taxpayer's shareholders or partners. If such taxpayer is a single 40
member limited liability company that is disregarded as an entity 41
separate from its owner, the credit may be claimed by such limited 42
liability company's owner, provided such owner is subject to the tax 43
imposed under chapter 208, 228z or 229 of the general statutes. 44
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Sec. 2. (Effective from passage) (a) There is established a working group 45
to examine the issue of the state's application of market-based sourcing 46
to income from investment assets for financial institutions as it relates 47
to modern sourcing policy, economic competitiveness, support of in -48
state jobs and equitable treatment of the tax base and in-state services. 49
(b) The working group shall consist of the following members or their 50
designees: 51
(1) The chairpersons of the joint standing committees of the General 52
Assembly having cognizance of matters relating to finance, revenue and 53
bonding and banking; 54
(2) The Commissioner of Revenue Services and the Banking 55
Commissioner; and 56
(3) The Secretary of the Office of Policy and Management. 57
(c) The working group may consult with any individuals or entities 58
relevant to or informative for the examination. 59
(d) The chairpersons of the joint standing committee of the General 60
Assembly having cognizance of matters relating to finance, revenue and 61
bonding shall serve as chairpersons of the working group and shall 62
schedule the first meeting of the working group, which shall be held not 63
later than sixty days after the effective date of this section. 64
(e) The administrative staff of the joint standing committee of the 65
General Assembly having cognizance of matters relating to finance, 66
revenue and bonding shall serve as administrative staff of the working 67
group. 68
(f) Not later than January 1, 2027, the working group shall submit a 69
report on its findings and recommendations to the joint standing 70
committees of the General Assembly having cognizance of matters 71
relating to finance, revenue and bonding and banking, in accordance 72
with the provisions of section 11-4a of the general statutes. The working 73
group shall terminate on the date that it submits such report or January 74
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1, 2027, whichever is later. 75
Sec. 3. Section 12 -704d of the general statutes is repealed and the 76
following is substituted in lieu thereof (Effective July 1, 2026): 77
(a) As used in this section: 78
(1) "Angel investor" means an accredited investor, as defined by the 79
Securities and Exchange Commission, or network of accredited 80
investors who review new or proposed businesses for potential 81
investment and who may seek active involvement, such as consulting 82
and mentoring, in a qualified Connecticut business or a qualified 83
cannabis business, but "angel investor" does not include (A) a person 84
controlling fifty per cent or more of the Connecticut business or cannabis 85
business invested in by the angel investor, (B) a venture capital 86
company, or (C) any bank, bank and trust company, insurance 87
company, trust company, national bank, savings association or building 88
and loan association for activities that are a part of its normal course of 89
business; 90
(2) "Cash investment" means the contribution of cash, at a risk of loss, 91
to a qualified Connecticut business or a qualified cannabis business in 92
exchange for qualified securities; 93
(3) "Connecticut business" means any business, other than a cannabis 94
business, with its principal place of business in Connecticut; 95
(4) "Related person" has the same meaning as provided in section 12-96
217w; 97
(5) "Control" has the same meaning as provided in section 12-217w; 98
[(4)] (6) "Bioscience" means manufacturing pharmaceuticals, 99
medicines, medical equipment or medical devices and analytical 100
laboratory instruments, operating medical or diagnostic testing 101
laboratories, or conducting pure research and development in life 102
sciences; 103
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[(5)] (7) "Advanced materials" means developing, formulating or 104
manufacturing advanced alloys, coatings, lubricants, refrigerants, 105
surfactants, emulsifiers or substrates; 106
[(6)] (8) "Photonics" means generation, emission, transmission, 107
modulation, signal processing, switching, amplification, detection and 108
sensing of light from ultraviolet to infrared and the manufacture, 109
research or development of opto -electronic devices, including, but not 110
limited to, lasers, masers, fiber optic devices, quantum devices, 111
holographic devices and related technologies; 112
[(7)] (9) "Information technology" means software publishing, motion 113
picture and video production, teleproduction and postproduction 114
services, telecommunications, data processing, hosting and related 115
services, custom computer programming services, computer system 116
design, computer facilities management services, other computer 117
related services and computer training; 118
[(8)] (10) "Clean technology" means the production, manufacture, 119
design, research or development of clean energy, green buildings, smart 120
grid, high -efficiency transportation vehicles and alternative fuels, 121
environmental products, environmental remediation and pollution 122
prevention; 123
[(9)] (11) "Qualified securities" means any form of equity, including a 124
general or limited partnership interest, common stock, preferred stock, 125
with or without voting rights, without regard to seniority position that 126
must be convertible into common stock; 127
[(10)] (12) "Emerging technology business" means any business that 128
is engaged in bioscience, advanced materials, photonics, information 129
technology, clean technology or any other emerging technology as 130
determined by the Commissioner of Economic and Community 131
Development; 132
[(11)] (13) "Cannabis business" means a cannabis establishment (A) 133
for which a social equity applicant has been granted a provisional 134
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license or a license, (B) in which a social equity applicant or social equity 135
applicants have an ownership interest of at least sixty-five per cent, and 136
(C) such social equity applicant or social equity applicants have control 137
of such establishment; 138
[(12)] (14) "Social equity applicant" has the same meaning as provided 139
in section 21a-420; 140
[(13)] (15) "Cannabis" has the same meaning as provided in section 141
21a-420; and 142
[(14)] (16) "Cannabis establishment" has the same meaning as 143
provided in section 21a-420. 144
(b) There shall be allowed a credit against the tax imposed under this 145
chapter, other than the liability imposed by section 12 -707, for a cash 146
investment by an angel investor of not less than twenty -five thousand 147
dollars in the qualified securities of a Connecticut business or a cannabis 148
business. The credit shall be in an amount equal to (1) twenty -five per 149
cent of such investor's cash investment in a Connecticut business, or (2) 150
forty per cent of such investor's cash investment in a cannabis business, 151
provided the total tax credits allowed to any angel investor shall not 152
exceed five hundred thousand dollars. The credit shall be claimed in the 153
taxable year in which such cash investment is made by the angel 154
investor. The credit may be sold, assigned or otherwise transferred, in 155
whole or in part. 156
(c) To qualify for a tax credit pursuant to this section, a cash 157
investment shall be in: 158
(1) A Connecticut business that (A) has been approved as a qualified 159
Connecticut business pursuant to subsection (d) of this section; (B) had 160
annual gross revenues of less than one million dollars in the most recent 161
income year of such business; (C) has fewer than twenty-five employees, 162
not less than [seventy-five] fifty per cent of whom reside in this state; 163
(D) has been operating in this state for less than seven consecutive years; 164
(E) is primarily owned by the management of the business and their 165
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families; and (F) received less than two million dollars in cash 166
investments eligible for the tax credits provided by this section; or 167
(2) A cannabis business that (A) has been approved as a qualified 168
cannabis business pursuant to subsection (d) of this section; (B) had 169
annual gross revenues of less than one million dollars in the most recent 170
income year of such business; (C) has fewer than twenty-five employees, 171
not less than seventy -five per cent of whom reside in this state; (D) is 172
primarily owned by the management of the business and their families; 173
and (E) received less than two million dollars in cash investments 174
eligible for the tax credits provided by this section. 175
(d) (1) A Connecticut business or a cannabis business may apply to 176
Connecticut Innovations, Incorporated, for approval as a Connecticut 177
business or cannabis business, as applicable, qualified to receive cash 178
investments eligible for a tax credit pursuant to this section , provided 179
on and after July 1, 2026, separate applications from a Connecticut 180
business and related persons thereto shall be considered a single 181
application for a Connecticut business for purposes of this section . The 182
application shall include (A) the name of the business and a copy of the 183
organizational documents of such business, (B) a business plan, 184
including a description of the business and the management, product, 185
market and financial plan of the business, (C) a description of the 186
business's innovative technology, product or service, (D) a statement of 187
the potential economic impact of the business, including the number, 188
location and types of jobs expected to be created, (E) a description of the 189
qualified securities to be issued and the amount of cash investment 190
sought by the business, (F) a statement of the amount, timing and 191
projected use of the proceeds to be raised from the proposed sale of 192
qualified securities, and (G) such other information as the chief 193
executive officer of Connecticut Innovations, Incorporated, may require. 194
(2) Said chief executive officer shall, on a monthly basis, compile a list 195
of approved applications, categorized by the cash investments being 196
sought by the qualified Connecticut business or the qualified cannabis 197
business and type of qualified securities offered. 198
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(e) (1) Any angel investor that intends to make a cash investment in 199
a business on such list may apply to Connecticut Innovations, 200
Incorporated, to reserve a tax credit in the amount indicated by such 201
investor. Connecticut Innovations, Incorporated, shall not reserve tax 202
credits under this section for any investments made in a qualified 203
Connecticut business on or after July 1, 2028, or for any investments 204
made in a qualified cannabis business on or after July 1, 2023. 205
(2) The aggregate amount of all tax credits under this section that may 206
be reserved by Connecticut Innovations, Incorporated, shall not exceed 207
(A) for cash investments made in qualified Connecticut businesses, six 208
million dollars annually for the fiscal years commencing July 1, 2010, to 209
July 1, 2012, inclusive, and five million dollars for each fiscal year 210
thereafter, and (B) for cash investments made in qualified cannabis 211
businesses, fifteen million dollars annually for the fiscal years 212
commencing July 1, 2021, and July 1, 2022. 213
(3) With respect to the tax credits available under this section for 214
investments in qualified Connecticut businesses, Connecticut 215
Innovations, Incorporated, shall not reserve more than seventy-five per 216
cent of such tax credits for investments in emerging technology 217
businesses, except if any such credits remain available for reservation 218
after April first in any fiscal year, such remaining credits may be 219
reserved for investments in such businesses and may be prioritized for 220
veteran-owned, women -owned or minority -owned businesses and 221
businesses owned by individuals with disabilities. 222
(4) The amount of the credit allowed to any investor pursuant to this 223
section shall not exceed the amount of tax due from such investor under 224
this chapter, other than section 12-707, with respect to such taxable year. 225
Any tax credit that is claimed by the angel investor but not applied 226
against the tax due under this chapter, other than the liability imposed 227
under section 12-707, may be carried forward for the five immediately 228
succeeding taxable years until the full credit has been applied. 229
(f) If the angel investor is an S corporation or an entity treated as a 230
partnership for federal income tax purposes, the tax credit may be 231
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claimed by the shareholders or partners of the angel investor. If the 232
angel investor is a single member limited liability company that is 233
disregarded as an entity separate from its owner, the tax credit may be 234
claimed by such limited liability company's owner, provided such 235
owner is a person subject to the tax imposed under this chapter. 236
(g) A review of the cumulative effectiveness of the credit under this 237
section shall be conducted by Connecticut Innovations, Incorporated, by 238
July first annually. Such review shall include, but need not be limited to, 239
the number and type of Connecticut businesses and cannabis businesses 240
that received angel investments, the number of angel investors and the 241
aggregate amount of cash investments, the current status of each 242
Connecticut business and cannabis business that received angel 243
investments, the number of employees employed in each year following 244
the year in which such Connecticut business or cannabis business 245
received the angel investment and the economic impact in the state of 246
the Connecticut business or cannabis business that received the angel 247
investment. Such review shall be submitted to the Office of Policy and 248
Management and to the joint standing committee of the General 249
Assembly having cognizance of matters relating to commerce, in 250
accordance with the provisions of section 11-4a. 251
Sec. 4. Subdivision (1) of subsection (a) of section 12 -217j of the 2026 252
supplement to the general statutes is repealed and the following is 253
substituted in lieu thereof (Effective October 1, 2026): 254
(a) (1) There shall be allowed as a credit against the tax imposed on 255
any taxpayer under this chapter, with respect to income years of such 256
taxpayer commencing on or after January 1, 1994, an amount equal to 257
twenty per cent of the amount spent by such taxpayer directly on 258
research and experimental expenditures, as [defined in Section 174 of 259
the Internal Revenue Code of 1986, or any subsequent corresponding 260
internal revenue code of the United States, as from time to time 261
amended, which] described in subdivision (1) of subsection (b) of 262
section 12-217n, that are conducted in this state and [which] that exceeds 263
the amount spent by such taxpayer during the preceding income year 264
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of such taxpayer for such expenditures. 265
Sec. 5. Subsection (a) of section 12 -217vv of the 2026 supplement to 266
the general statutes is repealed and the following is substituted in lieu 267
thereof (Effective from passage and applicable to income and taxable years 268
commencing on or after January 1, 2026): 269
(a) As used in this section: 270
(1) "Eligible farmer" means a taxpayer in this state whose federal 271
gross income from farming for the income or taxable year is (A) at least 272
two-thirds of excess federal gross income , or (B) not less than two 273
hundred fifty thousand dollars; 274
(2) "Excess federal gross income" means the amount of federal gross 275
income from all sources for the income or taxable year in excess of thirty 276
thousand dollars; 277
(3) "Agricultural production" has the same meaning as provided in 278
subdivision (63) of section 12-412; 279
(4) "Farm investment property" means machinery and equipment 280
that are acquired by purchase by an eligible farmer on or after January 281
1, 2026, and buildings and structural components of buildings that are 282
acquired, constructed, reconstructed or erected by an eligible farmer 283
and placed in service on or after January 1, 2026, and (A) are situated in 284
this state, (B) have a class life of more than four years, as described in 285
Section 168(e) of the Internal Revenue Code of 1986, or any subsequent 286
corresponding internal revenue code of the United States, as amended 287
from time to time, (C) are acquired by an eligible farmer from a person 288
other than a related person, (D) are not acquired to be leased, and are 289
not leased, to another person or persons during the twelve full months 290
following their acquisition or placement in service, and (E) will be held 291
and used in this state by the eligible farmer in the ordinary course of 292
agricultural production for not less than five full years following the 293
date of acquisition of such machinery and equipment or the date of 294
placement in service of such buildings; 295
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(5) "Related person" means (A) a corporation, limited liability 296
company, partnership, association or trust controlled by the taxpayer, 297
(B) an individual, corporation, limited liability company, partnership, 298
association or trust that is in control of the taxpayer, (C) a corporation, 299
limited liability company, partnership, association or trust controlled by 300
an individual, corporation, limited liability company, partnership, 301
association or trust that is in control of the taxpayer, or (D) a member of 302
the same controlled group as the taxpayer; and 303
(6) "Control" means (A) with respect to a corporation, ownership, 304
directly or indirectly, of stock possessing fifty per cent or more of the 305
total combined voting power of all classes of the stock of such 306
corporation entitled to vote, or (B) with respect to a trust, ownership, 307
directly or indirectly, of fifty per cent or more of the beneficial interest 308
in the principal or income of such trust. The ownership (i) of stock in a 309
corporation, (ii) of a capital or profits interest in a partnership or 310
association, or (iii) of a beneficial interest in a trust shall be determined 311
in accordance with the rules for constructive ownership of stock 312
provided in Section 267(c) of the Internal Revenue Code of 1986, or any 313
subsequent corresponding internal revenue code of the United States, 314
as amended from time to time, other than paragraph (3) of said section. 315
Sec. 6. Section 12-217ww of the 2026 supplement to the general 316
statutes is repealed. (Effective from passage) 317
This act shall take effect as follows and shall amend the following
sections:

Section 1 from passage and
applicable to income and
taxable years commencing
on or after January 1, 2026
New section
Sec. 2 from passage New section
Sec. 3 July 1, 2026 12-704d
Sec. 4 October 1, 2026 12-217j(a)(1)
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Sec. 5 from passage and
applicable to income and
taxable years commencing
on or after January 1, 2026
12-217vv(a)
Sec. 6 from passage Repealer section

Statement of Legislative Commissioners:
In Section 1(b), "years" was changed to "dollars" for accuracy. In Section
3(d)(1), "any application " was changed to " separate applications " and
"single Connecticut business " was changed to " single application for a
Connecticut business " for clarity, and Section 4 was redrafted for
accuracy.

FIN Joint Favorable Subst. -LCO

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sHB5571 / File No. 686 13

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of
the General Assembly, solely for purposes of information, summarization and explanation and do not
represent the intent of the General Assembly or either chamber thereof for any purpose. In general,
fiscal impacts are based upon a variety of informational sources, including the analyst’s professional
knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final
products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note

State Impact:
Agency Affected Fund-Effect FY 27 $ FY 28 $
Revenue Serv., Dept. GF - Potential
Revenue Loss
Up to 5
million
Up to 5
million
Note: GF=General Fund
Municipal Impact: None
Explanation
The bill results in the following fiscal impacts:
Section 1 , which establishes a refundable tax credit for the
PeoplesBank Arena’s facility management company under certain
circumstances, results in a potential General Fund revenue loss of up to
$5 million in FY 27 and FY 28. The overall amount of credits allowed is
capped at $10 million in aggregate; thus, the revenue loss could extend
to FY 29 and beyond to the extent less than $5 million in credits are
allowed in each of FY 27 and FY 28.
Section 2 establishes a working group to study certain aspects of
market-based sourcing. This does not result in any fiscal impact.
Section 3 adjusts the angel investor tax credit program. This does not
result in any fiscal impact as the program is subject to an aggregate
annual cap of $5 million and currently reaches that cap (which is
unchanged in the bill).
Sections 4 & 6 make technical adjustments that do not result in any
fiscal impact.
Section 5 makes a clarifying change to the farm investment tax credit
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program which is not anticipated to result in any fiscal impact.
The Out Years
The revenue impact identified in section 1 above would continue
until the full $10 million tax credit allocation is exhausted.

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OLR Bill Analysis
sHB 5571

AN ACT ESTABLISHING A TAX CREDIT FOR QUALIFIED
OPERATORS AND A WORKING GROUP TO EXAMINE MARKET -
BASED SOURCING FOR CERTAIN INVESTMENT ASSETS INCOME
AND CONCERNING THE ANGEL INVESTOR TAX CREDIT AND THE
DEFINITIONS FOR CERTAIN TAX CREDITS.

SUMMARY
This bill makes various unrelated changes regarding state tax credits
and establishes a working group on market -based sourcing. Generally,
it does the following:
1. creates a refundable tax credit under which, generally, the
PeoplesBank Arena’s facility management company may qualify
if it contracts with a state agency, such as UConn, to host at least
15 events each year at the arena for at least 15 years (§ 1);
2. sets up a working group to examine how Connecticut applies
market-based sourcing to income from financial institutions’
investment assets (§ 2);
3. modifies requirements for businesses to qualify for tax credits
under the angel investor tax credit program , including reducing
the minimum percentage of a business’s employees that must live
in Connecticut (§ 3);
4. changes the scope of the research and experimental (R&E)
expenditures tax credit program by redefining which
expenditures qualify (§ 4);
5. expands eligibility for a farm investment tax credit program to
include Connecticut taxpayers whose annual income from
farming is at least $250,000 (§ 5); and
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6. repeals a second, substantially similar farm investment tax credit
program that applies to a broader range of agricultural
production (§ 6).
The bill also makes technical and conforming changes.
EFFECTIVE DATE: Various, see below.
§ 1 — PEOPLESBANK ARENA REFUNDABLE BUSINESS TAX
CREDIT
The bill establishes a refundable tax credit for a “qualified operator,”
which it defines as a party to a facility management agreement with the
Capital Region Development Authority to operate the civic center and
coliseum complex in Hartford known as PeoplesBank Arena.
The credit is available starting with the 2026 income and tax year and
requires the qualified operator to be a party to a qualified agreement on
the last day of the income or tax year a credit is claimed. Under the bill,
a “qualified agreement” is an agreement between a qualified operator
and a state agency in which the (1) state agency commits to schedule
and host at least 15 events annually at the PeoplesBank Arena for at least
15 years and (2) qualified operator agrees to operate and promote each
of those events at the facility during the agreement’s term. By law, and
under the bill, a “state agency” is each state board, authority,
commission, department, office, institution, council , or other agency of
the state, including each constituent unit and each public institution of
higher education.
The credit equals up to $5 million for the income or tax year, as
applicable, and can be applied against the corporation business, pass -
through entity, or personal income tax, but not the withholding tax. The
bill caps the total credits allowed under the program at $10 million.
Under the bill, the qualified operator may apply to the Department
of Revenue Services (DRS) to reserve a credit allocation. The DRS
commissioner must prescribe the application, which must contain the
information he deems necessary to verify the qualified operator’s
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eligibility for the credit. Once verified, the commissioner must issue the
qualified operator a voucher for its credit amount.
If the qualified operator is an S corporation or treated as a partnership
for federal income tax purposes, the qualified operator’s shareholders
and partners may claim the credit. If the qualified operator is a single
member limited liability company (LLC) that is disregarded as an entity
separate from its owner, the LLC’s owner may claim the credit , as long
as the owner is subject to either the corporation business, pass-through
entity, or personal income tax.
The bill requires the DRS commissioner to refund, without interest,
any amount of the tax credit that exceeds a qualified operator’s liability,
unless he retains the refund, which, by law, he may do if the qualified
operator (1) owes state or municipal taxes or other obligations or (2) is
in default of a student loan made by the Connecticut Student Loan
Foundation or the Connecticut Higher Education Supplemental Loan
Authority.
EFFECTIVE DATE: Upon passage, and applicable to income and tax
years beginning on or after January 1, 2026.
§ 2 — MARKET-BASED SOURCING AND FINANCIAL
INSTITUTIONS WORKING GROUP
The bill creates a working group to examine how Connecticut applies
market-based sourcing to income from financial institutions’ investment
assets, as it relates to modern sourcing policy, economic
competitiveness, supporting in -state jobs, and ensuring equitable
treatment of the tax base and in -state service s. (Generally, under
market-based sourcing rules, businesses assign transactions involving
services or intangible property based on where their customers are
located or receive the service or property , instead of where the
transaction was performed . The “assigned” location affects the taxes
that apply to the transaction.)
The working group consists of the (1) chairs for the Banking and
Finance, Revenue and Bonding committees, (2) DRS and banking
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commissioners, and (3) Office of Policy and Management secretary. It
may consult with any individuals or entities relevant to or informative
for the examination.
The bill requires the Finance, Revenue and Bonding Committee
chairs and administrative staff to serve in the same capacities for the
working group. It also requires the chairs to schedule the working
group’s first meeting, which must be held within 60 days after the bill’s
passage.
The working group must submit a report with its findings and
recommendations to the Banking and Finance, Revenue and Bonding
committees by January 1, 2027, and ends on that date or when it submits
its report, whichever is later.
EFFECTIVE DATE: Upon passage
§ 3 — ANGEL INVESTOR TAX CREDIT PROGRAM CHANGES
The bill makes changes to the angel investor tax credit program ,
which, generally, allows angel investors who make cash investments of
at least $25,000 in the qualified securities of certain Connecticut
businesses to be eligible for a personal income tax credit equal to 25% of
their investment. By law, an “angel investor” is generally an investor
whom the Securities and Exchange Commission considers to be an
accredited investor and a “Connecticut business” is any business, other
than a cannabis business, wh ose principal place of business is in
Connecticut.
To qualify for the tax credit, existing law requires the investments to
be in Connecticut businesses that meet several criteria, including that
the business:
1. applied for and received approval from Connecticut Innovations,
Inc. (CI) to get credit-eligible investments;
2. had gross revenues of less than $1 million in the most recent
income year;
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3. has less than 25 employees;
4. has been operating in Connecticut for fewer than seven
consecutive years;
5. is primarily owned by the management of the business and their
families; and
6. received less than $2 million in investments from credit -eligible
angel investors.
Current law additionally requires that 75% of the business’s employees
live in Connecticut. The bill reduces this percentage to 50% and,
beginning July 1, 2026, requires applications to CI from a business and
a related person to be treated as a single Connecticut business under the
program.
Existing law and the bill define “related person” in relation to a
corporation claiming a credit as:
1. a corporation, partnership, association, or trust controlled by that
corporation;
2. an individual, corporation, partnership, association, or trust that
is in control of that corporation;
3. a corporation, partnership, association, or trust controlled by an
individual, corporation, partnership, association, or trust that is
in control of that corporation; or
4. a member of the same controlled group as that corporation.
For the purposes of the “related person” definition and the angel
investor tax credit program , the bill adds a definition for “control,”
which is (1) for corporations, direct or indirect ownership of stock
possessing at least 50% of the total combined voting power of all classes
of the stock of the corporation entitled to vote and (2) for trusts, direct
or indirect ownership of at least 50% of the beneficial interest in the
principal or income of the trust. For determining the ownership of a
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corporation’s stock, partnership’s or association’s capital or profits, or
trust’s beneficial interest, the definition generally requires:
1. direct or indirect ownership of these assets by or for a
corporation, partnership, estate, or trust is considered to be
owned proportionately by or for its shareholders, partners, or
beneficiaries;
2. an individual is considered as owning the asset, directly or
indirectly, by or for his or her family; and
3. the family of an individual includes only his or her brothers and
sisters ( full and half siblings ), spouse, ancestors, and lineal
descendants.
EFFECTIVE DATE: July 1, 2026
§ 4 — RESEARCH AND EXPERIMENTAL EXPENDITURES TAX
CREDIT CHANGES
The bill changes what is an R&E expenditure for the purposes of the
R&E tax credit program . By law, the program gives qualifying
businesses a credit against the corporation business tax equal to 20% of
the amount they spent on R&E conducted in Connecticut over and
above the amount they spent during the prior year.
Under current law, “ research and experimental expenditures ”
generally are (1) expenses a business incurs in connection with its trade
or business that represent research and development (R&D) costs in the
experimental or laboratory sense; (2) costs related to developing or
improving a product, including any pilot model, process, formula,
invention, technique, patent, or similar property; and (3) costs of getting
a patent. They do not include expenditures for (1) quality control testing;
(2) advertising or promotions; (3) consu mer or efficiency surveys; (4)
management studies; (5) research connected with literary, historical, or
similar projects; or (6) acquiring another business ’ patent, model,
production, or process (26 C.F.R. § 1.174-2).
The bill replaces this definition with the one for r esearch and
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development expenses under existing law for the R&D tax credit
program. Generally, “r esearch and development expenses” are (1)
research or experimental expenditures federally -deductible under the
applicable federal law as it was written on May 28, 1993 , and
determined without regard to the federal credit for increasing research
activities and (2) qualifying “basic research payments” (for example,
payments a business makes to qualifying nonprofit educational
institutions, scientific research organizations, or grant organizations). In
both cases, the expenditures or payments must (1) be paid or incurred
by the business for research and experimentation and basic research
done in Connecticut and (2) not be funded by any grant or contract with
a public or private entity, unless the entity is included in a combined
return with the business paying or incurring the expenses. Expenditures
under this definition generally include and exclude the same ones the
“research and experimental expenditures” definition above does.
EFFECTIVE DATE: October 1, 2026
§§ 5 & 6 — CHANGES TO FARM INVESTMENT TAX CREDIT
PROGRAMS
PA 25 -168 and PA 25 -152 created substantially similar refundable
corporate and income tax credit programs for farmers’ investments in
eligible machinery, equipment, and buildings for use in specific types of
agricultural production. By comparison, the program under PA 25-152
applies to a broader range of agricultural production by including the
production of (1) wine under a farm winery license, (2) Christmas trees,
and (3) apple juice and cider under both an apple juice and cider
manufacturing permit and farmer tax exemption permit.
The bill eliminates PA 25-152’s program and modifies the program
created under PA 25 -168. Specifically, it expands who qualifies as an
eligible farmer to include Connecticut taxpayers whose federal gross
income from farming for the income or tax year is at least $250,000.
Under existing law, Connecticut taxpayers can qualify if their federal
gross income from farming for the income or tax year is at least two -
thirds of their federal gross income from all sources over $30,000.
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EFFECTIVE DATE: Upon passage, and, for the continuing program,
applicable to income and tax years beginning on or after January 1, 2026.
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 47 Nay 7 (03/31/2026)