Short answer. You can claim both, and Connecticut is one of the few states with two research credits of its own. It runs its own calculations, a 20 percent incremental credit plus a nonincremental credit that is a flat 6 percent for companies with prior-year gross income of $100 million or less, and both stack with the federal Section 41 credit on the same Connecticut research. A company at $70 million or less with no Connecticut corporation business tax can exchange credits for cash at 65 percent of value, or 90 percent for a biotechnology company.
Key facts
| Claim both? | Yes, on the same Connecticut research |
|---|---|
| Federal rate | 20% regular / 14% ASC |
| Connecticut rate | 20% incremental (RC) plus 6% nonincremental (RDC); 1-6% above $100M gross income |
| Connecticut refundable? | Cash exchange at 65% (90% biotech), gross income $70M or less |
| Forms | Form 6765 (federal) + CT-1120RC and CT-1120 RDC |
Two state credits, plus the federal one
Connecticut does not take a percentage of the federal credit; it runs its own research credits on Connecticut expenses.
The federal Section 41 credit is claimed on Form 6765 with your federal return. Connecticut offers two corporation business tax research credits, an incremental credit (Form CT-1120RC) and a nonincremental credit (Form CT-1120 RDC), and a company can claim both in the same year, with the nonincremental credit computed on expenses net of the amount used for the incremental credit. The same Connecticut research can support a Connecticut credit and the federal credit in the same year.
Both Connecticut credits build on the federal Section 41 and 174 standards but reach only research performed in Connecticut, so the work you document federally is the basis for the state claim.
Federal Section 41 vs. Connecticut, factor by factor
Connecticut runs its own two-credit system and lets small companies exchange unused credit for cash.
| Factor | Federal Section 41 | Connecticut |
|---|---|---|
| What it is | Credit for increasing research activities | Two credits: incremental (RC) and nonincremental (RDC) |
| Credit rate | 20% regular / 14% ASC | RC: 20% of the increase. RDC: 6% of Connecticut R&D spend net of the RC amount (1% to 6% above $100M gross income) |
| Refundable | No - a QSB may offset up to $500,000 of payroll tax under Section 41(h) | Not refundable, but a company with $70M or less of gross income can exchange credits for cash at 65% of value (90% for a biotech) |
| Carryforward | 20 years, with a 1-year carryback | 15 years, no carryback |
| Where research must occur | United States | Connecticut only |
| How you claim it | Form 6765 with the federal return | Form CT-1120RC and CT-1120 RDC |
| Claim alongside the other? | Yes, on the same underlying QRE | Yes; you claim RC and RDC together for the state and the federal credit too |
| Documentation | Four-part test and QRE substantiation (Treas. Reg. 1.41-4) | Built on the Section 41 and 174 standards, Connecticut research only |
Where Connecticut differs from federal
Two features set the Connecticut credits apart.
Two credits that stack. You can claim both the incremental RC and the nonincremental RDC in the same year; the RDC is computed on expenses net of the amount used for the RC, so nothing is counted twice. These are corporation business tax credits. From 2026, S corporations and partnerships with gross income of $70 million or less get a separate 6 percent credit against the personal income tax, reserved in advance through a DECD voucher.
Cash for small companies. A company with prior-year gross income of $70 million or less and no Connecticut corporation business tax can exchange its credit with the state for cash worth 65 percent of its value, or 90 percent for a biotechnology company. The federal credit has no such exchange, though a qualified small business can offset up to $500,000 of payroll tax under Section 41(h).
One evidence base for both
The records that prove the federal claim are what Connecticut relies on too.
Because both Connecticut credits use the federal Section 41 and 174 standards, the four-part test analysis and the wage, contractor, and supply records that substantiate your federal credit under Treas. Reg. 1.41-4 support the Connecticut claim, limited to the in-state share. You build the evidence once.
R&D Binder documents the federal Section 41 four-part test that the credits stand on, with Connecticut handled as a state add-on. Whether your facts qualify and which Connecticut credits to claim are determinations for your CPA.
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
- Connecticut General Statutes chapter 208 (2026 supplement), including 12-217j, 12-217n and 12-217ee - Connecticut General Assembly
- Connecticut Public Act 26-68, section 267 (R&D credit for S corporations and partnerships) - Connecticut General Assembly
- Connecticut Form CT-1120 XCH (Rev. 12/25), research and development credit exchange - Connecticut Department of Revenue Services
- Aprio: State R&D tax credits, recent updates and impacts (August 18, 2025) - Aprio
- CBIZ: Connecticut bill expands R&D credit (July 15, 2026) - CBIZ
- 26 U.S.C. § 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
- IRS, About Form 6765 - Internal Revenue Service
- Treas. Reg. § 1.41-4 (recordkeeping and substantiation of qualified research) - 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.