Hiring Tax Credits Available to Connecticut Small Businesses

In 2010, the Connecticut State Legislature established the Qualified Small Business Job Creation tax credit program, which is available to a qualified small business that hires a new employee. The credit is administered by the Department of Economic and Community Development (DECD) and is applicable to taxable years beginning on or after January 1, 2010.

To be eligible to claim the credit, the qualified small business must apply to DECD. If approved, DECD will issue a certification letter to the qualified small business indicating that the credit will be available to be claimed.

A qualified small business is an employer who is subject to tax under Chapter 207, 208, or 229 of the Connecticut General Statutes and who employs less than 50 employees in Connecticut as of the date of its application to DECD.

The amount of the credit is $200 per month for each new employee hired. The new employee must reside in Connecticut and be hired after May 6, 2010, to fill a new full time job in which he or she is required to work at least 35 or more hours per week for not less than 48 weeks in a calendar year during the income years beginning on or after January 1, 2010, and prior to January 1, 2013. However, the new employee cannot have been employed in Connecticut during the prior 12 months by any of the following:

• A corporation, limited liability company, partnership, association, or trust controlled by the qualified small business;
• An individual, corporation, limited liability company, partnership, association, or trust in control of the qualified small business;
• A corporation, limited liability company, partnership, association, or trust controlled by an individual, corporation, limited liability company, partnership, association, or trust in control of the qualified small business; or
• A member of the same controlled group as the qualified small business.

A credit cannot be claimed for:

• A new temporary employee;
• A new employee hired for a seasonal job;
• Any new employee who is an owner, member, or partner in the qualified small business;
• A new employee for whom credit will be claimed against any tax under another statutory provision; or
• A new employee who is not employed at the close of the income year of the qualified small business.

The qualified small business must claim and use the credit in the income year in which the new employee is hired and, if eligible, the two immediately succeeding income years provided the new employee is still employed at the close of the income year of the qualified small business. The credit is not refundable and any tax credit not used in the income year will expire.

For qualified small businesses subject to Connecticut income tax under Chapter 229 of the Connecticut General Statutes, income year means the taxable year of the qualified small business as determined for federal income tax purposes.

For qualified small businesses subject to the corporation business tax under Chapter 208 of the Connecticut General Statutes, income year means the calendar year upon the basis of which net income of the qualified small business is computed unless a fiscal year other than a calendar year has been established for federal income tax purposes.

Don't forget to apply and take advantage of this credit on your 2011 business tax return.  As always, our office is available to assist you.