CT-1120 XCH: Application for Exchange of Research and Development or Research and Experimental (2025)
Connecticut · Connecticut DRS · Used for tax years 2025
Form CT-1120 XCH is a Connecticut application for a qualified small business to exchange research and development or research and experimental expenditures tax credits for a refund. It reports eligibility information, credits available for exchange, and the refund amount requeste
Who files this form
Use Form CT-1120 XCH if your qualified small business is applying to exchange eligible research and development or research and experimental expenditures tax credits for a refund.
To qualify:
- The company’s gross income for the previous income year must not exceed $70 million. It must not have met this test through transactions with a related person.
- The company must have no Corporation Business Tax liability. Paying the $250 minimum tax, or paying capital base tax in a year when the company reports no net income, does not count as a liability for this purpose.
A company filing as part of a combined group on Form CT-1120CU must determine its eligibility separately. If other requirements are met and the group pays tax on the capital base, the company may qualify if its apportioned share of the group’s net income is zero or negative, or its portion of the capital base tax is $250.
What you'll need
Attach 2025 Form CT-1120RC, Form CT-1120 RDC, or both, as applicable, along with all required supporting schedules and documentation.
The detailed research expenditure schedules must include:
- A full description of the company’s research projects during the income year and where the research was conducted.
- The methods used to determine direct Connecticut research and experimental expenditures under § 12-217j, and total Connecticut research, experimentation, and basic research expenditures and payments under § 12-217n.
- Each information source used to calculate the credit, including any expense allocation methods and calculations.
- The job title and detailed job description of each employee whose wages are included in research expenditures.
- If claiming the biotechnology company exchange rate, a full description of how the company meets the definition in § 12-217j.
Additional attachments may be required:
- Related-person transactions during 2025: Identify the related persons, their gross incomes, and their relationships to the company. Include an organizational chart and a separate schedule describing each transaction, the company’s gross income from it, and its date.
- Unpaid Connecticut taxes: If the company or its combined unitary group has unpaid taxes on the application date, attach a schedule describing their nature and amounts, including interest, penalties, fees, and other related charges.
How to file
- Complete the 2025 form in blue or black ink. Enter the income-year dates, company information, and contact person details. Form CT-1120CU filers must also provide the designated taxable member information.
- Complete Part I to establish eligibility. Report the previous income year’s gross income from all sources, including related-person transactions. Annualize gross income if the application is for a short period.
- Complete Part II using the 2025 credit amounts and credits applied from Form CT-1120RC and Form CT-1120 RDC. Subtract credits applied from each credit amount, then add the remaining amounts. Multiply the total by 65%, or 90% for a biotechnology company. The requested refund cannot exceed $1.5 million.
- Attach the required forms, schedules, and supporting documentation. Do not use staples.
- Mail the application and supporting information separately from Form CT-1120 or Form CT-1120CU, at the same time you file that return, to:
Department of Revenue Services
PO Box 150420
Hartford CT 06115-0420
Check the box at the top of Form CT-1120 or Form CT-1120CU indicating that you are exchanging research and development tax credits, and enter the requested refund amount. Do not check the box if the company’s previous-year gross income exceeds $70 million.
Common mistakes
- Using the wrong year’s form: Each form is year-specific. Use the correct year’s form.
- Using other ink or staples: Complete the form in blue or black ink only, and do not use staples.
- Sending the application with the tax return: File Form CT-1120 XCH separately from Form CT-1120 or Form CT-1120CU.
- Leaving out attachments: Include the applicable credit forms and all required supporting schedules and documentation.
- Failing to annualize gross income: Annualize it when applying for a short period.
- Claiming an exchange above the income limit: If previous-year gross income exceeds $70 million, the company is not eligible. Do not check the exchange box on the tax return.
- Requesting more than the limit: The refund request must not exceed $1.5 million.
Questions people ask
How much of the credit can be exchanged for a refund?
The refund is 65% of the credit available for exchange, or 90% for a company meeting the biotechnology company definition. A taxpayer may receive no more than $1.5 million in any one income year.
Does paying the $250 minimum tax make my company ineligible?
No. For this exchange, paying the $250 minimum tax does not count as Corporation Business Tax liability. The company must still meet the other eligibility requirements.
Can a company in a combined group apply?
Yes, if it meets the requirements. Each company filing as part of Form CT-1120CU must separately determine its eligibility, including whether it has no tax liability for purposes of the exchange.
Where can I find more information?
The form directs taxpayers to the Guide to Connecticut Business Tax Credits on the Department of Revenue Services website at portal.ct.gov/DRS.