(a) There shall be allowed as a credit against the tax imposed by this chapter the amount determined under subsection (c) of this section in respect of the research and development expenses paid or incurred during any income year, subject to the limitations of this section. (b) For purposes of this section: (1) “Research and development expenses” means research or experimental expenditures deductible under Section 174 of the Internal Revenue Code of 1986, as in effect on May 28, 1993, determined without regard to Section 280C(c) thereof or any elections made by a taxpayer to amortize such expenses on its federal income tax return that were otherwise deductible, and basic research payments as defined under Section 41 of said Internal Revenue Code to the extent not deducted under said Section 174, provided: (A) Such expenditures and payments are paid or incurred for such research and experimentation and basic research conducted in this state; and (B) such expenditures and payments are not funded, within the meaning of Section 41(d)(4)(H) of said Internal Revenue Code, by any grant, contract, or otherwise by a person or governmental entity other than the taxpayer unless such other person is included in a combined return with the person paying or incurring such expenses; (2) “Combined return” means a combined unitary tax return under section 12-222 ; (3) “Commissioner” means the Commissioner of Economic and Community Development; (4) “Qualified small business” means a company that (A) has gross income for the previous income year that does not exceed one hundred million dollars, and (B) has not, in the determination of the commissioner, met the gross income test through transactions with a related person, as defined in section 12-217w . (c) (1) The amount allowed as a credit in any income year shall be the tentative credit calculated under subdivision (2) of this subsection, modified as provided in subsection (e) or (f) of this section, if applicable, except that in the case of a qualified small business the tentative credit allowed for research and development expenses shall be equal to six per cent of such expenses or in the case of any business employing over two thousand five hundred people in the state of Connecticut with annual revenues in excess of three billion dollars and headquartered in an enterprise zone the tentative credit allowed for research and development expenses shall be equal to the greater of (A) the tentative credit calculated under subdivision (2), modified as provided in subsection (e) or (f) of this section, if applicable, or (B) three and one-half per cent of such expense. (2) Where the research and development expenses paid or incurred in the income year equal: (A) Fifty million dollars or less, the tentative credit allowed shall be an amount equal to one per cent of such expenses; (B) more than fifty million dollars but not more than one hundred million dollars, the tentative credit allowed shall be equal to five hundred thousand dollars plus two per cent of the excess of such expenses over fifty million dollars; (C) more than one hundred million dollars but not more than two hundred million dollars, the tentative credit allowed shall be equal to one million five hundred thousand dollars plus four per cent of the excess of such expenses over one hundred million dollars; and (D) more than two hundred million dollars, the tentative credit allowed shall be equal to five million five hundred thousand dollars plus six per cent of the excess of such expenses over two hundred million dollars. (d) (1) The credit provided for by this section shall be allowed for any income year commencing on or after January 1, 1993, provided any credits allowed for income years commencing on or after January 1, 1993, and prior to January 1, 1995, may not be taken until income years commencing on or after January 1, 1995, and, for the purposes of subdivision (2) of this subsection, shall be treated as if the credit for each such income year first became allowable in the first income year commencing on or after January 1, 1995. (2) No more than one-third of the amount of the credit allowable for any income year may be included in the calculation of the amount of the credit that may be taken in that income year. (3) The total amount of the credit under subdivision (1) of this subsection that may be taken for any income year may not exceed the greater of (A) fifty per cent of the taxpayer's tax liability or in the case of a combined return, fifty per cent of the combined tax liability, for such income year, determined without regard to any credits allowed under this section, and (B) the lesser of (i) two hundred per cent of the credit otherwise allowed under subsection (c) of this section for such income year, and (ii) ninety per cent of the taxpayer's tax liability or in the case of a combined return, ninety per cent of the combined liability for such income year, determined without regard to any credits allowed under this section. (4) (A) Credits that are allowed under this section for income years commencing prior to January 1, 2021, that exceed the amount permitted to be taken in an income year pursuant to the provisions of subdivision (1), (2) or (3) of this subsection shall be carried forward to each of the successive income years until such credits, or applicable portion thereof, are fully taken. (B) Credits that are allowed under this section for income years commencing on or after January 1, 2021, that exceed the amount permitted to be taken in an income year pursuant to the provisions of subdivision (1), (2) or (3) of this subsection shall be carried forward to each of the successive income years until such credits, or applicable portion thereof, are fully taken. No credit or portion thereof allowed under this section for income years commencing on or after January 1, 2021, shall be carried forward for a period of more than fifteen years. (C) No credit allowed under this section shall be taken in any income year until the full amount of all allowable credits carried forward to such year from any prior income year, commencing with the earliest such prior year, that otherwise may be taken under subdivision (2) of this subsection in that income year, have been fully taken. (e) In addition to the wage base test set forth in subsection (f) of this section, any aerospace company or in the case of a combined return, any combined group including an aerospace company, shall be subject to this subsection for any income year commencing on or after January 1, 1993, and prior to January 1, 1996. For purposes of this subsection, an aerospace company is any taxpayer, whether or not included in a combined return, engaged principally in the aerospace industry whose research and development expenses during each of the income years beginning on or after January 1, 1990, 1991 and 1992, respectively, exceeded two hundred million dollars. No aerospace company, or in the case of a combined return, a combined group including an aerospace company, shall be allowed any credit under this section for any income year to which this subsection applies in which the aggregate transfers by an aerospace company, if any, of historical economic base functions outside of this state, other than to a location outside the United States, since January 1, 1993, through the end of such income year, have materially reduced the historical economic base functions in this state. For purposes of this subsection, the historical economic base functions shall be those economic base functions conducted by an aerospace company, which need not be all economic base functions of the aerospace company, in this state on January 1, 1993, whose continuance in this state, as determined by the commissioner in his discretion, will further the policies set forth in section 32-221 . Such historical economic base functions shall be set forth in a binding memorandum of understanding between the commissioner and an aerospace company that may be entered into at any time prior to the expiration of the first income year to which this subsection applies, with sufficient specificity to allow the commissioner and the aerospace company to determine in all income years subject to this subsection whether there has been such a reduction in said historical economic base functions. As a prerequisite to the allowance of any credit otherwise allowable under this section for any income year to which this subsection applies, each aerospace company shall obtain a certificate of eligibility issued by the commissioner to the aerospace company for such income year. The aerospace company shall not later than sixty days after the close of each income year to which this subsection applies certify to the commissioner that there has been no such aggregate material reduction in the historical economic base functions in this state for the income year just completed that otherwise has not been offset as provided below. Within sixty days thereafter, the commissioner shall review the certification and, if the commissioner determines that there has been no such net aggregate material reduction in the historical economic base functions in this state, the commissioner shall issue a certificate of eligibility for said income year. The following shall not constitute a material reduction in the historical economic base functions in this state: (1) A reduction of not more than two per cent of the historical economic base functions; (2) transfer of an historical economic base function to a person in this state; (3) transfer of a historical economic base function outside of the United States; or (4) reductions in historical economic base functions attributable to reductions in volume, productivity improvements or the discontinuance of operations due to obsolescence or the like. Any transfers that may otherwise be counted in determining if a material reduction occurred may be offset to the extent economic base functions listed in, or comparable to those listed in, the memorandum of understanding are increased in this state, transferred into this state, or established in this state. Any such increase, transfer or establishment made during an income year, or subsequent to such income year but prior to the filing of the return for such income year, shall be effective for such income year and all income years thereafter. The commissioner may issue or reissue a certificate of eligibility for the applicable income year following any such offset. The commissioner shall, upon request, provide a copy of the certificate of eligibility and memorandum of understanding to the Commissioner of Revenue Services. (f) The tentative credit allowable to the taxpayer, or in the case of a combined return, the combined group, that pays or incurs research and development expenses in excess of two hundred million dollars for the income year shall be reduced for any income year in which the workforce reductions, if any, exceed the percentages set forth below. For purposes of this subsection, workforce reductions shall be reductions of the historical Connecticut wage base of the taxpayer, or in the case of a combined return, the combined group, as a result of the transfer outside of this state, other than to a location outside the United States, of work done by employees of the taxpayer, or in the case of a combined return, the combined group. Such reduction in the tentative credit shall be as follows: (1) If the historical Connecticut wage base for the income year is so reduced by not more than two per cent, the tentative credit allowable for the income year shall not be reduced; (2) if the historical Connecticut wage base for the income year is so reduced by more than two per cent but not more than three per cent, the tentative credit allowable for the income year shall be reduced by ten per cent; (3) if the historical Connecticut wage base for the income year is so reduced by more than three per cent but not more than four per cent, the tentative credit allowable for the income year shall be reduced by twenty per cent; (4) if the historical Connecticut wage base for the income year is so reduced by more than four per cent but not more than five per cent, the tentative credit allowable for the income year shall be reduced by forty per cent; (5) if the historical Connecticut wage base for the income year is so reduced by more than five per cent but not more than six per cent, the tentative credit allowable for the income year shall be reduced by seventy per cent; and (6) if the historical Connecticut wage base for the income year is so reduced by more than six per cent, no credit for the income year shall be allowed. The Connecticut wage base for any income year shall be the total wages assigned to Connecticut for such income year under section 12-218 excluding wages paid to the ten most highly-compensated executives of the taxpayer, or in the case of a combined return, the combined group, and any compensation that does not subject the recipient thereof to federal income tax thereon in said income year. The historical Connecticut wage base shall be the Connecticut wage base for the third full income year immediately preceding the current income year; provided the historical Connecticut wage base for the first three income years commencing on or after January 1, 1993, shall be the Connecticut wage base for May 1993, converted to an annual basis. The following shall not constitute a workforce reduction for any income year: (A) A reduction of wages attributable to the transfer of work done by a taxpayer, or in the case of a combined return, by the combined group, in this state to a party in this state; (B) a reduction of wages attributable to the transfer of work done by a taxpayer, or in the case of a combined return, by the combined group, outside the United States; or (C) a reduction in wages attributable to reductions in volume, productivity improvements or the discontinuance of operations due to obsolescence or the like. Solely for purposes of determining whether the allowable credit is to be reduced under this subsection for any income year, the Connecticut wages attributable to any new jobs or jobs moved into this state by the taxpayer, or in the case of a combined return, the combined group, during such income year or subsequent to such income year but prior to the filing of the return for such income year shall be an offset to any workforce reduction of a taxpayer, or in the case of a combined return, the combined group, for said income year. A new job shall be a job that did not exist in the business of a taxpayer, or in the case of a combined return, a member of the combined group, in this state at the end of the income year just completed. Notwithstanding subsection (g) of this section, a taxpayer may elect for any income year to separately compute its allowable tentative credit under this subsection for any one or more business units that had gross revenues for such income year in excess of one hundred million dollars. Any taxpayer subject to this subsection shall not later than sixty days after the close of each income year certify to the commissioner whether or not there has been any workforce reduction for the income year just completed, the amount thereof, and any offsets thereto as provided above. Not later than sixty days thereafter, the commissioner shall review the certification and, if the commissioner determines that there has been no more than a six per cent workforce reduction, net of any such offsets, the commissioner shall issue a certificate of eligibility stating the amount of net workforce reduction so determined for said income year, if any. The commissioner shall not issue a certificate of eligibility for any income year in which the commissioner determines that there has been more than a six per cent net workforce reduction. The commissioner shall, upon request, provide a copy of the certificate of eligibility to the Commissioner of Revenue Services. (g) Where one or more taxpayers properly included in a combined return pays or incurs research and development expenses, all allowances and limitations under this section shall be made on an aggregate basis for all taxpayers included in such combined return, provided, the credit attributable to a qualified small business may be taken only against the combined tax liability attributable to such qualified small business. The amount of the combined tax for all corporations properly included in a combined corporation business tax return that is attributable to a qualified small business shall be in the same ratio to such combined tax that the net income apportioned to this state of the qualified small business bears to the net income, in the aggregate of all corporations included in such combined return. Solely for the purposes of computing such ratio, any net loss apportioned to this state by a corporation included in such combined return shall be disregarded. (h) Any taxpayer, or in the case of a combined return, any combined group of taxpayers, that claims a credit under section 12-217j for any income year shall reduce the amount of research and development expenses that otherwise may be taken into account in computing the allowable credit under subsection (c) of this section for such income year by the amount of excess research and experimental expenditures, as computed under said section 12-217j , for which the credit thereunder is given. (i) The commissioner may adopt regulations, in accordance with the provisions of chapter 54, to carry out the purposes of this section.