Lawmaker wants to steer Connecticut defense contractors toward in-state suppliers

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A proposal in the General Assembly would create a "Buy Connecticut" program to incentivize the state's major defense contractors to use in-state suppliers.

Senate Bill 108, introduced by state Sen. Kevin Kelly, R-Shelton, would provide sales and use tax exemptions and research and development tax credits to companies — such as Sikorsky, which is in his district — for utilizing in-state subcontractors and businesses.

The bill is assigned to the Committee on Finance, Revenue and Bonding, which on Monday is slated to finalize the agenda for its next public hearing. It's not yet clear whether Kelly's bill will be on the list.

"Connecticut's labor pool is some of the best educated, highly trained and skilled workers in the nation. What we need to do is capitalize on that and give incentive to the major manufacturers to use more of that skill by using the tax credits and exemptions so that they use in-state supply line manufacturers," Kelly said by phone this week.

Federal military spending has increased for two straight years under President Donald Trump. And Connecticut's major defense contractors — Electric Boat, Sikorsky and Pratt & Whitney — have benefitted from the buildup.

Congress passed, and Trump signed, a $716 billion budget for the Pentagon that covers this fiscal year. Trump has yet to release his defense budget for fiscal year 2020 but reportedly is targeting $750 billion in military spending.

In Connecticut, there's been a ramp-up in hiring at the three major defense contractors, which also are searching for more suppliers.

EB, for its part, is seeking to triple the size of its supply base in the next three years, and company President Jeffrey Geiger has said the company is highly encouraging the development of local suppliers. Of the company's 3,500 suppliers, about 600 are located in Connecticut or Rhode Island.

Under Kelly's proposal, by tapping in-state suppliers, EB would be eligible for a sales tax exemption when purchasing construction materials and equipment, for example, and for a tax credit for research and development expenditures.

According to the state Department of Revenue Services, $1.8 billion in total deductions were claimed in sales and use tax exemptions in fiscal year 2018; revenue forgone was $114.5 million. Data from the state also shows that 159 research and development tax credits were claimed on 2016 corporate business returns totaling $6.34 million.


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