Under-the-Radar State Tax Credits That May Help Your Business

By Lori Paci September 3, 2026

As we draw closer to the start of giving season, banks and financial institutions may be looking at the communities they serve and wondering if there are opportunities to do some good without breaking the literal bank. States encourage banks and financial institutions to engage in their communities by providing tax credits for certain hirings, charitable donations, and more. While well-known programs like transferrable film tax credits and Brownfields tax credits often take center stage, there is an entire world of credits available that can impact not only your bottom line, but the communities you serve. Let’s take a closer look at just a small section of the credits available that can have a positive impact on the lives of your customers. Highlighted below is one credit for each of the New England states that helps create jobs, support education, preserve history, or invest in your communities.

Maine – Employer Support for Volunteer Firefighters, Volunteer Municipal Emergency Medical Services Persons, and Volunteer Municipal Firefighters

The Employer Support for Volunteer Firefighters, Volunteer Municipal Emergency Medical Services Persons, and Volunteer Municipal Firefighters is available to businesses that employ a volunteer firefighter, volunteer municipal EMS person, or a volunteer municipal firefighter. The credit functions automatically as a wage-continuation incentive: an employer that continues to pay a volunteer responder their normal wages while that employee is away from work responding to a fire or medical emergency call may claim a credit equal to that paid compensation, rather than applying for a discretionary allocation of limited program funds.

An employer who employs an individual who is a volunteer firefighter, a volunteer municipal emergency medical services person, or, for tax years beginning on or after January 1, 2025, a volunteer municipal firefighter, and who permits that employee to respond to fire calls or emergency medical services calls, as appropriate, during hours when the employee is scheduled to work without a reduction in pay, is eligible for the credit. These roles are defined by statute in Maine. To be eligible the employee must 1) be an active member of a volunteer fire association officially recognized by a Maine municipality or a volunteer municipal emergency medical services person; 2) respond to fire calls or emergency medical services calls during work hours when the employee was scheduled to work; and 3) be paid at their regular rate of pay while away from work due to firefighting or emergency response responsibilities.

The credit is available for tax years beginning on or after January 1, 2022, and coverage of volunteer municipal firefighters specifically was added for tax years beginning on or after January 1, 2025.

The employer is eligible for a credit against the tax that is equal to the compensation that is paid to the employee at the employee’s regular rate of pay during the time when the employee is away from work due to firefighting or emergency response responsibilities. No additional dollar cap or percentage limit is currently imposed and there is a worksheet available for calculating the credit amount with the appropriate return. A verification from the chief or other person in charge of the municipal volunteer fire or emergency response association must also be included.

There is no carryforward or carryback provisions for the credit.

New Hampshire — CDFA Tax Credit Program

The Community Development Finance Authority Tax Credit (CDFA) was established to stimulate private investment in community projects. The program provides support to organizations engaged in community economic development initiatives that are highly supportive of the communities they serve. The program requires that tax credit projects must be clearly in the public interest, have benefits that are publicly available, and produce results that contribute to the economic development of the state. The program awards approximately $5 million in tax credits annually in a competitive grant round. Grants are supported by the purchase of credits by eligible businesses with New Hampshire tax liability. The nonprofit receives a donation and the business receives a tax credit worth 75% of their contribution. The credit can be applied against the Business Profits Tax, Business Enterprise Tax or Insurance Premium Tax.

Nonprofit organizations engaged in community economic development apply to CDFA for project funding; projects must provide a clear public benefit and demonstrate that similar funding was not otherwise available. The tax credit itself is claimed by New Hampshire businesses. Even an out-of-state-headquartered business can use CDFA tax credits, since any business with employees in New Hampshire that pays the Business Enterprise Tax against their payroll is eligible.

There is a spring deadline each year for nonprofit projects to apply for the funding round. For businesses wanting to purchase tax credits, donations operate through a simple and flexible online pledge system. CDFA provides supporting resources to help businesses decide where to donate, including background on projects currently fundraising and a tax credit calculator to estimate the return on investment for a donation.

CDFA’s Tax Credit Program awards approximately $5 million in tax credits annually. Businesses receive a 75% New Hampshire state tax credit against their donation amount. A donor is limited to claiming no more than $1 million in CDFA tax credits in one fiscal year.

A business may carry forward the credits for up to five years until fully claimed, though carryback to prior years is not allowed.

Vermont — State Downtown and Village Center Tax Credit Program

Vermont’s state level Downtown and Village Center Tax Credit Program was created to help Vermont business preserve and enhance the historic character of Vermont’s buildings through supporting general rehabilitation, code compliance, and exterior improvements for eligible commercial buildings and non-profit owned buildings at least 30 years old located within designated downtown or village centers. Vermont-based banks are able to purchase these state level credits.

The state credit is between 10% and 50% of eligible rehabilitation expenses subject to an annual cap, with selection criteria applied to ensure credits are allocated to projects providing the most public benefit. The state program only requires that rehabilitation expenses exceed $5,000. It consists for four possible credits available to qualified building owners: Historic Rehabilitation tax credit, Façade improvement tax credit, Code Improvement tax credit, and Flood Mitigation tax credit. The credit program is separate from the Federal Rehabilitation Investment tax credits.
A bank that purchases a tax credit may use it to reduce its franchise tax liability in the first tax year in which the qualified building is placed back in service after completion of the qualified project or in the subsequent nine years.

Massachusetts — Community Investment Tax Credit Program (CITC)

The Community Investment Tax Credit (CITC) was created to help Community Development Corporations (CDCs) and Community Support Organizations (CSOs) accomplish their goals through adoption of community investment plans to undertake community development programs, policies, and activities. The CITC is designed to enable local residents and stakeholders to work with and through community development corporations to partner with nonprofit, public, and private entities to improve economic opportunities for low and moderate income households and other residents in urban, rural, and suburban communities across the Commonwealth.

The credit involves two stages. First, CDCs and CSOs receive tax credit allocations from the state. Also called Community Partners, CDCs and CSOs are selected by the Department of Housing and Community Development (DHCD) through a competitive process to receive a community investment tax credit allocation. Community Partnership Funds are funds administered by a nonprofit organization selected by DHCD to receive qualified investments from taxpayers for the purpose of allocating such investments to community partners. Taxpayers (individuals or businesses) then become eligible for the credit itself by making a qualifying investment in a Community Partner or Community Partnership Fund.

There is no specific application or deadline for taxpayers to make qualified investments.

The credit is equal to 50% of the total qualified investments made by a taxpayer, subject to certain limitations. A taxpayer must make a qualified investment of at least $1,000. Before a credit may be claimed, DHCD must certify that the taxpayer made a cash contribution to a Community Partner or to a Community Partnership Fund and issue an interim certificate to the taxpayer that establishes that the prerequisites to claiming the credit have been met. There is a process for the issuance of interim and final certificates and the inclusion of the required certificates on the taxpayer’s return.

Connecticut — Human Capital Investment Tax Credit

The Human Capital Investment Tax Credit was created to encourage businesses to support state-run education programs and to make active investment in the personal and professional development and well-being of their employees. Bank and financial institutions organized as corporations and subject to Connecticut’s corporation business tax may be eligible for the credit.

Businesses qualify for the credit when they make certain donations or contributions to defined “Human Capital Investments” through certain exempt organizations for the planning, site preparation, construction, renovation or acquisition of facilities in Connecticut for establishing  childcare centers in the state to be used by children residing in the community. “Human Capital Investments” include:

• In-state job training of persons employed in Connecticut;
• Work education programs in Connecticut;
• Worker training and education of persons employed in Connecticut provided by Connecticut institutions of higher education;
• Donations or capital contributions to institutions of higher education in Connecticut for improvements or advancement of technology, including physical plant improvements;
• Planning, site preparation, construction, renovation, or acquisition of facilities in Connecticut for the purpose of establishing a childcare center to be used primarily by the children of employees who are employed in Connecticut;
• For income years beginning on or after January 1, 2024, donations or capital contributions to an organization exempt from taxation pursuant to IRC § 501(c)(3) for the planning, site preparation, construction, renovation or acquisition of facilities in this state for the purpose of establishing a child care center in Connecticut to be used by children residing in the community, including the children of employees who are employed in the state;
• Childcare subsidies paid to employees employed in Connecticut for childcare provided in Connecticut; or
• Contributions made to the Individual Development Account Reserve Fund administered by the Connecticut Department of Labor.

The credit rate available depends on the type of investment and the income year. Prior to income years beginning on or after January 1, 2024, the tax credit was equal to 5% of the amount paid or incurred by the corporation for a human capital investment and no corporation claiming the tax credit could claim any other credit against any tax with respect to the same investment. Beginning with income years beginning on or after January 1, 2024, the rate was split into two tiers:

• 10% credit for in-state job training, work education programs, worker training/education through Connecticut higher-education institutions, donations/capital contributions to Connecticut institutions of higher education for facility or technology improvements, and contributions to the Individual Development Account Reserve Fund.
• 25% credit for planning, site preparation, construction, renovation, or acquisition of facilities for an employer-based childcare center; donations or capital contributions to a 501(c)(3) organization for a community-use childcare center; and childcare subsidies paid to employees for childcare provided in Connecticut.

To apply for the credit, a taxpayer must complete Form CT-1120 HCIC, Human Capital Investment Tax Credit, and attach it to Form CT-1120K, Business Tax Credit Summary, along with all required detailed schedules. This is filed with the bank’s Connecticut tax return rather than through a separate advance application process.

Any tax credit not used during the income year may be carried forward to the next five succeeding income years until the entire credit is used, and no carryback is allowed.

Rhode Island — SGO Tax Credit Program

The SGO Tax Credit Program incentivizes donations to Qualified Scholarship Organizations (SGOs) in Rhode Island to expand private and parochial school educational opportunities to children from economically disadvantaged families. Banks organized as corporations are able to utilize the credit against applicable taxes.

Applications for credits in conjunction with donations must be submitted to the Division of Taxation beginning in the summer of each year by the date determined by the Division. The state provides a list of SGOs to which donations can be made to qualify for the credit. Within thirty (30) days of submittal, an applicant will receive an approval or denial letter from the Division of Taxation. Once approved, the entity has one hundred twenty (120) days from the date of the approval letter to make its contribution to the chosen designated SGO. For a two-year commitment, the second-year contribution must be made by the same date in the subsequent calendar year as the due date of the initial contribution. Further certification process is required once the contribution is made before a certificate to claim the credit on the applicable return is issued.

If all conditions are met, a one-year contribution commitment results in 75% credit, while a two-year commitment results in 90% credit. However, for two-year commitments, the entity must contribute at least 80% of its first-year contribution amount for the second-year contribution; otherwise, the credit for both years shall be equal to 75% of each year’s contribution, and the difference in credit allowable for the first year shall be recaptured by adding it to the taxpayer’s tax in that year.

The credit under this program can only be used in the year in which the contribution was made, and unused credit amounts cannot be carried forward.

For more information about any of these or other credits available, please reach out to your advisor at Baker Newman Noyes. We can help research and advise on the best tax credit programs for your bank’s unique goals and financial impacts.

For more information about any of these or other credits available, please reach out to your advisor at Baker Newman Noyes. We can help research and advise on the best tax credit programs for your bank’s unique goals and financial impacts.