AN ACT IMPLEMENTING THE RECOMMENDATIONS OF THE LEGISLATIVE PROGRAM REVIEW AND INVESTIGATIONS COMMITTEE RELATING TO CONNECTICUT'S TAX SYSTEM.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Subsection (c) of section 2-79a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2006):

(c) (1) On or before the second Wednesday after the convening of the 1998 regular session of the General Assembly, and every four years thereafter, the commission shall submit to the General Assembly a report [which] that lists each existing state mandate, as defined in subsection (a) of section 2-32b, as amended, and [which (1)] that (A) categorizes each mandate as constitutional, statutory or executive, [(2)] (B) provides the date of original enactment or issuance along with a brief description of the history of the mandate, and [(3)] (C) analyzes the costs incurred by local governments in implementing the mandate.

(2) On or after the second Wednesday after the convening of the 2007 regular session of the General Assembly, on or after the second Wednesday after the convening of the 2010 regular session of the General Assembly, and every four years thereafter, the commission shall submit to the General Assembly a report that (A) identifies and describes each unfunded or partially funded state mandate, as defined in subsection (a) of section 2-32b, as amended, (B) quantifies the actual cost to local governments of such mandates, and (C) analyzes the effect of eliminating or reducing such mandates.

(3) In each report required by this subsection, the commission may also make recommendations on state mandates for consideration by the commission. [On and after October 1, 1996, the report] The reports shall be submitted to the joint standing committee of the General Assembly having cognizance of matters relating to appropriations and budgets of state agencies, to any other joint standing committee of the General Assembly having cognizance and, upon request, to any member of the General Assembly. A summary of the report shall be submitted to each member of the General Assembly if the summary is two pages or less and a notification of the report shall be submitted to each member if the summary is more than two pages. Submission shall be by mailing the report, summary or notification to the legislative address of each member of the committees or the General Assembly, as applicable. The provisions of this subsection shall not be construed to prevent the commission from making more frequent recommendations on state mandates.

Sec. 2. Subsection (a) of section 12-2 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2006):

(a) (1) The Governor shall, in the manner and for the term provided by sections 4-5 to 4-8, inclusive, appoint a Commissioner of Revenue Services and the Governor shall fill any vacancy occurring during such term as provided by said sections. The commissioner shall, before entering upon the duties of his office, take the oath by law provided for executive and judicial officers and, in the performance of his duties, he shall have power to administer oaths.

(2) The commissioner may prescribe regulations, to be adopted in accordance with chapter 54, and make rulings, not inconsistent with law, to carry into effect the provisions of this title, which regulations or rulings, when reasonably designed to carry out the intents and purposes of this title, shall be prima facie evidence of its proper interpretation. Each regulation shall be assigned a section number corresponding to the section of the general statutes (A) pursuant to which such regulation is authorized or required, or (B) with respect to which such regulation pertains for purposes of implementation, procedural details or supplementary interpretation, provided whenever such section number corresponds to a section which does not include the authorization or requirement for such regulation, a reference to the section providing such authorization or requirement shall be included in the text of the regulation.

(3) The commissioner shall publish for distribution all regulations prescribed hereunder and such rulings as appear in the discretion of the commissioner to be of general interest.

(4) (A) On and after July 1, 2007, the commissioner shall periodically estimate the state tax gap, and shall develop an overall strategy to promote compliance and discourage tax avoidance. For purposes of this subdivision, "tax gap" means the difference between taxes owed under full compliance with all state tax laws, and state taxes voluntarily paid, where such difference may be due to failure to file taxes, underreporting of liability, or not paying all taxes owing.

(B) On and after July 1, 2007, the commissioner shall, annually conduct a cost benefit analysis of each major compliance initiative undertaken by the department, including amnesty programs.

(C) As provided in subparagraph (D) of this subsection, the commissioner shall, annually, after consultation with the Secretary of the Office of Policy and Management, report information on total local property tax collections for the most current five-year period available.

(D) On and after December 31, 2008, the commissioner shall submit a report annually, in accordance with section 11-4a, to the joint standing committees of the General Assembly having cognizance of matters relating to appropriations and finance, revenue and bonding. Such report shall include tax gap information, cost benefit analyses on major compliance initiatives, and information on local property tax collections.

(5) On or before July 1, 2007, and annually thereafter, the commissioner shall update and publish a strategic plan that shall include the department's mission, measurable goals that define how the mission is to be accomplished, specific strategies to achieve the goals and a timetable to measure progress toward achieving the goals.

[(4)] (6) The commissioner may require any person who is or appears to be affected by the provisions of any tax law of this state to furnish to the Department of Revenue Services the Social Security account number or numbers issued to such person by the Secretary of Health and Human Services, or the employer identification number or numbers issued to such person by the Secretary of the Treasury, or both numbers.

[(5)] (7) No interest, penalty or addition to tax shall be imposed on any tax or installment of estimated tax required to be paid to the Department of Revenue Services with respect to any tax or installment of estimated tax not paid when required to the extent that the Commissioner of Revenue Services determines that, by reason of casualty or disaster, the imposition of such interest, penalty or addition to tax would be against equity and good conscience. The provisions of this subdivision shall not be construed as authorizing suit against the state where the Commissioner of Revenue Services does not determine that the imposition of interest, penalty or addition to tax would be against equity and good conscience and shall not be construed as a waiver of sovereign immunity.

Sec. 3. (Effective July 1, 2006) The Commissioner of Revenue Services shall study the impact of amending the general statutes to require that any person or entity doing business with the state must be in compliance with all tax laws. The study shall (1) assess the methods available to the Department of Revenue Services to provide verification of tax compliance to state agencies before an agency issues a contract or grant, (2) review legal issues that may arise, including those arising out of statutory definitions of compliance and confidentiality, (3) consider the possibility of delays in the awarding of contracts, and the impact of such delays, and (4) provide an estimate of the resources necessary for implementation of such requirement. The commissioner shall submit the study, in accordance with section 11-4a of the general statutes, on or before January 1, 2007, to the joint standing committees of the General Assembly having cognizance of matters relating to finance, revenue and bonding and government administration.

Sec. 4. Section 12-7 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2006):

The Secretary of the Office of Policy and Management shall, in addition to any other reports required by law to be made by [him] the secretary, annually collate and prepare, from the reports provided for in section 12-9 and such other information as [he] the secretary obtains, statistics concerning the assessment and collection of taxes during the preceding year; and [he] the secretary shall, annually, cause to be printed so much of the report herein provided for as will show (1) the methods and manner of the assessment and collection of taxes, [and] (2) the amount of such taxes levied and collected in the several towns, cities and boroughs, [. He] (3) information on trends in local property values and taxes, such as the average and median single-family residence tax bills and the per cent change in such amounts over time, (4) town-by-town information on the availability and use of local option property tax exemptions, and (5) measures that indicate the accuracy and uniformity of local revaluations, as performed according to the regulations adopted pursuant to section 12-62i. The secretary may also publish such other reports as will give information to the public regarding taxation.

Sec. 5. Section 12-9 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2006):

The Secretary of the Office of Policy and Management shall annually cause to be prepared by the tax collector complete statements relating to the mill rate and tax levy during the preceding year, [such statements to] information on average and median single-family residence tax bills, information on the availability and use of local option property tax exemptions, and such information on local revaluations as the secretary may require for purposes of the report required pursuant to section 12-7, as amended by this act. Such statements shall be made upon printed blanks to be prepared and furnished by the secretary to all such [officers] collectors at least thirty days before the date prescribed by the secretary for the filing of such statements. Any person who neglects to file a true and correct report in the office of the secretary at the time and in the form required by [him] said secretary or which, in making and filing such report, includes therein any wilful misstatement, shall forfeit one hundred dollars to the state, provided the secretary may waive such forfeiture in accordance with procedures and standards adopted by regulation in accordance with chapter 54.

Sec. 6. Subsection (a) of section 12-35 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2006, and applicable to taxes due on or after said date):

(a) Wherever used in this chapter, unless otherwise provided, "state collection agency" includes the Treasurer, the Commissioner of Revenue Services and any other state official, board or commission authorized by law to collect taxes payable to the state and any duly appointed deputy of any such official, board or commission; "tax" includes not only the principal of any tax but also all interest, penalties, fees and other charges added thereto by law; and "serving officer" includes any state marshal, constable or employee of such state collection agency designated for such purpose by a state collection agency and any person so designated by the Labor Commissioner. Upon the failure of any person to pay any tax, except any tax under chapter 216, due the state within thirty days from its due date, the state collection agency charged by law with its collection shall add thereto such penalty or interest or both as are prescribed by law, provided, if any statutory penalty is not specified, there may be added a penalty in the amount of ten per cent of the whole or such part of the principal of the tax as is unpaid or fifty dollars, whichever amount is greater, and provided, if any statutory interest is not specified, there shall be added interest at [the rate of one per cent of] a rate adjusted annually to be equal to the federal short-term rate as it is determined as of July first of each year under Section 6621(b) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, plus three percentage points on the whole or such part of the principal of the tax as is unpaid [for each month or fraction thereof,] from the due date of such tax to the date of payment. Upon the failure of any person to pay any tax, except any tax under chapter 216, due within thirty days of its due date, the state collection agency charged by law with the collection of such tax may make out and sign a warrant directed to any serving officer for distraint upon any property of such person found within the state, whether real or personal. An itemized bill shall be attached thereto, certified by the state collection agency issuing such warrant as a true statement of the amount due from such person. Such warrant shall have the same force and effect as an execution issued pursuant to chapter 906. Such warrant may be levied on any real property or tangible or intangible personal property of such person, and sale made pursuant to such warrant in the same manner and with the same force and effect as a levy of sale pursuant to an execution. In addition thereto, if such warrant has been issued by the Commissioner of Revenue Services, his deputy, the Labor Commissioner, the executive director of the Employment Security Division or any person in the Employment Security Division in a position equivalent to or higher than the position presently held by a revenue examiner four, said serving officer shall be authorized to place a keeper in any place of business and it shall be such keeper's duty to secure the income of such business for the state and, when it is in the best interest of the state, to force cessation of such business operation. In addition, the Attorney General may collect any such tax by civil action. Each serving officer so receiving a warrant shall make a return with respect to such warrant to the appropriate collection agency within a period of ten days following receipt of such warrant. Each serving officer shall collect from such person, in addition to the amount shown on such warrant, his fees and charges, which shall be twice those authorized by statute for serving officers, provided the minimum charge shall be five dollars and money collected pursuant to such warrant shall be first applied to the amount of any fees and charges of the serving officer. In the case of an employee of the state acting as a serving officer the fees and charges collected by such employee shall inure to the benefit of the state. For the purposes of this section, "keeper" means a person who has been given authority by an officer authorized to serve a tax warrant to act in the state's interest to secure the income of a business for the state and, when it is in the best interest of the state, to force the cessation of such business's operation, upon the failure of such business to pay taxes owed to the state.

Sec. 7. Section 12-235 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2006, and applicable to taxes due and payable on or after said date):

To any taxes which are assessed under section 12-233, as amended, there shall be added interest [at the rate of one per cent per month or fraction thereof] at a rate adjusted annually to be equal to the federal short-term rate as it is determined as of July first of each year under Section 6621(b) of the Internal Revenue Code, plus three percentage points from the date when the original tax became due and payable. The amount of any tax, penalty or interest due and unpaid under the provisions of this part may be collected under the provisions of section 12-35, as amended by this act. The warrant therein provided for shall be signed by the commissioner or his authorized agent. The amount of any such tax, penalty and interest shall be a lien, from the last day of the income year until discharged by payment, against all real estate of the company within the state, and a certificate of such lien signed by the commissioner may be filed for record in the office of the clerk of any town in which such real estate is situated, provided no such lien shall be effective as against any bona fide purchaser or qualified encumbrancer of any interest in any such property. When any tax with respect to which a lien has been recorded under the provisions of this section has been satisfied, the commissioner, upon request of any interested party, shall issue a certificate discharging such lien, which certificate shall be recorded in the same office in which the lien was recorded. Any action for the foreclosure of such lien shall be brought by the Attorney General in the name of the state in the superior court for the judicial district in which the property subject to such lien is situated, or, if such property is located in two or more judicial districts, in the superior court for any one such judicial district, and the court may limit the time for redemption or order the sale of such property or pass such other or further decree as it judges equitable.

Sec. 8. Subsection (b) of section 12-415 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2006, and applicable to taxes due and payable on or after said date):

(b) The amount of the assessment, exclusive of penalties, shall bear interest at [the rate of one per cent per month or fraction thereof] a rate adjusted annually to be equal to the federal short-term rate as it is determined as of July first of each year under Section 6621(b) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, plus three percentage points. The interest shall be computed from the last day of the month succeeding the period for which the amount or any portion thereof should have been returned until the date of payment.

Sec. 9. Subsection (a) of section 12-728 of the 2006 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2006, and applicable to taxes due and payable on or after said date):

(a) (1) After a final return pursuant to the provisions of this chapter is filed, the commissioner shall cause the same to be examined and may make such further audit or investigation or reaudit as the commissioner deems necessary, and if the commissioner determines that there is a deficiency with respect to the payment of any tax due under this chapter, the commissioner shall assess or reassess the additional taxes, penalties and interest due to this state, give notice of such assessment or reassessment to the taxpayer and make demand upon the taxpayer for payment. Not later than sixty days after the mailing of such notice, the taxpayer shall pay to the commissioner, in cash or by check, draft or money order drawn to the order of the commissioner, the amount of the deficiency. Such amount shall bear interest at [the rate of one per cent per month or fraction thereof] a rate adjusted annually to be equal to the federal short-term rate as it is determined as of July first of each year under Section 6621(b) of the Internal Revenue Code, plus three percentage points from the date when the original tax became due and payable.

(2) When it appears that any part of the deficiency for which a deficiency assessment is made is due to negligence or intentional disregard of the provisions of this chapter or regulations adopted thereunder, there shall be imposed a penalty equal to ten per cent of the amount of such deficiency assessment. When it appears that any part of the deficiency for which a deficiency assessment is made is due to fraud or intent to evade the provisions of this chapter or regulations adopted thereunder, there shall be imposed a penalty equal to twenty-five per cent of the amount of such deficiency assessment. For audits of returns commencing on or after January 1, 2006, when it appears that any part of the deficiency for which a deficiency assessment is made is due to failure to disclose a listed transaction, as defined in Section 6707A of the Internal Revenue Code, [of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended,] on the taxpayer's federal tax return, there shall be imposed a penalty equal to seventy-five per cent of the amount of such deficiency assessment.

(3) No taxpayer shall be subject to more than one penalty under this section in relation to the same tax period.

(4) Any decision rendered by any federal court holding that a taxpayer has filed a fraudulent return with the Director of Internal Revenue shall subject the taxpayer to the twenty-five per cent penalty imposed by this subsection without the necessity of further proof thereof, except when it can be shown that the return to the state so differed from the return to the federal government as to afford a reasonable presumption that the attempt to defraud did not extend to the state.