You asked for a summary of new requirements for the Department of Revenue Services (DRS) to file reports with the General Assembly or any legislative committees in 2005 and 2006 and whether these requirements have been satisfied to date. You also asked whether DRS' legislative reporting requirements for 2000 through 2004 have been met and what use was made of the information reported.

The information in this report is based on computer searches of the Connecticut General Statutes and the Legislative Library's database of reports submitted to the legislature.

SUMMARY

In the 2005 session, the General Assembly imposed two reporting requirements on DRS although neither requires DRS to submit a formal report to the General Assembly or any of its committees. One requires the department to provide information to the Business Tax Credit and Tax Policy Review Committee at the request of the committee's chairs. The other requires DRS to consult with the Department of Consumer Protection (DCP) on a report to the General Law Committee on changes in the liquor permit fee system. The first of these has so far been met through a presentation by DRS personnel to the committee at its only meeting to date. The liquor permit fee report is not due until February 1, 2006.

The General Assembly did not impose any new reporting requirements on DRS during the 2000 through 2004 sessions. But, as part of a law passed in 1996, DRS is required to submit annual reports to the Public Health and Children's committees on enforcement of laws regarding tobacco sales to minors. The reports were to be submitted every year starting by January 1, 1998, but DRS has not submitted any so far.

In 1995, the General Assembly required DRS to consult with the Probate Court Administrator on developing a method for determining the value of a gross estate to serve as the basis for computing the cost of settling estates of those who die on or after January 1, 2005. The administrator was required to report to the Judiciary and Finance committees by January 1, 2004. The administrator submitted the required report on December 30, 2003. The legislature changed the basis of the probate court fee for settling an estate in the 2005 session and made the new fee apply to estates of those dying on or after January 1, 2005. But it did not appear to use information in the administrator's report in making these fee changes.

DRS is also required to report tax data periodically to the Office of Fiscal Analysis (OFA). OFA uses the information to prepare a biennial tax expenditure report, develop revenue forecasts, and assess the fiscal impact of proposed legislative tax changes. The reports to OFA were originally required in 1985 and the information to be included in the reports has been modified several times since. Information reports are provided as required except for recent problems attributable to issues with DRS' new computerized tax administration system.

REPORTING REQUIREMENTS IMPOSED IN 2005

Provide Requested Information to the Business Tax Credit and Tax Policy Review Committee

PA 05-251 (§ 64) requires the DRS commissioner, at the request of the review committee chairs, to provide information to the committee about (1) corporation tax exemptions or credits, (2) how legislative tax policies are implemented and operate, and (3) other tax-related issues. The information may not include taxpayer names and addresses but may include, for each recipient of a tax credit or change in tax policy:

1. a description of its business activities,

2. the amount of income it apportions to Connecticut and taxes paid on that income,

3. the exemptions or credits it takes and their amounts, and

4. any other information DRS has available that relates to the committee's inquiry.

DRS staff presented a briefing on the corporation tax for the committee at its first meeting in October 2005.

Consult on DCP's Report on Liquor Permit Fees

PA 05-226 requires DRS to consult with DCP on any statutory changes required to implement a liquor permit fee structure that is in part based on volume. DCP must report its recommendations to the General Law Committee. DCP's report must include recommendations for (1) reasonable fees for temporary permits and permits issued to charitable and nonprofit organizations, (2) the most accurate and comprehensive source of information on which to base a volume-based fee for commercial permittees, and (3) the appropriate fee for all commercial permittees that will generate total revenues equal to or greater than current revenues.

The report is due by February 1, 2006. It had not been submitted as of the date of this report.

ONE-TIME REPORTS DUE IN 2000 THROUGH 2004

The General Assembly did not impose any new reporting requirements on DRS in the 2000 through 2004 sessions.

In 1995, as part of an act phasing out the succession tax, the probate court administrator was required, in consultation with the DRS commissioner, to develop (1) a method for the probate court to determine the gross estate in order to compute its fees for settling estates of people who die on or after January 1, 2005, and (2) a form the court must use for this purpose. The probate court administrator was to report to the Finance and Judiciary committees by January 1, 2004. The report was to include the form and recommendations for legislation needed to implement the method of determining the gross estate. The administrator submitted the report on December 30, 2003.

During the 2005 session, the General Assembly repealed the old succession and gift taxes early and established a new combined estate and gift tax. As part of that new law, the legislature also revised the

definition of “gross estate” for purposes of assessing probate fees for settling estates of those who die on or after January 1, 2005. It does not appear that the legislature used the information in the administrator's report to revise the fees.

ANNUAL TOBACCO ENFORCEMENT REPORT

A law passed in 1996 requires DRS to report annually by January 1 to the Public Health and Children's committees on its efforts to enforce laws (1) prohibiting tobacco sales to minors, (2) restricting placement of cigarette vending machines, (3) imposing fines and license suspensions for selling tobacco products to minors, and (4) prohibiting sales of cigarettes in packs of less than 20. The report must include, for the previous fiscal year (1) the number of unannounced inspections by DRS, (2) a summary of DRS' enforcement actions, and (3) an assessment of progress in reducing tobacco product availability to minors (CGS § 12-315a).

Although the law requires the annual reports to be submitted starting January 1, 1998, DRS has not submitted any of them so far.

REPORTS TO OFA

The law requires DRS to provide detailed tax data to the Office of Fiscal Analysis. Generally, reporting is annual but certain sales tax data must be reported monthly. OFA uses the data to develop revenue forecasts, provide fiscal impact statements on legislative proposals, and to compile its biennial Tax Expenditure Report. According to OFA, DRS has been providing the required information although lately some of the usual information reports have not been provided because of implementation issues with the department's new computerized Integrated Tax Administration System (ITAS).

Annual Tax Data Report (CGS § 12-7b (a), (b), and (c))

The law requires DRS to submit specified data about state taxes for the fiscal year ending the previous June to OFA annually by December 31. (Some of these reporting requirements need updating because of changes in tax laws. ) The law requires at least the following data, by tax:

Sales and Use Tax. The data must include:

• Gross receipts subject to the tax divided into receipts for tangible personal property, leasing or renting tangible personal property, and taxable services.

• Total revenue loss for each tax exemption.

• Total tax collected by industrial classification according to the Standard Industrial Classification Code DRS currently uses to compile statistical data.

• The portion of tax revenue attributable to (1) sales of goods, (2) sales of taxable services, (3) leases, and (4) use tax.

Corporation Business Tax. The data must include:

• Total net income and total net income apportioned to Connecticut for the most recent year for which data is available.

• Amount of depreciation not allowed as deductions for determining net income.

• Amount of operating loss carryovers.

• Credits and refunds for overpayments of taxes for the most recent year for which data is available, stated separately.

• Number of accounts and total tax payments attributable to the net income and capital base tax payment methods, and to S corporation filings. (The last provision is obsolete since S corporations are exempt from the tax. )

• Total tax attributable to each industrial classification according to the Standard Industrial Classification Code DRS currently uses to compile statistical data.

• Annual corporation tax liability in relation to certain corporate taxpayer characteristics, including data related to (1) schedules A, B, C, D, and H along with payments, refunds, and assessments to the extent they are included in the returns and (2) all corporations included on any lists starting with the 1989 income year that DRS must compile that ranks the largest corporate taxpayers, by size of payment, for 40% of total annual corporation tax liability.

Succession and Transfer Tax. (The succession tax was repealed in 2005. ) Data must include:

• Total taxes collected from, and number of taxpayers in, each class of heirs.

• Total value of net taxable estates for each class of heirs.

Personal Income Tax. Data must include, for Connecticut taxpayers:

• Each component of, and adjustment to, federal gross, adjusted gross, and taxable income, as derived from federal income tax returns.

• Each component of, and adjustment to, Connecticut adjusted gross and taxable income, as derived from state income tax returns.

Data must be sorted into federal or Connecticut AGI increments of $ 10,000 for AGI up to $ 100,000 and $ 25,000 for AGI between $ 100,000 and $ 200,000, with one increment reported for AGI over $ 200,000.

Admissions, Cabaret, and Dues tax. (The cabaret tax is no longer in effect. ) Data must include number of taxpayers and total amount collected under each tax.

Real Estate Conveyance Tax. Data must include the number of taxable transfers and total revenue, as well the amount of revenue derived from transfers for purchase prices in the following categories: (1) under $ 30,000; (2) each $ 10,000 bracket from $ 30,000 to $ 200,000; and (3) $ 200,000 and over.

Data Applicable to Any State Tax Not Listed. Data for each tax must include: (1) number of taxpayers, (2) payments for delinquency under applicable penalty statutes, and (3) of the taxes that became due in preceding fiscal year, the amount collected.

Other Data. DRS must also include any data that would be useful in assessing the effect of any change in any state tax base that results in an increase or decrease equal to 10% of the tax or $ 10 million, whichever is less.

Monthly Sales Tax Report (§ 12-7a (d))

DRS must submit a monthly report to OFA on the sales and use tax. The report must include:

1. gross receipts subject to the tax, for each of the following categories: (a) selling tangible property, (b) leasing and renting tangible personal property, and (c) rendering taxable services;

2. total consideration for taxable purchases in each category;

3. total amount of deductions for each statutory sales tax exemption; and

4. total tax collected, by industrial classification, according to the Standard Industrial Classification Code DRS currently uses to compile statistical data.

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