sSB 1—AAC JOBS FOR THE 21^ST CENTURY

Table 1: sSB 1 Summary: Innovation Programs

Table 1: Continued

Table 1: Continued

Total Funds in bill:

• $ 52. 5 million from FY 06 surplus

• $ 130 million appropriation from GF for FY ending June 30, 2007

• Plus $ 535,000 appropriation from GF for FY ending June 30, 2007 for study and Commerce Office

Table 2: Economic Development Planning and Delivery System

Table 3: Economic Development Agencies

(2) The governor's recommended budget appropriates $ 125,000 for this office.

Table 4: Manufacturing Machinery and Equipment Property

Tax Exemption

On or after October 1, 2007, all manufacturing machinery and equipment is exempt from local property taxes, and the state will provide a grant to reimburse towns for 100% of the municipal tax loss as a payment in lieu of taxes (PILOT). Beginning in FY 09 a significant cost will result to fully fund the grant, OFA is still trying to determine the full extent of these costs, and is in the process of reconciling two conflicting data sets. In the event that appropriations are insufficient, these grants will be reduced on a proportional basis, pursuant to current law. The bill allows municipalities to tax manufacturers for the difference between the tax loss and the amount of the grant. To the extent appropriations are insufficient and municipalities do not exercise their ability to levy a supplemental tax, municipal revenue loss will result.

Table 5: SB—1 Blue Ribbon Commission

Membership breakdown by sector:

State Government: 9

Private Sector: 6

Economic Development Profession: 1

Unspecified: 4

EFFECTIVE DATES: Various

sSB 89—AAC A BUSINESS EMPLOYMENT INCENTIVE PROGRAM TO GENERATE RESOURCES AND OPPORTUNITIES IN THE WORKPLACE

EFFECTIVE DATE: July 1, 2006

sSB 350—AAC BONDS FOR INFRASTRUCTURE AND ECONOMIC DEVELOPMENT AT RENTSCHLER FIELD

The bill authorizes $ 45 million in state general obligation bonds for two projects for Rentschler Field in East Hartford. It earmarks up to $ 35 million of the authorization for the Rentschler Field Roadway Improvement Project and up to $ 10 million for the Avian Mitigation Project. The former involves developing, designing, and building road and pedestrian infrastructure and transportation improvements for Rentschler Field. The latter involves acquiring, preparing, and maintaining habitat improvements and deploying suitable habitat for endangered species of birds.

OPM must use the bond proceeds to finance project costs directly or provide grants and other financial assistance to East Hartford or to any state agency, instrumentality, or quasi-public agency. Bond issuance is contingent on the Rentschler Field developer, which is a private entity selected and hired by United Technologies Corporation, filing a master plan for the project with OPM and negotiating a financial assistance agreement with the Department of Economic and Community Development. The agreement must obligate the developer to meet specific job targets.

The bill also specifies certain improvements that must be included in the roadway improvement project and gives the OPM secretary various powers in relation to the projects, including financial oversight authority over it.

EFFECTIVE DATE: Upon passage

sSB 484—AA EXTENDING THE FILING DEADLINE FOR CERTAIN TAX EXEMPTIONS, CONCERNING MAIL DISTRIBUTION SERVICES FROM THE PROPERTY TAX, EXEMPTIONS FROM THE GROSS EARNINGS TAX ON NATURAL GAS AND STATE PAYMENTS IN LIEU OF TAXES FOR MACHINERY AND EQUIPMENT AND PROVIDING A TAX CREDIT FOR BUSINESS EMPLOYMENT EXPANSION PROJECTS

§ 1—Tax Exemption Filing Deadline Extension

The bill allows an eligible company in Waterbury to receive a property tax exemption for new manufacturing machinery and equipment for 2004 despite having missed the November 1, 2003 application deadline for a 2004 exemption.

EFFECTIVE DATE: Upon passage

§ 2—Tax Exemption for Mail Distribution Services

The bill expands the five-year, state-reimbursed property tax exemption for new and newly acquired manufacturing machinery and equipment by extending it to cover machinery and equipment used to provide (1) mail presorting, sorting, folding or stuffing or (2) delivery of direct or indirect mail distribution services. The General Assembly eliminated eligibility for this type of equipment in 2003.

§ 3—Utility Company Gross Earnings Tax Exemption

The law exempts sales of gas used to operate certain cogeneration facilities from the 5% gross earnings tax applicable to nonresidential gas sales. To be exempt, the facility must provide electricity or steam for use in manufacturing and be located entirely on the manufacturer's premises, whether or not the manufacturer actually owns or operates the facility. The exemption took effect June 1, 2004. This bill makes it retroactive to cover gas sold, furnished, or distributed to such a facility on or after March 10, 2003.

EFFECTIVE DATE: Upon passage

§ 4 & 5—PILOT Payments for Tax-Exempt Property

The bill increases the state's payment in lieu of taxes (PILOT) to offset certain property tax exemptions to 100% of each town's lost revenue. The higher PILOT payments apply to property first approved for exemptions for the October 1, 2007 or subsequent assessment years. The bill increases the PILOT payment from 80% to 100% of revenue lost from exemptions for newly acquired manufacturing equipment and commercial vehicles. It increases the payment from 50% to 100% of revenue lost from exemptions for (1) manufacturing facilities and equipment located in distressed municipalities, targeted investment communities, and enterprise zones; (2) machinery in a service facility in an enterprise zone; and (3) machinery and equipment acquired as part of a technological upgrade.

The bill's reference to SB 348 of the current session is outdated because that bill died in the Commerce Committee, although some of its content was incorporated into sSB 1.

EFFECTIVE DATE: October 1, 2006

§ 6—Corporation Tax Credit Pass-Through

Under certain conditions, this bill allows a partnership, limited partnership, limited liability company, or other type of pass-through entity in which one or more corporations have an interest as general or limited partners, members, or otherwise, to pass through to these constituent corporations any corporation tax credits for which the pass-through entity would qualify if it were a corporation.

To qualify for credits and pass them through, the noncorporate entity must sponsor an employment expansion project that will create at least 400 permanent, full-time jobs new to Connecticut over a maximum of five years following a commencement date approved by the DECD commissioner in an eligibility certification. Although the aggregate five-year job increase must be at least 400, it appears that an entity can qualify to pass through credits for any given income year if the project creates at least 90% of the annual number of new jobs called for in the DECD eligibility certificate in that year. Jobs at the noncorporate entity and all its constituent corporations are included in determining the number of new jobs the project creates.

If the noncorporate entity qualifies, its constituent corporations are entitled to share in the credits attributable to its activities on a pro rata basis according to their distributive shares of the entity's profit or loss for the income year. The bill allows the corporations to use the credits not only for the income years covered by a DECD eligibility certificate but also for income years starting before the certified commencement date, even though the activity that produces the credit was carried out by the noncorporate entity rather than the corporation. To receive credits for these earlier years, the corporation must have reported them on its tax return for those years. If credits for earlier years exceed the tax due, the corporation receives no refund but may carry the excess forward for whatever period the underlying credit allows.

Pass-through credits are subject to the aggregate corporation tax credit limit of 70% of tax liability without credits. They can be used by companies joining a combined corporate return. One constituent corporation may assign its share of pass-through credits to another of the entity's constituents but the assignee can use the credits only in same the income year that the assigning corporation could have used them. The credits cannot be further assigned.

EFFECTIVE DATE: Upon passage and applicable to project with commencement dates on or after July 1, 2005.

sHB 5317—AA ESTABLISHING A PILOT PROGRAM EXEMPTING HUBZONE BUSINESSES FROM THE SALES TAX

The bill requires the DECD commissioner, in consultation with the DRS commissioner, to set up a pilot program in three municipalities to exempt certified HUBZone businesses (see below) from paying state sales tax on taxable services or items they buy. The program must be in one municipality in Hartford, New Haven, and Fairfield counties. It must terminate on June 30, 2011. The DECD commissioner must report on the program annually by each October 1 starting in 2007 and continuing for the program's duration to the Commerce and Finance committees.

A HUBZone is a “historically under utilized business” zone established by the federal Small Business Administration. To qualify for the program under the federal law, a business must be located in a HUBZone and be owned or controlled by U. S. citizens. At least 35% of its employees must live in the zone.

EFFECTIVE DATE: July 1, 2006

sHB 5494—AA BONDS OF THE STATE FOR GRANTS TO MICROENTERPRISES

EFFECTIVE DATE: October 1, 2006

sHB 5510—AAC TOURISM MARKETING FUNDING

The bill requires the DRS commissioner to intercept a maximum of 1% of the revenue from the state's 12% hotel and lodging house tax and deposit it in the separate, nonlapsing Connecticut Commission on Culture and Tourism (CCCT) account in the General Fund. It adds this revenue to other funds available to CCCT.

For FY 07, the bill requires the DRS commissioner to allocate $ 2. 5 million of the intercepted revenue to CCCT and $ 750,000 to each of the five tourism districts. For FY 08 and subsequent years, the commissioner must allocate 42% of the funds to CCCT and divide the remaining 58% equally among the districts. The bill allows the OPM secretary to adjust these annual funding allocations.

CCCT and the districts must use the money for marketing. The districts must submit marketing plans to the CCCT for its approval and must use their funds as described in the approved plans. Marketing plans are due annually by January 1, starting in 2007.

The bill appears to place limits on either the amount the DRS commissioner withholds or on OPM's authority to make adjustments but its wording is not clear (last sentence of subsection (f)). In addition, although the intercept amount is limited, the bill does not give the DRS commissioner any guidance on how much revenue to intercept if she does not intercept 1% (unless the bill's last sentence is interpreted to limit the intercept to the amount spent).

EFFECTIVE DATE: July 1, 2006