Tax Changes 1991-2006

Topic:
LEGISLATION; TAX CREDITS; TAX EXEMPTIONS; TAX REFORM; TAXATION (GENERAL);
Location:
TAXATION;

OLR Research Report


May 7, 2007		2007-R-0364
CHANGES IN STATE TAXES, 2003-2006

By: Judith Lohman, Chief Analyst

You asked us to update our November 1, 2002 report on state tax changes from 1992 to 2002.

This report covers legislative changes from 2003 through 2006. Tables 1 to 3 below show the new taxes and tax increases; new and expanded tax exemptions, deductions, and credits; and the taxes eliminated in the 2003 through 2006 legislative sessions. For tax changes enacted from 1991 to 2002, please see OLR Report 2002-R-0884. As with our previous report, this report does not include minor definitional changes or clarifications. It covers only state tax changes and does not include changes in local property taxes.

Table 1: New Taxes and Tax Increases, 2003-2006


Business Entity Tax
2003	Impose 20% surcharge for 2003.
Cigarette Tax
2003	Increase from $ 1. 11 to $ 1. 51 per pack.
Corporation Tax
2003	• Impose 20% surcharge for 2003. • Impose 25% surcharge for 2004 for companies paying more than the $ 250 minimum. • Increase maximum supplemental tax on corporate groups filing combined returns from $ 25,000 to $ 250,000.
2005	• Impose 20% surcharge for 2006 for companies paying more than the $ 250 minimum tax. • Impose 15% surcharge for 2007 for companies paying more than the $ 250 minimum tax (surcharge eliminated in 2006 – see table 2).
Estate, Succession, and Generation-Skipping Transfer Taxes
2003	• Impose temporary tax on estates over $ 1 million of people who die between 7/1/04 and 12/31/04. • Delay remaining steps in succession tax phase-out by two years, postponing final phase-out from 1/1/04 to 1/1/06 for Class B, and from 1/1/06 to 1/1/08 for Class C, heirs.
2005	Establish new estate tax to replace old estate and succession taxes. New tax applies to: o estates exceeding $ 2 million of those who die on or after 1/1/05 and o estates of decedents who die on or after 1/1/05 whose combined taxable estate and value of taxable gifts (see below) made during life after 1/1/05 exceeds $ 2 million. Rates vary from 5. 085% to 16. 0% depending on estate value.
Gift Tax
2003	Delay phase-out of tax on gifts of $ 1 million or under for two years, from 1/1/08 to 1/1/10.
2005	Establish new gift tax for gifts made on or after January 1, 2005 exceeding a lifetime exclusion of $ 2 million. Tax rates range from 5. 085% to 16. 0% depending on value of gift. The $ 2 million lifetime exclusion applies against both new gift and new estate tax (see above). Tax replaces old gift tax.
Income Tax
2003	• Increase rate on upper bracket from 4. 5% to 5%. • Reduce maximum property tax credit from $ 500 to $ 350. (Credit increased to $ 500 again in 2004 to start in 2005, but see below. )
2005	• Reduce maximum property tax credit for 2005 from $ 500 to $ 350. • Reduce maximum property tax credit for 2006 and after from $ 500 to $ 400 (later raised to $ 500 as of 1/1/06 – see table 2).
2005	• Delay scheduled income tax reductions for single filers by two years.
Motor Fuels Tax
2004	Increase gasohol tax from $ 0. 24 to . 25 per gallon.
Petroleum Products Gross Earnings Tax
2005	• Increase tax from 5% to: o 5. 8% for FY 06 o 6. 3% for FY 07 o 7. 0% for FY 08 o 7. 5% for FYs 09-13 o 8. 1% for FY 14 and thereafter.
Nursing Home Provider Tax
2005	Establish a nursing home provider tax of 6% of net revenues adjusted for number of annual patient days.
Real Estate Conveyance Tax
2003	Increase municipal tax rate from 0. 11% to 0. 25% until 7/1/04. Allow 18 towns to increase their rates to 0. 5% until 7/1/04.
2004	Extend 0. 25% municipal rate expiration to 7/1/05. Make option for extra 0. 25% for 18 towns permanent.
2005	Extend 0. 25% municipal rate expiration to 7/1/07.
Sales and Use Taxes
2003	• Impose 3% sales tax on sale of advertising services starting 4/1/03 (removed as of 7/1/03). • Extend 6% tax to: o For-profit, private health and athletic club services o Newspapers and magazines sold by subscription (removed as of 7/1/04). • Reduce threshold for exemption for clothing and footwear from $ 75 to $ 50. • Eliminate sale-tax-free week (later restored before taking effect).
Surcharges (Miscellaneous)
2005	Impose 1. 5% surcharge on heavy equipment rentals similar to surcharge on rental cars and trucks.
2005	$ 1-per-trip surcharge on tickets for travel on New Haven line from 1/1/08 to 7/1/15.
Taxes (Miscellaneous)
2003	5% gross earnings tax imposed on satellite t. v. companies.
Utility Company Gross Earnings Tax
2006	Increase tax rates for municipal electric companies from 4% to 6. 8% for transmitting power to residential customers and from 5% to 8. 5% for transmission to nonresidential customers.

Table 2: New and Expanded Tax Exemptions, Credits, and Deductions, 2003 -2006


Admission Tax
2006	Exempts events at: • Nature's Art, near Waterford, effective 4/1/06 • Arena at Harbor Yard, Bridgeport, effective 11/ 1/06 • Dodd Stadium, Norwich, effective 11/1/06.
All Business Taxes
2003	Increases credit from 40% to 60% of certain Neighborhood Assistance Act investments.
2006	Increases maximum total credits for contributions to nonprofit housing developers from $ 5 million to $ 10 million per year.
2006	Establishes a credit equal to 25% of state income tax withheld from new employees' wages by a company that relocates to Connecticut and creates at least 50 new full-time jobs here.
2006	Established a $ 1,500 per worker credit for hiring Connecticut worker previously laid off because of a corporate restructuring in which at least 10 workers in the state lost jobs.
Corporation Tax
2005	Exempts corporations whose only activity in Connecticut is participating in trade shows at the Hartford convention center, if they meet certain conditions.
2006	Eliminates 15% tax surcharge for the 2007 income year for all corporations other than those that owe the $ 250 minimum.
2006	Establishes a transferable credit equal to 30% of eligible film and digital media production expenses incurred in Connecticut over $ 50,000.
2006	Establishes a credit of 25% of qualified costs up to $ 2. 7 million for rehabilitating historical commercial and industrial properties for residential use.
Income Tax
2005	Exempts 50% of military retirement income starting with income years on and after January 1, 2008.
2006	Increases the maximum property tax credit from $ 400 to $ 500 for tax years starting 1/1/06.
2006	Allows taxpayers to deduct contributions to the Connecticut Higher Education Trust of up to $ 5,000 for individuals and $ 10,00 for joint filers.
Petroleum Products Gross Earnings Tax
2006	Exempts commercial heating oil blends containing not less than 10% biofuels.
Real Estate Conveyance Tax
2004	Exempts employer and relocation company sales of residential property acquired through employee relocation plans.
Sales and Use Tax
2004	Exempts items sold on the premises of a for-profit hospital by a federally tax-exempt nonprofit organization.
2004	Exempts items and services a for-profit hospital buys in connection with building or equipping a hospital facility if the hospital filed a certificate of need before and the certificate was pending on July 1, 2005.
2005	Exempts retailers whose only activity in Connecticut is participating in trade shows at the Hartford convention center, if they meet certain conditions.
2006	Exempts residential weatherization and energy efficiency products and energy efficient heating equipment through July 1, 2007.
2006	Exempts aircraft repair and replacement parts and aircraft repair services for ultralight aircraft.
2006	Extends to LLCs an existing exemption for business services rendered between joint venture participants under a joint venture agreement and extends the duration of the exemption from 10 to 20 years from the date the joint venture is formed
2006	Exempts charges for yoga instruction provided at a yoga studio.
2006	Exempts items or services used, incorporated into, or otherwise consumed in building the Connecticut Science Center in Hartford.

Table 3: Taxes Eliminated 2003-2006

2004	10% quarterly tax on the retail value of oysters harvested from state-seeded shellfish grounds
2005	Succession tax
2006	2% gross earnings tax on railroad express companies
2006	4. 5% gross earnings tax on telegraph and undersea cable companies