OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

SB-813

AN ACT ESTABLISHING A TAX CREDIT FOR THE PURCHASE OF LONG-TERM CARE INSURANCE.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 14 $

FY 15 $

Department of Revenue Services

GF - Revenue Loss

71.5 million

78.3 million

Department of Revenue Services

GF - Cost

90,593

60,593

State Comptroller - Fringe Benefits1

GF - Cost

20,929

20,929

Municipal Impact: None

Explanation

The bill establishes a $500 Personal Income Tax credit for Connecticut residents for long-term care insurance premiums paid. This results in a General Fund revenue loss of approximately $71.5 million in FY 14, $78.3 million in FY 15, and $84.6 million annually thereafter, as well as a cost of $111,522 in FY 14 and $81,522 in FY 15 to the Department of Revenue Services for printing, programming and compliance assurance.

The revenue loss estimate is based on information from the University of Connecticut Health Center indicating that approximately 103,000 Connecticut residents have purchased long-term care insurance policies, with an approximate additional 10,500 policies purchased annually,2 and assumes taxpayers would receive a credit for each year in which an eligible premium is paid. Additionally, a credit amount of $694 is used for calculation purposes to control for the variation in total credits available based on filing status.3

The cost to DRS includes a one-time cost of $30,000 in FY 14 associated with form alteration and tax schedule printing, and technical/programming changes to the online Taxpayer Service Center (TSC) and the Integrated Taxpayer Administration System (ITAS). It is also anticipated that a Revenue Examiner I position would be necessary to ensure compliance with the provision, at a cost of $81,522 in each of FY 14 and FY 15 (consisting of $60,593 for salary and $20,929 for fringe benefits).

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation. In addition, normal annual pension costs (currently estimated at 7.5% of payroll) attributable to the identified personnel changes will be recognized in the state's annual required pension contribution in future actuarial valuations.

Sources:

Department of Public Health Connecticut Resident Mortality Statistics

 

University of Connecticut Health Center Connecticut Long-Term Care Needs Assessment March 2010

1 The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes is 34.54% of payroll in FY 14 and FY 15.

2 An annual attrition rate of approximately 700 policies is also assumed, based on mortality data from the Department of Public Health.

3 The bill specifies that one credit of $500 is available to taxpayers filing as single, head of household, or married filing separately, and up to two credits of $500 are available to taxpayers filing jointly.