Finance, Revenue and Bonding Committee
AN ACT CONCERNING STATE TAXATION AND COLLECTION, TAX GAP COMPLIANCE, TAX PREPARERS AND FACILITATORS, CHANGES TO THE TAX AND RELATED STATUTES, A MENTAL HEALTH COMMUNITY INVESTMENT ACCOUNT AND MUNICIPAL BONDS
§ 1 — ORDER OF APPLYING PARTIAL PAYMENTS
Changes the order in which the DRS commissioner must apply partial tax payments
§ 2 — INCOME TAX ON NONQUALIFIED COMPENSATION
Subjects to the personal income tax certain deferred compensation attributed to services performed in the state
§ 3 — SALES TAX PERMIT RENEWALS
Requires sales tax permits to be renewed every two years instead of every five
§ 4 — WEEKLY SALES TAX REMITTANCE
Specifies methods for sales tax remittance
§ 4 — FILING SALES TAX RETURNS ON AN ANNUAL BASIS
Codifies the DRS rule for determining when sales tax must be annually remitted
§ 5 — SECURITY REQUIREMENT FOR WITHHOLDING TAX
Establishes conditions under which the DRS commissioner may require employers and payers to post a bond or other security to secure withholding tax payments
§§ 6 & 8 — INCOME TAX WITHHOLDING FOR PENSION AND ANNUITY PAYMENTS
Requires, rather than allows, income tax withholding for pension and annuity payments
§ 7 — INFORMATION RETURNS BY PAYERS OF NONPAYROLL AMOUNTS
Advances the date by which payers of non-payroll amounts that are not subject to income tax withholding must submit information returns to DRS
§ 9 — INFORMATION RETURNS ON CREDIT AND DEBIT CARD SALES (1099-K FORMS)
Requires certain entities to file with DRS copies of the annual federal information returns that report the payment transactions they process for Connecticut retailers
Allows certain DRS tax warrants to provide for a continuous order to withhold intangible personal property for up to 180 days
§ 11 — PERIODIC CRIMINAL BACKGROUND CHECKS FOR CURRENT DRS EMPLOYEES
Requires current DRS employees to undergo periodic criminal background checks
§§ 12-14 — BED AND BREAKFAST OCCUPANCY TAX RATE
Imposes a uniform occupancy tax rate on rent charged at bed and breakfast establishments
§§ 15-18 — TAX PREPARERS AND FACILITATORS
Establishes a regulatory structure for tax preparers and facilitators
§ 19 — DELINQUENT TAXPAYER LIST
Requires the DRS commissioner to prepare a delinquent corporation business taxpayer list only upon OPM's request
§§ 20, 22, 32, 35, 37 & 38 — TAX REGULATIONS
Eliminates provisions requiring or allowing the DRS commissioner to adopt regulations on various tax provisions
Makes administrative and policy changes to DRS's data match program
§ 23 — CAPTIVE REAL ESTATE INVESTMENT TRUSTS
Modifies the definition of a captive real estate investment trust (REIT) for corporation business tax purposes
§§ 24 & 25 — CORPORATION TAX FILING DEADLINES
Extends the deadlines for filing corporation business tax returns
§ 26 — DRY CLEANING DROP STORES
Exempts dry cleaning “drop stores” from the dry cleaning surcharge
Aligns the determination of utility companies' gross earnings with the way income is classified in PURA's uniform system of accounts
§§ 28 & 30 — SUCCESSOR LIABILITY FOR CIGARETTE AND TOBACCO PRODUCTS TAXES
Makes people who buy certain cigarette or tobacco products businesses or product stock liable for back taxes
§ 29 — CIGARETTE TAX EXEMPTION FOR SALES TO U.S. VETERANS' HOSPITALS AND ARMED FORCES MEMBERS
Exempts certain cigarette sales from the cigarette tax as required by federal law
§ 31 — TOBACCO PRODUCTS TAX RECORDS
Tightens requirements for maintaining tobacco products tax records and establishes a civil penalty for any distributor or importer who fails to immediately produce or provide electronic access to records
§§ 33 & 34 —TRANSFERS OF THE USE TAX TO DEDICATED ACCOUNTS AND FUNDS
Extends to the use tax the required revenue diversion for certain dedicated accounts, according to the same amounts and schedules specified under existing law for the sales tax
§ 36 — SOURCING OF INCOME FROM REAL PROPERTY FOR INCOME TAX PURPOSES
Clarifies ownership requirements for the sourcing of income from certain real property
§ 38 — DEADLINES FOR FILING CERTAIN INFORMATIONAL RETURNS
Sets an earlier date by which certain employers and payers must file informational returns with DRS for personal income tax purposes
§ 39 — PENALTY WAIVER REQUESTS
Imposes a deadline for taxpayer submission of DRS penalty waiver requests
§ 40 — ENFORCING THE GROSS EARNINGS TAX THAT FUNDS PEGPETIA
Extends the penalty for willfully failing to pay the tax that funds the “public, educational, and governmental programming and education technology investment account”
Extends the definition of racketeering activity under the Corrupt Organizations and Racketeering Act (CORA) to include violations of certain tobacco product-related crimes
§§ 42 & 43 — MENTAL HEALTH COMMUNITY INVESTMENT ACCOUNT
Allows income tax return contributions for mental health programs and services
§§ 44 & 45 — SECURITY REQUIREMENT FOR SALES AND USE AND ADMISSIONS AND DUES TAXES
Establishes conditions under which the DRS commissioner may impose the existing security requirement for the (1) sales and use tax and (2) admissions and dues tax
§ 46 — PENALTY FOR FAILING TO COMPLY WITH CERTAIN SALES AND USE TAX REQUIREMENTS
Authorizes the DRS commissioner to impose a civil penalty of $500 per violation for failing to comply with certain sales and use tax requirements
§§ 47 & 48 — MUNICIPAL REFUNDING BOND MATURITY
Temporarily allows municipalities, by a two-thirds vote of their legislative bodies, to issue refunding bonds with a term of up to 30 years
§§ 49 & 50 — MUNICIPAL DEFICIT FINANCING
Excludes refunding bonds and tax anticipation notes from the municipal deficit financing law
SUMMARY: This act makes numerous tax law changes, including (1) shortening the validity period of sales tax permits; (2) establishing methods for weekly sales tax remittance; (3) requiring, rather than allowing, income tax withholding for certain pension and annuity payments; and (4) creating a regulatory structure for tax preparers and facilitators.
The act also (1) temporarily allows municipalities, by a two-thirds vote of their legislative bodies, to issue refunding bonds with terms of up to 30 years and (2) excludes certain types of municipal bonds from the municipal deficit financing law.
EFFECTIVE DATE: Various; see below.
§ 1 — ORDER OF APPLYING PARTIAL PAYMENTS
Changes the order in which the DRS commissioner must apply partial tax payments
The law requires delinquent taxpayers to pay penalties and interest in addition to any back taxes owed and specifies the order in which the DRS commissioner must apply a partial payment to these amounts. Under prior law, he had to apply the payment to any penalties first, then to interest on the unpaid tax, and any remaining balance to the tax. Under the act, the commissioner must still apply the payment to the penalties first, but he must apply the remaining balance first to the tax and then the interest.
EFFECTIVE DATE: July 1, 2018
§ 2 — INCOME TAX ON NONQUALIFIED COMPENSATION
Subjects to the personal income tax certain deferred compensation attributed to services performed in the state
The act requires taxpayers to include in Connecticut adjusted gross income, to the extent it is not properly includable in gross income for federal income tax purposes, compensation attributed to services performed in Connecticut that is deferred under a nonqualified entity's nonqualified deferred compensation plan. A nonqualified entity is generally a foreign corporation. A nonqualified deferred compensation plan is an arrangement between an employer and an employee or service provider to pay compensation in the future, thus deferring the tax liability on the compensation. Such plans exclude qualified employer plans (e.g., 457(b) plans) and bona fide vacation leave, sick leave, compensatory time, disability pay, and death benefit plans.
Federal law generally provides that any compensation that is deferred under a nonqualified entity's nonqualified deferred compensation plan is includable in gross income when the compensation is no longer subject to a substantial risk of forfeiture (26 U.S.C. § 457A). Under federal law, such deferred compensation earned and deferred before January 1, 2009 must be recognized for federal tax purposes by 2017.
EFFECTIVE DATE: July 1, 2017, and applicable to tax years beginning on or after January 1, 2017.
§ 3 — SALES TAX PERMIT RENEWALS
Requires sales tax permits to be renewed every two years instead of every five
Beginning with permits issued on or after October 1, 2017, the act shortens the period during which sales tax permits are valid from five to two years.
EFFECTIVE DATE: October 1, 2017
§ 4 — WEEKLY SALES TAX REMITTANCE
Specifies methods for sales tax remittance
The act specifies the methods taxpayers must use to remit sales taxes when the Department of Revenue Services commissioner requires them to do so weekly. Prior law let the commissioner prescribe the method for weekly remittance.
By law, a taxpayer, which can be a person or entity, is generally required to collect sales tax and must remit it on a monthly, quarterly, or annual basis, depending on the amount of sales tax it collects. But the commissioner can require a taxpayer to remit weekly if the taxpayer fails to remit it on time.
The act specifies that taxpayers that remit the tax weekly can still file claims for refunds and exercise the other rights the law affords them.
Methods for Weekly Remittance
Under the act, taxpayers that remit sales tax weekly must do so by establishing a separate account with a financial institution for depositing payments, unless they elect to use a certified service provider to remit the funds.
The act requires the commissioner to inform taxpayers of these options when he sends the notice, required by law, informing them that they must remit the tax every week. The notice must also include a list of all certified service providers, a description of how they can be contacted, and a form for electing to use a provider.
A taxpayer that chooses to remit the sales tax through a service provider must complete the form that accompanies the notice and return it to the commissioner within two business days after receiving it. Taxpayers that miss this deadline or do not return the form must establish an account with a financial institution as described below.
The commissioner cannot use the act's weekly sales tax remittance in place of the legally authorized methods for collecting delinquent taxes.
Under the act, a taxpayer's weekly remittance method is irrevocable and remains in effect until the commissioner notifies the taxpayer that he or she no longer must weekly remit the tax. Prior law fixed the period for weekly remittance at one year. The act allows the commissioner to relieve the taxpayer after one year if the evidence shows that the taxpayer continuously remitted the tax on a weekly basis for 12 months. But the act also allows the commissioner to relieve the taxpayer sooner.
Remittance through a Certified Service Provider
Under the act, taxpayers that choose to remit the tax through a service provider must select one that is certified by the Streamlined Sales Tax Governing Board, Inc. They have 30 days to (1) contract with a certified service provider and (2) begin weekly remittance. Upon request, the taxpayer must provide the commissioner with a copy of the contract, a statement authorizing the commissioner to contact the provider about the taxpayer, and any other information the commissioner needs about the taxpayer's arrangement with the provider.
The provider must electronically remit the taxes. It may, if the commissioner approves, keep a portion of the remitted tax, up to the amount it charged the taxpayer for its services.
Remittance through a Bank Account
Establishment. A taxpayer that chooses not to remit the taxes through a certified service provider must, within 30 days after receiving the commissioner's notice, establish an account with a financial institution exclusively for remitting the taxes. It may be with a bank, Connecticut credit union, federal credit union, an out-of-state bank that maintains a branch in Connecticut, or an out-of-state credit union that maintains an office in the state. The account may be a demand deposit, checking, negotiable order of withdrawal, or a share draft account. In any case, the account must be one that allows the depositor to make transfers or withdrawals by negotiable or transferable instrument, payment orders of withdrawals, electronic transfers, or other similar mechanisms for making payments of transfers to third parties.
The account must be separate from the taxpayer's other accounts and be designated for DRS under the taxpayer's name as trustee. The establishment of the account and the commissioner's authority to order payments from it do not affect the financial institution's right to recover uncollected funds credited to the account, including the right to remove funds from it as a charge-back to recover uncollected funds.
If the commissioner requests it, the taxpayer must provide the name of the financial institution where account is located, the account number, and any other account information the commissioner requires, including account balances, dates and amounts of credits and debits, and other account-related nonpublic personal information. The taxpayer, as the account's trustee, must also provide written consent to the financial institution authorizing it to disclose this account-related information to the commissioner. This authorization also serves as the statutorily-required consent the taxpayer must give to the financial institution before it can disclose financial records.
Deposits. After establishing the account, the taxpayer has up to two days to deposit in it the taxes collected or received on a given day. The taxpayer may deposit no other funds in the account except funds for its maintenance. Money in the account constitutes funds in trust for the state. As such, it is deemed property of the state, payable only to DRS, and no liens can be placed on the account.
Withdrawals. The taxpayer must obtain the commissioner's approval before withdrawing funds from the account for purposes other than remitting sales taxes. Doing so without the commissioner's prior approval is larceny, with each unauthorized withdrawal constituting a separate offense.
Account Status. The commissioner may request that a financial institution provide information about an account established for remitting the sales tax. But he must also identify, in consultation with banking industry representatives, acceptable methods for providing that information.
Failure to Remit Taxes. The act authorizes the commissioner to order the payment of funds from the account if the taxpayer fails to remit the tax and the commissioner determines that it might not be collected. The commissioner may do this to recoup only the delinquent taxes, not the associated penalties and interest charges that he may collect by other means the law authorizes.
In these cases, the commissioner may serve notice on the institution holding the account and order the payment from the account. The commissioner must determine, in consultation with banking industry representatives, acceptable ways to provide this notice.
Upon receiving the commissioner's notice, the financial institution must remove from the taxpayer's account the funds deposited there or an amount equal to the tax the commissioner ordered paid, whichever is less. The institution must remove the amount before midnight of the banking day following the banking day it received the notice (i.e., midnight deadline) and pay the amount to the commissioner within two business days after the midnight deadline.
If the institution fails or refuses to pay the requested amount, the commissioner may ask the attorney general to bring an action in the Superior Court for the Hartford Judicial District to compel the institution to pay the amount.
Taxpayer Rights. The act allows taxpayers to file a claim against the commissioner if he withdraws funds from an account that contains funds deposited for purposes other than remitting taxes.
The commissioner must notify a taxpayer about this right at the same time he notifies the institution about the payment due. He must do so by providing a written notice, which he may deliver in person, leave at the taxpayer's dwelling or usual business place, send by first class mail to the taxpayer's last-known address, or send by email or fax.
Claim Process. The taxpayer has up to 10 business days from the receipt of the notice to file a claim on a form the commissioner prescribes. If the taxpayer misses the 10-day deadline, he or she waives any demand against the state.
Within 10 business days of receiving a claim, the commissioner must determine if it is valid. If he determines that it is, he must return only those funds that are not remitted taxes. These funds are not the state's property and cannot be used to offset the taxpayer's liabilities.
If the commissioner determines the claim, or part of it, is not valid, he must send a notice to the taxpayer to that effect. The taxpayer may protest the denial by notifying the commissioner in writing within five business days after the denial was mailed and specifying the grounds for the protest. The commissioner then has up to 10 business days from the taxpayer's protest notice to reconsider the denial. He must notify the taxpayer in writing about his decision. If the commissioner denies the claim or returns only part of the money, he must specify his findings of fact and the basis for his decision.
The taxpayer may appeal the commissioner's decision to the Superior Court for the New Britain Judicial District, as the law specifies. The appeal is subject to the requirements of the Uniform Administrative Appeals Act.
Penalty Waivers. The act prohibits the commissioner from waiving any penalties imposed on taxpayers that must remit the sales tax on a weekly basis.
Electronic Filing
Taxpayers that must remit sales taxes weekly must continue to file their returns on a monthly or quarterly basis. The act requires them to do so electronically.
EFFECTIVE DATE: January 1, 2018
§ 4 — FILING SALES TAX RETURNS ON AN ANNUAL BASIS
Codifies the DRS rule for determining when sales tax must be annually remitted
The act codifies DRS's requirements for remitting sales tax on an annual basis, requiring taxpayers to remit the tax on an annual basis if they collected and remitted less than $1,000 in sales tax for the 12-month period ending June 30. The act also requires these taxpayers to file returns annually by January 31 reporting the sales made during the previous calendar year.
EFFECTIVE DATE: January 1, 2018
§ 5 — SECURITY REQUIREMENT FOR WITHHOLDING TAX
Establishes conditions under which the DRS commissioner may require employers and payers to post a bond or other security to secure withholding tax payments
The act authorizes the DRS commissioner, under certain conditions, to require employers and payers to deposit securities (e.g., bonds or cash deposits) with the commissioner to ensure their compliance with withholding tax requirements. Under the act, the commissioner may impose the security requirement whenever an employer or payer required to deduct and withhold income tax (1) owes withholding taxes that have been finally due and payable for at least 90 days and for which any administrative or judicial remedies (or both) have been exhausted or have lapsed or (2) has failed to file at least one required withholding tax return. (The act imposes similar conditions for existing security requirements for other taxes. See §§ 44 & 45, below.)
The act gives the commissioner discretion to determine the type and amount of security required, up to six times the employer's or payer's estimated liability for the prior or future 12-month period. He may increase or decrease the security amount subject to these limitations.
Under the act, the commissioner may sell the security at public auction if necessary to recover any taxes, amounts required to be collected, interest, or penalty due. Notice of the sale may be served in person or by mail to the person depositing the security. Mailings must be made to the person's address listed in DRS records, in the same way DRS sends tax deficiency assessment notices. After the sale, the commissioner must return to the person depositing the security any surplus above the amounts due.
EFFECTIVE DATE: October 1, 2017
§§ 6 & 8 — INCOME TAX WITHHOLDING FOR PENSION AND ANNUITY PAYMENTS
Requires, rather than allows, income tax withholding for pension and annuity payments
Prior law allowed Connecticut residents receiving pensions or annuities to instruct the payer of the pension or annuity to withhold Connecticut income tax. Beginning January 1, 2018, the act instead requires income tax withholding by certain payers of pensions and annuities. These distributions include those from an employer pension, annuity, profit-sharing plan, stock bonus, deferred compensation plan, individual retirement arrangement, endowment, or life insurance contract.
The withholding requirement applies to payers of pension or annuity distributions that (1) maintain an office or transact business in Connecticut and (2) make taxable payments to resident individuals. Under the act, such payers must deduct and withhold from the taxable portion of any such distribution, as far as practicable, an amount substantially equal to the tax reasonably estimated to be due from the payee during the calendar year. With the exception of “lump sum distributions,” the method of determining the amount to be withheld must be the same as the method employers use for payroll withholding. A lump sum distribution must be taxed at the highest marginal rate unless (1) any portion of the distribution was previously taxed or (2) it is a rollover effected as a direct trustee-to-trustee transfer. The act defines lump sum distributions as payments from a payer to a resident payee of the payee's entire retirement account balance, excluding any other tax withholding and administrative charges and fees.
EFFECTIVE DATE: January 1, 2018
§ 7 — INFORMATION RETURNS BY PAYERS OF NONPAYROLL AMOUNTS
Advances the date by which payers of non-payroll amounts that are not subject to income tax withholding must submit information returns to DRS
Under the act and existing DRS practice, payers making payments of non-payroll amounts to payees during the calendar year, other than those payers subject to income tax withholding, must provide to each payee, annually by the following January 31, a written statement showing the amount of non-payroll amounts paid, the amount deducted and withheld from such payments, and any other information the DRS commissioner requires (e.g., federal Form 1099-MISC, Miscellaneous Income). Under prior DRS practice, such payers were generally required to file copies of these forms with DRS by March 31. The act instead requires them to do so by January 31.
EFFECTIVE DATE: January 1, 2018
§ 9 — INFORMATION RETURNS ON CREDIT AND DEBIT CARD SALES (1099-K FORMS)
Requires certain entities to file with DRS copies of the annual federal information returns that report the payment transactions they process for Connecticut retailers
Federal law requires certain “reporting entities” to file with the IRS annual information returns that report the payment transactions they process for retailers (i.e., federal Form 1099-K). The act requires such entities processing payments for Connecticut retailers (i.e., participating payees) to file copies of these information returns with DRS within 30 days after filing them with the IRS, in the manner and form prescribed by the DRS commissioner. DRS previously received copies of such forms from the IRS about six months after they were filed.
The act's reporting requirement applies to the same entities subject to the federal reporting requirement (i.e., payment settlement entities; third party settlement organizations; electronic payment facilitators; or other third parties acting on behalf of a payment settlement entity). These entities generally include domestic and foreign entities that process credit, debit, and payment card transactions on behalf of retailers.
Reporting entities that fail to file the returns within the prescribed timeframe are subject to a civil penalty of (1) $50 for each failure if the return is submitted within one month after it was due and (2) an additional $50 for each month or part of a month that the failure continues, up to $250,000 per year per reporting entity. The commissioner may waive all or part of the penalties imposed if the reporting entity's failure to timely file the return was not due to willful neglect, but rather based on reasonable cause. If the commissioner chooses to do so, he must follow the statutory procedure for waiving penalties over $1,000.
EFFECTIVE DATE: July 1, 2017, and applicable to information returns due for calendar years beginning on or after January 1, 2017.
Allows certain DRS tax warrants to provide for a continuous order to withhold intangible personal property for up to 180 days
Existing law allows DRS to issue a tax warrant on the intangible personal property (e.g., bank accounts, receivables, and securities) of a taxpayer who fails to pay state taxes and serve the warrant on a third person (e.g., bank or payment settlement entity) who possesses the property or is obligated to it in some respect.
The act allows such warrants to include an order to the third person to continually deliver the intangible property that is due and becomes due to the taxpayer during the 180 days immediately following the warrant's issuance date or until the tax is fully paid, whichever is earlier. The act specifies that such warrants have the same force and effect as executions issued under the existing post-judgment procedures law, as is the case with other DRS tax warrants.
EFFECTIVE DATE: July 1, 2017
§ 11 — PERIODIC CRIMINAL BACKGROUND CHECKS FOR CURRENT DRS EMPLOYEES
Requires current DRS employees to undergo periodic criminal background checks
The act requires current DRS employees, at least once every ten years, to undergo the same criminal background checks that existing law requires for prospective DRS employees. The checks include:
1. disclosing in writing any criminal convictions and pending charges and, if charges are pending, the court in which they are pending;
2. fingerprinting; and
3. submitting to state and national criminal records checks under Connecticut's uniform criminal records check procedure.
As with prospective employees, DRS must enforce these requirements consistent with the law prohibiting employers from requiring prospective employees to disclose information in certain erased criminal records (CGS § 31-51i).
EFFECTIVE DATE: Upon passage
§§ 12-14 — BED AND BREAKFAST OCCUPANCY TAX RATE
Imposes a uniform occupancy tax rate on rent charged at bed and breakfast establishments
The act applies a uniform 11% room occupancy tax to rent received by bed and breakfast establishments (B&Bs) and specifies that rent received by hotels, lodging houses, and B&Bs includes any meals that are included with the occupancy charge. Under the act, rent received by hotels and lodging houses continues to be subject to the current 15% room occupancy tax. Under prior DRS practice, B&B room occupancy charges that include lodging and meals at a fixed price were allocated according to a specified schedule such that the percentage allocated to meals is taxed at the general 6.35% sales tax rate and the percentage allocated to the room is taxed at the 15% occupancy tax rate (DRS Policy Statement 2003 (1)).
The act defines a B&B as a private operator-occupied house, other than a hotel or lodging house, with 12 or fewer rooms in which people are lodged for hire and a full morning meal is included in the rent. It also specifies that “lodging house” includes furnished residences in which people are lodged for hire, thus explicitly subjecting rent received for lodging in such residences to the room occupancy tax.
EFFECTIVE DATE: October 1, 2017, and applicable to sales occurring on or after that date.
§§ 15-18 — TAX PREPARERS AND FACILITATORS
Establishes a regulatory structure for tax preparers and facilitators
The act establishes a regulatory structure for most tax preparers and facilitators who are not otherwise regulated. It also prohibits a number of actions by anyone who provides tax preparation services, including those who are otherwise regulated.
Definitions
Under the act, “tax preparation services” means preparing or assisting in preparing another person's federal or state personal income tax return for a fee or other consideration. A person who provides tax preparation services is a “tax preparer.”
The act defines “facilitator” as a person who, individually or with another person, (1) solicits, processes, receives, or accepts an application or agreement for a refund anticipation loan or refund anticipation check; (2) serves or collects upon a refund anticipation loan or a refund anticipation check; or (3) facilitates the making of such loans or checks in any other manner. “Facilitator” does not include any employee who provides clerical or comparable support services to a facilitator.
The act defines “refund anticipation check” as a check, debit card, stored value card, or other payment mechanism that (1) represents federal or state income tax refund proceeds; (2) is issued by a bank or other person that received a direct deposit of the tax refund or tax credits; and (3) is paid for by a fee or other consideration.
Under the act, a “refund anticipation loan” is a loan secured by, or that a creditor arranges to be repaid directly or indirectly from, the proceeds of a federal or state personal income tax refund. It includes any sale, assignment, or purchase of a tax refund at a discount or for a fee, whether or not the amount is required to be repaid to the buyer or assignee if the IRS or DRS denies or reduces the amount of the tax refund.
Prohibited Conduct
The act prohibits anyone who provides tax preparation services or acts as a facilitator, including those who are exempt from the act's other provisions (see below), from doing the following:
1. imposing a fee or other consideration for making or facilitating a refund anticipation loan or refund anticipation check other than the originating creditor's or bank's fee;
2. engaging in unfair or deceptive acts in making or facilitating a refund anticipation loan or refund anticipation check, including making any statements contradicting the Taxpayer Bill of Rights under the Internal Revenue Code or the Connecticut Taxpayer's Bill of Rights (CGS § 12-39n);
3. directly or indirectly arranging for a third party, other than the originating bank or creditor, to impose any interest, fee, or charge related to a refund anticipation loan or refund anticipation check;
4. taking or arranging for a creditor to take a security interest in a taxpayer's property interest, other than the proceeds of a tax refund, to secure payment of a refund anticipation loan;
5. collecting an outstanding or delinquent refund anticipation loan for any creditor or assignee;
6. materially misrepresenting any fact in obtaining a tax preparer or facilitator permit (see below);
7. refusing or failing to return a taxpayer's documents within a reasonable period of time;
8. refusing or failing to provide a taxpayer, for his or her own records, with a copy of any document requiring his or her signature within a reasonable time after signing the document;
9. failing to maintain a copy of a prepared return for a period of four years from the later of the return's due date or completion date;
10. requiring or allowing a taxpayer to sign blank or incomplete tax forms;
11. requiring a taxpayer to designate the tax preparer or facilitator as the payee for a federal or state personal income tax refund; or
12. requiring a taxpayer to designate and use a specific bank, debit card, or stored value card provider for federal or state personal income tax refund purposes.
The act also prohibits anyone who provides tax preparation services or acts as a facilitator from including any of the following provisions in documents provided with respect to a refund anticipation loan or refund anticipation check, including in the loan application or agreement:
1. a hold harmless clause;
2. a confession of judgment clause;
3. an assignment of, or order for, payment of wages or other compensation for services;
4. a waiver of any provision of the federal Taxpayer Bill of Rights or the Connecticut Taxpayer's Bill of Rights; or
5. a waiver of the right to injunctive, declaratory, or other equitable relief or relief on a class-wide basis.
Under the act, tax preparers must sign returns they prepare and include their IRS-issued tax identification number.
Penalties. The act allows the DRS commissioner to impose a civil penalty of up to $500 per violation on any tax preparer or facilitator who violates the provisions described above. But he may waive the penalty if the violation is proven to be due to reasonable cause and was not intentional or due to neglect.
Permits
Beginning January 1, 2019, the act requires anyone who furnishes tax preparation services or acts as a facilitator, or advertises or solicits business as such, to hold a DRS-issued tax preparer permit or facilitator permit, respectively, unless the person is exempt (see below). For individuals who act as both a preparer and a facilitator, the commissioner must issue a single permit covering both activities.
Under the act, anyone seeking to obtain or renew a permit must apply to the DRS commissioner electronically in the form and manner the commissioner prescribes. Applicants must pay $100 for an initial permit and $50 when they renew their permit, which they must do every two years. The commissioner must notify an applicant in writing of his application decision within 60 days after he receives the application.
Under the act, if a permittee no longer provides tax preparation services or acts as a facilitator, he or she may apply to DRS for inactive permit status. Permittees with inactive permits may not provide tax preparation services or act as facilitators or advertise such services. Inactive permits do not need to be renewed, but can be reactivated with payment of a renewal fee.
The act requires DRS to maintain a public registry containing the names and principal business addresses of each permittee. Permittees are prohibited from advertising their permit as a DRS endorsement of their services.
Applicant Criteria. A permit applicant must (1) be age 18 or older; (2) hold a high school diploma; and (3) hold an IRS-issued preparer tax identification number, which must be used by the preparer or facilitator for each return, refund anticipation check, or refund anticipation loan he or she signs. The applicant must also provide evidence that proves, to the commissioner's satisfaction, that he or she has experience, education, or training in tax preparation services. Starting January 1, 2020, this evidence must include a certificate of completion of an IRS-administered annual filing season program.
The act also allows the DRS commissioner to issue permits to someone who proves he or she is an authorized tax preparer or facilitator in another state that has substantially similar professional requirements.
If any information a permittee provided to DRS becomes inaccurate, he or she must promptly provide updated information to the commissioner.
Permit Suspension, Revocation, or Denial. Beginning October 1, 2018, the act prohibits tax preparers or facilitators who are not exempt (see below) from doing any of the following:
1. engaging in a criminal act that is substantially related to their qualifications as a tax preparer or facilitator and that results in a conviction;
2. engaging in unprofessional conduct that is substantially related to their qualifications as a tax preparer or facilitator and that results in disciplinary action by the federal government, any state or jurisdiction of the United States, any other government agency, or a professional licensing board;
3. obtaining or attempting to obtain a tax preparer or facilitator permit by material misrepresentation or fraud; or
4. violating, attempting to violate, or assisting in the violation of the act's provisions regarding permits, activities by permittees, and disclosures.
If a tax preparer or facilitator does any of the above, the act allows the DRS commissioner to suspend, revoke, or deny the issuance of any permit. He may issue a written order notifying a preparer or facilitator that his or her permit is revoked or suspended for good cause. The notice must state that the permittee may request in writing a hearing, as long as he or she does so within 30 days after the order's date.
If the permittee requests a hearing, the act requires the DRS commissioner to convene one within 30 days after receiving the request, according to hearing procedures outlined in the Uniform Administrative Procedure Act. Within 60 days after receiving the request, the DRS commissioner must issue a final decision. Anyone aggrieved by the decision may appeal to the Superior Court.
Under the act, the commissioner may also discipline a tax preparer or facilitator by issuing a written warning or temporarily suspending his or her permit for up to one year.
Additionally, the act specifies that its provisions do not prevent the state from pursuing other available legal remedies against a tax preparer or facilitator.
Other Penalties. Beginning January 1, 2019, if the commissioner finds that a person acted as tax preparer or facilitator without a permit, he may impose a $100 civil penalty for each day the person did so. If a preparer, facilitator, or a person who employs tax preparers (i.e., a “commercial tax return preparation business”) employs a tax preparer or facilitator who does not hold the required permit, the commissioner may impose a civil penalty of $500 per violation.
Confidentiality
The act generally requires the DRS commissioner to keep confidential any personal financial information, including tax returns and return information, he gathers while investigating alleged violations of the act's provisions. However, he may disclose such information if it is (1) necessary to investigate or prosecute an alleged violation or (2) otherwise expressly permitted by state or federal law.
Disclosures
Under the act, a tax preparer who is not exempt (see below) must provide a written disclosure to anyone requesting tax preparation services prior to providing the services. The disclosure must include:
1. the tax preparer's name, principal business address, and primary business telephone number;
2. an estimate of the total charge for all requested tax preparation services; and
3. a warranty that the tax preparer will securely store and transmit a taxpayer's personal and tax record information by encryption or other means.
Exemptions
The following individuals are exempt from the act's provisions, except as noted above (see “Prohibited Conduct”):
1. accountants who hold an active license issued by the State Board of Accountancy or a valid, active license or similar credential issued by another jurisdiction;
2. attorneys and anyone who provides tax preparation services under the supervision of an attorney;
3. individuals enrolled to practice before the IRS (i.e., under Circular 230);
4. employees of a local, state, or federal government agency while engaged in their official duties;
5. employees of, or assistants to, tax preparers or anyone exempt from the act's provisions, in the course of their official duties;
6. employees who act as tax preparers exclusively for the business purposes of their employer;
7. anyone who acts as a fiduciary for an estate; and
8. IRS-qualified tax preparers, including those sponsored by the Tax Counseling for the Elderly program or the Volunteer Income Tax Assistance program.
EFFECTIVE DATE: October 1, 2018, except the provisions described under “Prohibited Conduct” are effective October 1, 2017.
§ 19 — DELINQUENT TAXPAYER LIST
Requires the DRS commissioner to prepare a delinquent corporation business taxpayer list only upon OPM's request
The act (1) requires the DRS commissioner to prepare a list of delinquent corporation business taxpayers only if the Office of Policy and Management (OPM) secretary requests it and (2) allows the commissioner to decide whether to include the taxpayers' identification numbers. Under prior law, the commissioner had to submit the list, arranged sequentially by taxpayer identification number, to the secretary by July 15 annually.
EFFECTIVE DATE: Upon passage
§§ 20, 22, 32, 35, 37 & 38 — TAX REGULATIONS
Eliminates provisions requiring or allowing the DRS commissioner to adopt regulations on various tax provisions
The act eliminates requirements that the DRS commissioner adopt regulations concerning:
1. the disclosure of tax returns or return information for administrative purposes (§ 20);
2. sales and use tax exemption permits for businesses purchasing goods in Connecticut for business use or consumption outside the state (§ 32); and
3. the place for paying income taxes and filing income tax returns, declarations, statements, or documents (§ 37).
It eliminates laws authorizing him to adopt regulations concerning informational income tax returns filed by certain payers, including standards for determining which returns must be filed on magnetic media or another machine-readable format (see § 38, below). And it allows, rather than requires, him to issue regulations concerning the (1) taxation of personal property used in rendering telecommunications services (§ 22) and (2) administration and enforcement of municipal admissions taxes on pari-mutuel or off-track betting facilities (§ 35).
EFFECTIVE DATE: Upon passage, except the provision on informational income tax returns is effective upon passage and applicable to tax years beginning on or after January 1, 2017.
Makes administrative and policy changes to DRS's data match program
Data Match Program Agreements
The act makes administrative and policy changes to DRS's “data match” program under which it and financial institutions exchange information about delinquent taxpayers. The act explicitly requires financial institutions to enter into agreements with DRS concerning program administration. But it also allows the commissioner to waive the requirement for any financial institution.
Information Exchange
The law requires the DRS commissioner to provide to each financial institution a list of people who owe taxes that are finally due and payable and for which all other administrative or judicial remedies have been exhausted or lapsed. The list must include each taxpayer's address, social security number, or other taxpayer identification number.
Under the act, this list must also include any information that is necessary or convenient to administer the program. The act also allows the commissioner's designee to provide this list.
By law, financial institutions must provide to DRS specified information on taxpayers who appear on the list. The act expands this information to include (1) taxpayer account numbers and balances (previously, institutions only needed to state whether an account balance exceeds $1,000) and (2) any other information the commissioner requires to administer the program.
The law protects the institutions from liability for disclosing information to the commissioner. The act extends this protection to disclosures to the commissioner's designee.
Institutions' Disclosure to Other Parties
The act allows the financial institutions to disclose the information they receive through the program to certain service providers and government regulators, but it prohibits these parties from disclosing this information to other parties. To comply with the data match program's requirements, an institution may disclose the information to a service provider it retains to perform data processing and data receipt and transmission functions. It may also disclose the information to a government regulator that needs it to fulfill its regulatory duties.
EFFECTIVE DATE: Upon passage
§ 23 — CAPTIVE REAL ESTATE INVESTMENT TRUSTS
Modifies the definition of a REIT for corporation business tax purposes
By law, “captive REITs” (real estate investment trusts) are not entitled to a deduction for dividends paid in calculating their net income for Connecticut corporation tax purposes. A captive REIT is generally one that, among other things, has more than 50% of its voting power, beneficial interests, or shares directly or constructively owned or controlled by a single-entity corporation. For purposes of determining whether a REIT is a captive REIT, the act excludes any voting power, beneficial interests, or shares in a REIT held by a life insurance company in a segregated asset account.
EFFECTIVE DATE: Upon passage
§§ 24 & 25 — CORPORATION TAX FILING DEADLINES
Extends the deadlines for filing corporation business tax returns
The act extends the deadline for filing corporation business tax returns, which varies depending on whether a corporation must file a corresponding federal return, and makes a conforming change.
For those corporations that must file a federal return, the act extends the filing deadline to the 15th day, rather than the first day, of the month following the month in which their federal return for the income year is due. For corporations that do not have to file a federal return, the act extends the deadline from the 1st day of the fourth month succeeding the end of the income year to the 15th day of the fifth month of that income year.
EFFECTIVE DATE: Upon passage and applicable to income years beginning on or after January 1, 2017.
§ 26 — DRY CLEANING DROP STORES
Exempts dry cleaning “drop stores” from the dry cleaning surcharge
The act exempts from the 1% dry cleaning surcharge businesses that accept clothing or other fabrics to be dry cleaned by another establishment (i.e., “drop stores”).
EFFECTIVE DATE: October 1, 2017, and applicable to calendar quarters beginning on or after that date.
Aligns the determination of utility companies' gross earnings with the way income is classified in PURA's uniform system of accounts
The act makes a number of minor and technical changes to generally align the determination of utility companies' gross earnings (i.e., taxable income) with the way income is classified in the Public Utilities Regulatory Authority's (PURA) uniform system of accounts, except with respect to electric transmission services income. Under prior law, income was classified as electric transmission services income according to the uniform system of accounts. Under the act, the DRS commissioner, in consultation with PURA, must determine which income is classified as such.
EFFECTIVE DATE: October 1, 2017
§§ 28 & 30 — SUCCESSOR LIABILITY FOR CIGARETTE AND TOBACCO PRODUCTS TAXES
Makes people and entities who buy certain cigarette or tobacco products businesses or product stock liable for back taxes
The act makes anyone who buys a cigarette dealer's business or stock of cigarettes liable for unpaid cigarette taxes under the same provisions that already apply to buyers of a cigarette distributor's business or product stock. In general, those provisions require the buyer to withhold enough money from the purchase price to pay the unpaid taxes until the seller provides either a DRS (1) receipt showing that all the outstanding taxes have been paid or (2) certificate stating that no taxes are owed. The buyer is personally liable for the tax if the buyer fails to withhold the appropriate amount from the purchase price. The liability equals the amount of the unpaid tax, up to the purchase price of the business or stock.
The act also establishes parallel requirements, with regard to unpaid tobacco products taxes, for purchasers of a tobacco products distributor's or unclassified importer's business or products stock. (“Tobacco products” include most forms of tobacco prepared for chewing or smoking. It does not include cigarettes or liquid nicotine containers used in e-cigarettes.)
EFFECTIVE DATE: July 1, 2017
§ 29 — CIGARETTE TAX EXEMPTION FOR SALES TO U.S. VETERANS' HOSPITALS AND ARMED FORCES MEMBERS
Exempts certain cigarette sales from the cigarette tax as required by federal law
To conform with federal law, the act exempts from the cigarette tax cigarettes that are sold to U.S. veterans' hospitals and members of the U.S. Armed Forces, if they are sold on a military base by an agency permitted by federal regulation to operate there.
EFFECTIVE DATE: Upon passage
§ 31 — TOBACCO PRODUCTS TAX RECORDS
Tightens requirements for maintaining tobacco products tax records and establishes a civil penalty for any distributor or importer who fails to immediately produce or provide electronic access to records
The act requires tobacco products distributors and importers to maintain tobacco products tax records on the premises where the products are possessed, stored, or sold and make them available at all times for the DRS commissioner and his authorized agents to inspect. Prior law required these distributors and importers to keep such records safely preserved to ensure their permanency and accessibility for inspection. By law, unchanged by the act, they must keep the records for three years in a form prescribed by the DRS commissioner.
The act establishes a civil penalty of $1,000 per day for any distributor or importer who fails to immediately produce or provide electronic access to the records on the commissioner's or agent's request. It authorizes the commissioner to waive all or any part of the penalties if he is satisfied that the failure to provide the records was due to reasonable cause.
EFFECTIVE DATE: October 1, 2017
§§ 33 & 34 — TRANSFERS OF THE USE TAX TO DEDICATED ACCOUNTS AND FUNDS
Extends to the use tax the required revenue diversion for certain dedicated accounts, according to the same amounts and schedules specified under existing law for the sales tax
The act extends, to the 6.35% use tax, the requirement that the DRS commissioner direct a portion of the tax revenue to the Municipal Revenue Sharing Account (MRSA) and Special Transportation Fund (STF), using the same amounts and schedules specified under existing law for the sales tax as indicated in Table 1. In practice, DRS does not segregate sales tax revenue from use tax revenue.
Table 1: Sales and Use Tax Diversion to MRSA and STF under the Act
MRSA |
STF | ||
Applicable Months |
% Diverted |
Applicable Months |
% Diverted |
May and June 2016 |
4.7% |
December 2015 through September 2016* |
4.7% |
July 2017 and thereafter |
7.9% |
October 2016 through June 2017 |
6.3%* |
July 2017 and thereafter |
7.9% | ||
*For FY 17, the DRS commissioner must reduce each monthly deposit into the STF by $4,166,667 (i.e., $50 million in the aggregate).
The act similarly extends to the use tax the requirement that the DRS commissioner, for FY 17, cease directing portions of the use tax to the Regional Planning Incentive Account (RPIA), thus redirecting these amounts to the General Fund. As is the case with the sales tax diversion under existing law, the act requires the commissioner to resume the RPIA deposits (6.7% of the revenue generated by the hotel tax and 10.7% of the revenue generated by the rental car tax) for calendar quarters ending on or after July 1, 2017.
EFFECTIVE DATE: Upon passage
§ 36 — SOURCING OF INCOME FROM REAL PROPERTY FOR INCOME TAX PURPOSES
Clarifies ownership requirements for the sourcing of income from certain real property
By law, nonresidents must pay Connecticut income tax on gains or losses from the sale or disposition of an interest in an entity (i.e., partnership, limited liability company, or S corporation) that owns certain real property in Connecticut. The act specifies that the entity may own this property directly or indirectly. As under existing law, the gains or losses are considered taxable in Connecticut if such real property is valued at 50% or more of the fair market value of the entity's total assets in the preceding two years.
EFFECTIVE DATE: Upon passage
§ 38 — DEADLINES FOR FILING CERTAIN INFORMATIONAL RETURNS
Sets an earlier date by which certain employers and payers must file informational returns with DRS for personal income tax purposes
The act changes the date by which certain employers and payers must annually file informational returns with DRS for personal income tax purposes, moving it from the last day of February to January 31, thus aligning it to the deadline for employers filing income tax withholding data (i.e., federal W-2 forms) with DRS. By law, the filing requirement applies to individuals and entities (e.g., employers, mortgagors, and fiduciaries) making or crediting payments of $600 or more ($10 or more for interest or dividend payments) to anyone who may be subject to Connecticut personal income tax.
EFFECTIVE DATE: Upon passage, and applicable to tax years beginning on or after January 1, 2017.
§ 39 — PENALTY WAIVER REQUESTS
Imposes a deadline for taxpayer submission of DRS penalty waiver requests
This act implicitly imposes a one-year deadline for requesting a penalty waiver from the DRS commissioner. For those situations in which the law allows him to waive a penalty, the act prohibits the commissioner from considering any waiver request he receives more than one year after he notified the taxpayer about the penalty. If the taxpayer reported the penalty on a tax return, the one-year period begins on the return's filing date. The one-year timeframe for the commissioner to consider waiver requests does not extend the deadlines for protesting or appealing a commissioner's decision.
EFFECTIVE DATE: July 1, 2017, and applicable to waiver requests received on or after that date.
§ 40 — ENFORCING THE GROSS EARNINGS TAX THAT FUNDS PEGPETIA
Extends the penalty for willfully failing to pay the tax that funds the “public, educational, and governmental programming and education technology investment account”
The law imposes a 0.25% tax on the gross earnings of cable-TV, satellite-TV, and certified video service providers to fund the “public, educational, and governmental programming and education technology investment account” (PEGPETIA). The act makes these taxpayers subject to the following penalties, which also apply to other types of state taxes under existing law:
1. for willfully failing to pay the tax, file returns, keep required records, or supply required information regarding the tax, a fine of up to $1,000, imprisonment for up to one year, or both, in addition to any other penalties the law imposes or
2. for willfully delivering or disclosing to the commissioner or his authorized agent any list, return, account, statement, or other document known to be fraudulent or false, a class D felony (see Table on Penalties).
The act authorizes the DRS commissioner to collect the tax using administrative procedures the law provides for other taxes, including examining records, taking testimony under oath, issuing subpoenas, imposing penalties, and conducting hearings.
EFFECTIVE DATE: Upon passage
Extends the definition of racketeering activity under the Corrupt Organizations and Racketeering Act (CORA) to include violations of certain tobacco product-related crimes
The act expands the definition of “racketeering activity” under CORA to include violations of certain tobacco product-related crimes. In doing so, it subjects a person or entity that engages in a pattern of these violations to prosecution under CORA. Specifically, the act expands the definition to include the following activities:
1. transporting for sale, selling, or offering for sale untaxed tobacco products that should be taxed at $2,500 or more;
2. willfully attempting to evade tobacco products taxes or failing to pay tobacco product taxes of $2,500 or more; and
3. willfully delivering or disclosing to the commissioner or his authorized agent any list, report, account, statement, or other document known to be materially fraudulent or false.
CORA subjects violators to (1) one to 20 years in prison, a fine of up to $25,000, or both; (2) forfeiture of property acquired, maintained, or used in violation of CORA, including profits, appreciated value, and sale proceeds; and (3) forfeiture of any interest in, security of, claim against, or property or contractual right of any kind affording a source of influence over any enterprise the violator established, operated, controlled, conducted, or participated in to violate CORA. Violators are also subject to the fines and penalties associated with the underlying crimes.
EFFECTIVE DATE: July 1, 2017
§§ 42 & 43 — MENTAL HEALTH COMMUNITY INVESTMENT ACCOUNT
Allows income tax return contributions for mental health programs and services
The act establishes a mechanism for collecting income tax return contributions to improve mental health programs and services designed to support people diagnosed with mental health conditions. Eligible recipient programs and services include residential services, job training and placement services, educational programs, and support groups.
The mechanism generates funds for these programs and services by allowing taxpayers to contribute a portion of their income tax refund to a separate, non-lapsing General Fund account established exclusively for this purpose (i.e., “Mental Health Community Investment Account”). The mental health and addiction services commissioner must use funds from the account, in consultation with nonprofit mental health organizations, for eligible programs and services.
The DRS commissioner must modify the tax return forms to allow taxpayers to contribute a portion of their refund to the account if they wish to do so.
EFFECTIVE DATE: July 1, 2017
§§ 44 & 45 — SECURITY REQUIREMENT FOR SALES AND USE AND ADMISSIONS AND DUES TAXES
Establishes conditions under which the DRS commissioner may impose the existing security requirement for the (1) sales and use tax and (2) admissions and dues tax
Prior law authorized the DRS commissioner to impose a security requirement, as he deemed necessary, to ensure taxpayer compliance with sales and use tax and admissions and dues tax requirements. The act establishes specific conditions under which the DRS commissioner may impose security requirements for these taxes. Under the act, the commissioner may require a taxpayer to deposit security if he or she (1) owes sales and use or admissions and dues taxes that have been finally due and payable for at least 90 days and for which any administrative or judicial remedies (or both) have been exhausted or have lapsed or (2) has failed to file at least three required tax returns. As under existing law, the security amount is capped at six times the taxpayer's estimated tax liability.
The act eliminates obsolete provisions concerning state- or federally-issued bearer bonds. Neither the state nor federal government currently issues such bonds.
EFFECTIVE DATE: Upon passage
§ 46 — PENALTY FOR FAILING TO COMPLY WITH CERTAIN SALES AND USE TAX REQUIREMENTS
Authorizes the DRS commissioner to impose a civil penalty of $500 per violation for failing to comply with certain sales and use tax requirements
The law authorizes DRS to (1) examine the books and records of any person selling services or tangible personal property and any person liable for use tax, (2) investigate businesses to verify or determine how much sales and use tax they owe, and (3) require the filing of information reports on taxable goods and services relating to use tax liability. Under the act, if the DRS commissioner provides written notice to a person that specifies a deadline for complying with any of these examinations, investigations, or filings, and the person fails to meet the deadline for doing so, then the commissioner may impose a civil penalty of $500 per violation. Each distinct violation, and each day that it continues, is a separate offense. The act allows DRS to collect the penalty in the same manner as it collects delinquent taxes.
EFFECTIVE DATE: July 1, 2017
§§ 47 & 48 — MUNICIPAL REFUNDING BOND MATURITY
Temporarily allows municipalities, by a two-thirds vote of their legislative bodies, to issue refunding bonds with a term of up to 30 years
Existing law allows municipalities to issue refunding bonds to pay off all or part of their bonds, notes, or other debt obligations and requires that the refunding bonds mature by the maturity date of the bonds, notes, or obligations which they are used to pay off. The law limits municipal bond terms to 20 years unless the general statutes or a special act expressly allows another term.
The act waives these limitations on refunding bond maturities by allowing municipalities, from July 1, 2017 to July 1, 2022, to issue refunding bonds with a term of up to 30 years if their respective legislative bodies adopt a resolution to do so by a two-thirds vote. Under the act, the resolution approving the bonds may include a provision securing the refunding bonds by a statutory lien on all of the municipality's tax revenues. The revenues are immediately subject to the lien without any further action or authorization by the municipality. The lien is valid and binding against the municipality; its successors, transferees, and creditors; and all other parties asserting rights to such revenues, regardless of whether they received specific notice of the lien, and without physical delivery, recording, or filing of the lien or any further action.
EFFECTIVE DATE: July 1, 2017
§§ 49 & 50 — MUNICIPAL DEFICIT FINANCING
Excludes refunding bonds and tax anticipation notes from the municipal deficit financing law
Existing law establishes conditions under which municipalities meeting certain criteria may issue bonds to cover a deficit or projected deficit. For purposes of these bonds, the act excludes the impact of any refunding bonds (described in §§ 48 & 49, above) in calculating a municipality's deficit or projected fiscal year deficit for any fiscal year ending on or after July 7, 2017 and by June 30, 2022.
The act excludes tax anticipation notes from the types of debt obligations included under the municipal deficit financing law. It also excludes from the calculation of a municipality's projected fiscal year deficit (1) estimated revenues from the proceeds of tax anticipation notes and (2) estimated expenditures from the principal payment of such notes. The same exclusions apply under existing law in calculating a municipality's deficit.
The act also makes technical changes.
EFFECTIVE DATE: Upon passage