Connecticut Seal

General Assembly

File No. 624

    February Session, 2018

Substitute Senate Bill No. 11

Senate, April 23, 2018

The Committee on Finance, Revenue and Bonding reported through SEN. FONFARA of the 1st Dist. and SEN. FRANTZ, L. of the 36th Dist., Chairpersons of the Committee on the part of the Senate, that the substitute bill ought to pass.

AN ACT CONCERNING CONNECTICUT'S RESPONSE TO FEDERAL TAX REFORM.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2018) (a) As used in this section and section 2 of this act:

(1) "Partnership" has the same meaning as provided in Section 7701(a)(2) of the Internal Revenue Code, as defined in section 12-213 of the general statutes, and regulations adopted thereunder. "Partnership" includes a limited liability company that is treated as a partnership for federal income tax purposes;

(2) "S corporation" means a corporation that is treated as an S corporation for federal income tax purposes;

(3) "Affected business entity" means a partnership or S corporation, but does not include a publicly-traded partnership, as defined in Section 7704(b) of the Internal Revenue Code, that has agreed to file an annual return pursuant to section 12-726 of the general statutes reporting the name, address, Social Security number or federal employer identification number and such other information required by the Commissioner of Revenue Services of each unitholder whose distributive share of partnership income derived from or connected with sources within this state was more than five hundred dollars;

(4) "Member" means (A) a shareholder of an S corporation, (B) a partner in (i) a general partnership, (ii) a limited partnership, or (iii) a limited liability partnership, or (C) a member of a limited liability company that is treated as a partnership for federal income tax purposes; and

(5) "Taxable year" means the taxable year of an affected business entity for federal income tax purposes.

(b) Each affected business entity that is required to file a return under the provisions of section 12-726 of the general statutes, as amended by this act, shall, on or before the fifteenth day of the third month following the close of each taxable year, pay to the commissioner a tax as determined under this section.

(c) The tax due under subsection (b) of this section shall equal (1) (A) the separately and nonseparately computed items, as described in Section 702(a) of the Internal Revenue Code, of the affected business entity, to the extent derived from or connected with sources within this state, as determined under the provisions of chapter 229 of the general statutes, (B) as increased or decreased by any modification described in section 12-701 of the general statutes, as amended by this act, that relates to an item of the affected business entity's income, gain, loss or deduction, to the extent derived from or connected with sources within this state, as determined under the provisions of chapter 229 of the general statutes, (2) multiplied by six and ninety-nine-hundredths per cent. If the amount calculated under subdivision (1) of this subsection results in a net loss, such net loss may be carried forward to succeeding taxable years until fully used.

(d) If an affected business entity, the lower-tier entity, is a member of another affected business entity, the upper-tier entity, the lower-tier entity shall, when calculating the amount under subdivision (1) of subsection (c) of this section, subtract its distributive share of income or add its distributive share of loss from the upper-tier entity to the extent that the income or loss was derived from or connected with sources within this state.

(e) (1) A nonresident individual who is a member of an affected business entity shall not be required to file an income tax return under the provisions of chapter 229 of the general statutes for a taxable year if, for such taxable year, the only source of income derived from or connected with sources within this state for such member, or the member and the member's spouse if a joint federal income tax return is or shall be filed, is from one or more affected business entities and such affected business entity or entities file and pay the tax due under this section.

(2) The provisions of subdivision (1) of this subsection shall not apply to a nonresident individual who is a member of an affected business entity that elects to file its return on a combined basis under subsection (j) of this section if such nonresident individual member's tax under chapter 229 of the general statutes would not be fully satisfied by the credit allowed to such individual under subparagraph (A) of subdivision (1) of subsection (g) of this section.

(f) Each affected business entity shall report to each of its members, for each taxable year, such member's direct pro rata share of the tax imposed under this section on such affected business entity and indirect pro rata share of the tax imposed on any upper-tier entity of which such affected business entity is a member.

(g) (1) (A) Each person that is subject to the tax imposed under chapter 229 of the general statutes and is a member of an affected business entity shall be entitled to a credit against the tax imposed under said chapter, other than the tax imposed under section 12-707 of the general statutes. Such credit shall be in an amount equal to such person's direct and indirect pro rata share of the tax paid under this section by any affected business entity of which such person is a member multiplied by ninety-three and one-hundredths per cent. If the amount of the credit allowed pursuant to this subdivision exceeds such person's tax liability for the tax imposed under said chapter, the commissioner shall treat such excess as an overpayment and, except as provided in section 12-739 or 12-742 of the general statutes, shall refund the amount of such excess, without interest, to such person.

(B) Each person that is subject to the tax imposed under chapter 229 of the general statutes and is a member of an affected business entity shall also be entitled to a credit against the tax imposed under said chapter, other than the tax imposed under section 12-707 of the general statutes, for such person's direct and indirect pro rata share of taxes paid to another state of the United States or the District of Columbia, on income of any affected business entity of which such person is a member that is derived therefrom, provided the taxes paid to another state of the United States or the District of Columbia results from a tax that the commissioner determines is substantially similar to the tax imposed under this section. Any such credit shall be calculated in the manner prescribed by the commissioner, which shall be consistent with the provisions of section 12-704 of the general statutes.

(2) Each company that is subject to the tax imposed under chapter 208 of the general statutes and is a member of an affected business entity shall be entitled to a credit against the tax imposed under said chapter. Such credit shall be in an amount equal to such company's direct and indirect pro rata share of the tax paid under this section by any affected business entity of which such company is a member multiplied by ninety-three and one-hundredths per cent. Such credit shall be applied after all other credits are applied and shall not be subject to the limits imposed under section 12-217zz of the general statutes. Any credit that is not used in the income year during which the affected business entity incurs the tax under this section shall be carried forward to each of the succeeding income years by the company until such credit is fully taken against the tax under chapter 208 of the general statutes.

(h) Upon the failure of any affected business entity to pay the tax due under this section within thirty days of the due date, the provisions of section 12-35 of the general statutes shall apply with respect to the enforcement of this section and the collection of such tax. The warrant therein provided for shall be signed by the commissioner or an authorized agent of the commissioner. The amount of any such tax, penalty and interest shall be a lien, from the last day of the last month of the taxable year next preceding the due date of such tax until discharged by payment, against all real estate of the taxpayer within the state, and a certificate of such lien signed by the commissioner may be recorded in the office of the clerk of any town in which such real estate is situated, provided no such lien shall be effective as against any bona fide purchaser or qualified encumbrancer of any interest in any such property. When any tax with respect to which a lien has been recorded under the provisions of this section has been satisfied, the commissioner, upon request of any interested party, shall issue a certificate discharging such lien, which certificate shall be recorded in the same office in which the lien was recorded. Any action for the foreclosure of such lien shall be brought by the Attorney General in the name of the state in the superior court for the judicial district in which the property subject to such lien is situated, or, if such property is located in two or more judicial districts, in the superior court for any one such judicial district, and the court may limit the time for redemption or order the sale of such property or make such other or further decree as it judges equitable.

(i) If any tax is not paid when due as provided in this section, there shall be added to the amount of the tax interest at the rate of one per cent per month or fraction thereof from the date the tax became due until it is paid.

(j) (1) Any affected business entity subject to tax under this section may elect to file a combined return together with one or more other commonly-owned affected business entities subject to tax under this section. Each affected business entity making such election shall submit written notice of such election to file a combined return, including the written consent of the other commonly-owned affected business entities to such election, to the commissioner not later than the due date, or if an extension of time to file has been requested and granted, the extended due date, of the returns due from such entities. An affected business entity shall submit such written notice and consent for each taxable year such entity makes the election under this subdivision. Each affected business entity electing to file a combined return under this subdivision shall be jointly and severally liable for the tax due under this section. For the purposes of this subdivision, "commonly-owned" means that more than eighty per cent of the voting control of an affected business entity is directly or indirectly owned by a common owner or owners, either corporate or noncorporate. Whether voting control is indirectly owned shall be determined in accordance with Section 318 of the Internal Revenue Code.

(2) Except as provided in subdivision (5) of this subsection, affected business entities that elect to file a combined return under subdivision (1) of this subsection shall net the amounts each such entity calculates under subdivision (1) of subsection (c) of this section after such amounts are separately apportioned or allocated by each affected business entity in accordance with this section.

(3) Affected business entities that elect to file a combined return under subdivision (1) of this subsection shall report to the commissioner the portion of the direct and indirect pro rata share of the tax paid with the combined return that is allocated to each of their members. Such report shall be filed with the combined return and the allocation reported shall be irrevocable.

(4) The election made under this subsection shall not affect the calculation of tax due under any other provision of the general statutes other than with respect to the calculation of the credits under subsection (g) of this section.

(5) Affected business entities that elect to file a combined return under subdivision (1) of this subsection shall calculate their tax due in accordance with subsection (c) of this section unless each such entity elects under subsection (k) of this section to calculate its tax due on the alternative basis under subsection (l) of this section. If such election is made, the affected business entities shall net their alternative tax bases instead of netting the amounts under subdivision (2) of this subsection.

(k) In lieu of calculating the tax due in accordance with subsection (c) of this section, any affected business entity may elect to calculate the tax due on the alternative basis under subsection (l) of this section. An affected business entity making such election shall submit to the commissioner written notice of such election not later than the due date, or if an extension of time to file has been requested and granted, the extended due date, of the return due from such entity. An affected business entity shall submit such written notice for each taxable year such entity makes the election under this subsection. The election made under this subsection shall not affect the calculation of tax due under any other provision of the general statutes other than with respect to the calculation of the credits under subsection (g) of this section.

(l) (1) The tax due from an affected business entity making the election under subsection (k) of this section shall be equal to six and ninety-nine-hundredths per cent multiplied by the alternative tax base. The alternative tax base shall be equal to the resident portion of unsourced income plus modified Connecticut source income.

(2) For the purposes of this subsection:

(A) "Resident portion of unsourced income" means unsourced income multiplied by a percentage equal to the sum of the ownership interests in the affected business entity owned by members who are residents of this state, as defined in section 12-701 of the general statutes, as amended by this act;

(B) "Unsourced income" means the separately and nonseparately computed items, as described in Section 702(a) of the Internal Revenue Code, of the affected business entity, regardless of the location from which such item is derived or connected, as increased or decreased by any modification described in section 12-701 of the general statutes, as amended by this act, that relates to an item of the affected business entity's income, gain, loss or deduction, regardless of the location from which such item is derived or connected, less (i) the amount determined under subdivision (1) of subsection (c) of this section, determined without regard to subsection (d) of this section, and (ii) the separately and nonseparately computed items, as described in Section 702(a) of the Internal Revenue Code, of the affected business entity, to the extent derived from or connected with sources within another state that has jurisdiction to subject the affected business entity to tax, as determined under the provisions of chapter 229 of the general statutes, as increased or decreased by any modification described in section 12-701 of the general statutes, as amended by this act, to the extent derived from or connected with sources within another state that has jurisdiction to subject the affected business entity to tax, as determined under the provisions of chapter 229 of the general statutes; and

(C) "Modified Connecticut source income" means the amount calculated under subdivision (1) of subsection (c) of this section multiplied by a percentage equal to the sum of the ownership interests in the affected business entity owned by members that are (i) subject to tax under chapter 229 of the general statutes, or (ii) affected business entities to the extent such entities are directly or indirectly owned by persons subject to tax under chapter 229 of the general statutes. A member that is an affected business entity shall be presumed to be directly or indirectly owned by persons subject to tax under chapter 229 of the general statutes unless the affected business entity subject to tax under this section can establish otherwise by clear and convincing evidence satisfactory to the commissioner.

(m) The provisions of sections 12-723, 12-725 and 12-728 to 12-737, inclusive, of the general statutes shall apply to the provisions of this section in the same manner and with the same force and effect as if the language of said sections had been incorporated in full into this section and had expressly referred to the tax under this section, except to the extent that any such provision is inconsistent with a provision of this section.

Sec. 2. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2018) (a) As used in this section, "required annual payment" means the lesser of (1) ninety per cent of the tax under section 1 of this act that is reported on the return filed for the taxable year or, if no return is filed, ninety per cent of the tax due under section 1 of this act, or (2) if the preceding taxable year was a taxable year of twelve months and the affected business entity filed a return for such taxable year, one hundred per cent of the tax under section 1 of this act that is reported on such return.

(b) (1) Each affected business entity required to pay the tax imposed under section 1 of this act shall make the required annual payment each taxable year, in four required estimated tax installments on the following due dates: (A) For the first required installment, the fifteenth day of the fourth month of the taxable year; (B) for the second required installment, the fifteenth day of the sixth month of the taxable year; (C) for the third required installment, the fifteenth day of the ninth month of the taxable year, and (D) for the fourth required installment, the fifteenth day of the first month of the next succeeding taxable year. An affected business entity may elect to pay any required installment prior to the specified due date. Except as provided in subdivision (2) of this subsection, the amount of each required installment shall be twenty-five per cent of the required annual payment.

(2) (A) For any required installment, if the affected business entity establishes that its annualized income installment calculated pursuant to subparagraph (B) of this subdivision is less than the amount determined under subsection (a) of this section, the amount of such required installment shall be the annualized income installment. Any reduction in a required installment resulting pursuant to this subdivision shall be recaptured by increasing the amount of the next required installment by the amount of such reduction and by increasing subsequent required installments to the extent such reduction has not previously been recaptured under this subdivision.

(B) The annualized income installment is the amount by which (i) the amount equal to the applicable percentage, as set forth in subparagraph (C) of this subdivision, multiplied by the tax imposed under section 1 of this act for the taxable year that would be due if income subject to tax under said section for the months in the taxable year ending before the due date of the installment was annualized, (ii) exceeds the aggregate amount of any prior required installments for the taxable year.

(C) For the purposes of subparagraph (B) of this subdivision, the applicable percentages shall be as follows: (i) For the first required installment, twenty-two and one-half per cent; (ii) for the second required installment, forty-five per cent; (iii) for the third required installment, sixty-seven and one-half per cent; and (iv) for the fourth required installment, ninety per cent.

(c) (1) Except as otherwise provided in this section, in the case of any underpayment of estimated tax by an affected business entity, there shall be added to the tax imposed under section 1 of this act an amount determined by applying interest (A) at the rate of one per cent per month or fraction thereof, (B) to the amount of the underpayment, (C) for the period of the underpayment.

(2) For the purposes of subdivision (1) of this subsection, (A) the amount of the underpayment is the amount by which the required installment exceeds the amount, if any, of the installment paid on or before the due date of the installment, and (B) the period of the underpayment runs from the due date of the installment to whichever date is earlier: (i) The fifteenth day of the third month of the next succeeding taxable year, or (ii) with respect to any portion of the underpayment, the date on which such portion is paid. Any payment of estimated tax under this section shall be credited against unpaid or underpaid required installments in the order in which such installments are required to be paid.

(d) Payment of the estimated tax under this section or any required installment thereof shall be considered payment on account of the tax imposed under section 1 of this act for the taxable year.

(e) For taxable years of less than twelve months, the provisions of this section shall apply in a manner consistent with the regulations adopted under chapter 229 of the general statutes pertaining to such taxable years.

Sec. 3. Subdivision (1) of subsection (b) of section 12-719 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(b) (1) (A) The provisions of this subsection shall not apply to taxable years commencing on or after January 1, 2018.

(B) With respect to each of its nonresident partners, each partnership doing business in this state or having income derived from or connected with sources within this state shall, for each taxable year, make payment to the commissioner as provided in subdivision (2) of this subsection.

Sec. 4. Subdivision (1) of subsection (c) of section 12-719 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(c) (1) (A) The provisions of this subsection shall not apply to taxable years commencing on or after January 1, 2018.

(B) With respect to each of its nonresident shareholders, each S corporation doing business in this state or having income derived from or connected with sources within this state shall, for each taxable year, make payment to the commissioner as provided in subdivision (2) of this subsection.

Sec. 5. Section 12-726 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage and applicable to taxable years commencing on or after January 1, 2018):

(a) Each partnership doing business in this state or having any income derived from or connected with sources within this state, determined in accordance with the provisions of this chapter, shall make a return for the taxable year setting forth all items of income, gain, loss and deduction, and the name, address and Social Security or federal employer identification number of each partner, whether or not a resident of this state, the amount of each partner's distributive share of (1) such partnership's separately and nonseparately computed items, as described in Section 702(a) of the Internal Revenue Code, (2) any modification described in section 12-701, as amended by this act, which relates to an item of such partnership's income, gain, loss or deduction, (3) such partnership's separately and nonseparately computed items, as described in Section 702(a) of the Internal Revenue Code, to the extent derived from or connected with sources within this state, as determined under this chapter, [and] (4) any modification described in section 12-701, as amended by this act, which relates to an item of such partnership's income, gain, loss or deduction, to the extent derived from or connected with sources within this state, as determined under this chapter, and (5) the direct pro rata share of the tax imposed on the partnership under section 1 of this act and the indirect pro rata share of the tax imposed on any upper-tier entity under section 1 of this act, and such other pertinent information as the Commissioner of Revenue Services may prescribe by regulations and instructions. Such return shall be filed on or before the fifteenth day of the [fourth] third month following the close of each taxable year. The partnership shall, on or before the day on which such return is filed, furnish to each person who was a partner during the taxable year a copy of such information as shown on the return. By way of example and not of limitation, and for purposes of this section, [and section 12-719,] a partnership that has a substantial economic presence within this state, as evidenced by a purposeful direction of business toward this state, examined in light of the frequency, quantity and systematic nature of the partnership's economic contacts with this state, without regard to physical presence, shall, to the extent permitted by the Constitution of the United States, be considered to be doing business in this state.

(b) Each S corporation doing business in this state or having any income derived from or connected with sources within this state, determined in accordance with the provisions of this chapter, shall make a return for the taxable year setting forth all items of income, gain, loss and deduction, and the name, address and Social Security or federal employer identification number of each shareholder, whether or not a resident of this state, the amount of each shareholder's pro rata share of (1) such S corporation's separately and nonseparately computed items, as described in Section 1366 of the Internal Revenue Code, (2) any modification described in section 12-701, as amended by this act, which relates to an item of such S corporation's income, gain, loss or deduction, (3) such S corporation's separately and nonseparately computed items, as described in Section 1366 of the Internal Revenue Code, to the extent derived from or connected with sources within this state, as determined under this chapter, [and] (4) any modification described in section 12-701, as amended by this act, which relates to an item of such S corporation's income, gain, loss or deduction, to the extent derived from or connected with sources within this state, as determined under this chapter, and (5) the direct pro rata share of the tax imposed on the S corporation under section 1 of this act and the indirect pro rata share of the tax imposed on any upper-tier entity under section 1 of this act, and such other pertinent information as the Commissioner of Revenue Services may prescribe by regulations and instructions. Such return shall be filed on or before the fifteenth day of the [fourth] third month following the close of each taxable year. The S corporation shall, on or before the day on which such return is filed, furnish to each person who was a shareholder during the taxable year a copy of such information as shown on the return. By way of example and not of limitation, and for purposes of this section, [and section 12-719,] an S corporation that has a substantial economic presence within this state, as evidenced by a purposeful direction of business toward this state, examined in light of the frequency, quantity and systematic nature of the S corporation's economic contacts with this state, without regard to physical presence, shall, to the extent permitted by the Constitution of the United States, be considered to be doing business in this state.

Sec. 6. Subsection (b) of section 12-733 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage and applicable to taxable years commencing on or after January 1, 2018):

(b) (1) If the taxpayer omits from Connecticut adjusted gross income, in the case of an individual, or from Connecticut taxable income, in the case of a trust or estate, an amount properly includable therein which is in excess of twenty-five per cent of the amount of Connecticut adjusted gross income or Connecticut taxable income, as the case may be, stated in the return, a notice of a proposed deficiency assessment may be mailed to the taxpayer not later than six years after the date on which the return is filed. For purposes of this subdivision, there shall not be taken into account any amount which is omitted in the return if such amount is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the Commissioner of Revenue Services of the nature and the amount of such item.

(2) If the taxpayer omits from the Connecticut adjusted gross income derived from or connected with sources within this state, in the case of a nonresident individual or part-year resident individual, or from Connecticut taxable income derived from or connected with sources within this state, in the case of a nonresident trust or estate of part-year resident trust, an amount properly includable therein which is in excess of twenty-five per cent of the amount of Connecticut adjusted gross income derived from or connected with sources within this state or Connecticut taxable income derived from or connected with sources within this state, as the case may be, stated in the return, a notice of a proposed deficiency assessment may be mailed to the taxpayer not later than six years after the date on which the return is filed. For purposes of this subdivision, there shall not be taken into account any amount which is omitted in the return if such amount is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the commissioner of the nature and the amount of such item.

(3) If an employer, as defined in section 12-707, omits from Connecticut wages an amount properly includable that is in excess of twenty-five per cent of the amount of Connecticut wages stated in the Connecticut withholding tax return required under section 12-707, a notice of a proposed deficiency assessment may be mailed to the employer not later than six years after the date on which the return is filed. For purposes of this subdivision, there shall not be taken into account any amount which is omitted in the return if such amount is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the commissioner of the nature and the amount of such item.

(4) If [a pass-through entity, as defined in subparagraph (D) of subdivision (2) of subsection (b) of section 12-719] an affected business entity, as defined in section 1 of this act, omits from the Connecticut adjusted gross income derived from or connected with sources within Connecticut of any [nonresident individual who is a] member of such [pass-through] affected business entity an amount properly includable therein [which] that is in excess of twenty-five per cent of the amount of Connecticut adjusted gross income derived from or connected with sources within Connecticut stated in the return required under section 1 of this act, a notice of a proposed deficiency assessment may be mailed to the taxpayer not later than six years after the date on which the return is filed. For purposes of this subdivision, there shall not be taken into account any amount [which] that is omitted in the return if such amount is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the commissioner of the nature and the amount of such item.

Sec. 7. Subsection (a) of section 4-30a of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(a) All revenue in excess of three billion one hundred fifty million dollars received by the state each fiscal year from estimated and final payments of the personal income tax imposed under chapter 229 and the affected business entity tax imposed under section 1 of this act shall be transferred by the Treasurer to a special fund to be known as the Budget Reserve Fund.

Sec. 8. Subdivision (1) of subsection (aa) of section 3-20 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective May 15, 2018):

(aa) (1) For each fiscal year during which general obligation bonds or credit revenue bonds issued on and after May 15, 2018, and prior to July 1, 2020, shall be outstanding, the state of Connecticut shall comply with the provisions of (A) section 4-30a of the general statutes, revision of 1958, revised to January 1, 2017, as amended by section 704 of public act 17-2 of the June special session and section 7 of this act, (B) section 2-33c in effect on October 31, 2017, (C) section 2-33a of the general statutes, revision of 1958, revised to January 1, 2017, as amended by section 709 of public act 17-2 of the June special session, (D) subsections (d) and (g) of this section, revision of 1958, revised to January 1, 2017, as amended by sections 710 and 711 of public act 17-2 of the June special session, and (E) section 3-21 of the general statutes, revision of 1958, revised to January 1, 2017, as amended by section 712 of public act 17-2 of the June special session. The state of Connecticut does hereby pledge to and agree with the holders of any bonds, notes and other obligations issued pursuant to subdivision (2) of this subsection that no public or special act of the General Assembly taking effect on or after May 15, 2018, and prior to July 1, 2028, shall alter the obligation to comply with the provisions of the sections and subsections set forth in subparagraphs (A) to (E), inclusive, of this subdivision, until such bonds, notes or other obligations, together with the interest thereon, are fully met and discharged, provided nothing in this subsection shall preclude such alteration (i) if and when adequate provision shall be made by law for the protection of the holders of such bonds, or (ii) (I) if and when the Governor declares an emergency or the existence of extraordinary circumstances, in which the provisions of section 4-85 are invoked, (II) at least three-fifths of the members of each chamber of the General Assembly vote to alter such required compliance during the fiscal year for which the emergency or existence of extraordinary circumstances are determined, and (III) any such alteration is for the fiscal year in progress only.

Sec. 9. Section 3-114g of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

At the end of each fiscal year, commencing with the fiscal year ending on June 30, 1990, the Comptroller is authorized to record as revenue for such fiscal year [,] the amount of revenue related to the tax imposed under chapter 208 and section 1 of this act for such fiscal year which is received by the Commissioner of Revenue Services not later than five business days after the [August fifteenth] last day of July immediately following the end of such fiscal year.

Sec. 10. (NEW) (Effective July 1, 2018) (a) As used in this section: (1) "Residential property" means (A) a building containing three or fewer dwelling units used for human habitation, the parcel of land on which such building is situated and any accessory buildings or other improvements located on such parcel, (B) a condominium, as defined in section 47-68a of the general statutes, that is used for residential purposes, or (C) a common interest community, as defined in section 47-202 of the general statutes; (2) "community supporting organization" means an organization that is (A) exempt from taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, and (B) organized solely to support municipal expenditures for public programs and services, including public education; and (3) "municipality" means any town, city or borough, consolidated town and city or consolidated town and borough.

(b) (1) Upon approval, on or before October first of each year, by a municipality's legislative body, or in any town in which the legislative body is a town meeting, by the board of selectmen, any municipality may provide a residential property tax credit for the following fiscal year in accordance with the provisions of this section. The municipality shall determine the amount of such tax credit, except that such amount shall not exceed the lesser of (A) the amount of property tax owed, or (B) eighty-five per cent of the amount of voluntary, unrestricted and irrevocable cash donations made by or on behalf of the owner of a residential property located in the municipality to a community supporting organization during the calendar year preceding the year in which an application for such tax credit is filed. The municipality may include in any such approval a residency requirement or other requirement the municipality deems necessary or desirable. Any grant amounts received by a municipality from the designated community supporting organization pursuant to subsection (c) of this section shall be subject to municipal appropriation and expenditure.

(2) Upon approval of a tax credit under subdivision (1) of this subsection, the owner of a residential property located in the municipality or a person on behalf of such owner may make a voluntary, unrestricted and irrevocable cash donation or donations to the community supporting organization designated pursuant to subsection (c) of this section.

(c) Any municipality that approves a tax credit pursuant to subdivision (1) of subsection (b) of this section shall designate a single community supporting organization to receive cash donations that will qualify for such tax credit. The chief executive officer of such municipality shall enter into an agreement with such designated community supporting organization that requires (1) the designated community supporting organization to only accept voluntary, unrestricted and irrevocable cash donations, (2) the designated community supporting organization to provide, on or before July first of each year, a grant to the municipality in an amount equal to all cash donations received during the prior fiscal year and a written statement of all cash donations received during such year, including the name and residential address of each donor, the name and residential address of the owner of the residential property if the donation was made on behalf of such owner and the date each such donation was received, (3) the municipality to provide, not later than December thirty-first following such fiscal year, a written statement to the designated community supporting organization of the municipal programs and services supported by the grant provided by the designated community supporting organization in such fiscal year, (4) the municipality to serve as the administrative and fiscal agent for the designated community supporting organization. The municipality may retain and expend an amount of not more than fifteen per cent of the total amount of the grant received during a fiscal year as the reasonable costs of providing such service as the administrative and fiscal agent, and (5) the designated community supporting organization to provide a contemporaneous written receipt to a donor of a voluntary, unrestricted and irrevocable cash donation.

(d) (1) A taxpayer that has made a voluntary, unrestricted and irrevocable cash donation pursuant to subdivision (2) of subsection (b) of this section may file an application for the tax credit under this section with the tax collector of the municipality in which the residential property is located. No tax credit under this section shall be allowed unless the taxpayer or an authorized agent of the taxpayer files the application on or after January first and prior to April second prior to the fiscal year for which such tax credit is being claimed.

(2) Each such applicant shall include evidence satisfactory to the tax collector of the total amount of such donations made during the preceding calendar year to a community supporting organization and an affidavit, on a form prescribed by the Secretary of the Office of Policy and Management, affirming that such donations were made in cash and were voluntary, unrestricted and irrevocable.

(e) Upon the receipt of all information required under subsection (d) of this section, the tax collector shall apply the residential property tax credit, subject to any limitations set forth by the municipality in the authorizing ordinance, to the residential property tax due and payable for the fiscal year for which the application was received.

(f) No taxpayer may use a cash donation made pursuant to subdivision (2) of subsection (b) of this section to claim a tax credit with respect to more than one fiscal year. Any taxpayer who knowingly submits a false record or knowingly makes a false affidavit to claim the tax credit under this section shall be fined not more than five hundred dollars and shall refund to the municipality the entire amount of the tax credit improperly received.

Sec. 11. Subparagraphs (A) and (B) of subdivision (20) of subsection (a) of section 12-701 of the 2018 supplement to the general statutes are repealed and the following is substituted in lieu thereof (Effective from passage and applicable to taxable years commencing on or after January 1, 2017):

(20) "Connecticut adjusted gross income" means adjusted gross income, with the following modifications:

(A) There shall be added thereto:

(i) [to] To the extent not properly includable in gross income for federal income tax purposes, any interest income from obligations issued by or on behalf of any state, political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity, exclusive of such income from obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut and exclusive of any such income with respect to which taxation by any state is prohibited by federal law; [,]

(ii) [any] Any exempt-interest dividends, as defined in Section 852(b)(5) of the Internal Revenue Code, exclusive of such exempt-interest dividends derived from obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut and exclusive of such exempt-interest dividends derived from obligations, the income with respect to which taxation by any state is prohibited by federal law; [,]

(iii) [any] Any interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States which federal law exempts from federal income tax but does not exempt from state income taxes; [,]

(iv) [to] To the extent included in gross income for federal income tax purposes for the taxable year, the total taxable amount of a lump sum distribution for the taxable year deductible from such gross income in calculating federal adjusted gross income; [,]

(v) [to] To the extent properly includable in determining the net gain or loss from the sale or other disposition of capital assets for federal income tax purposes, any loss from the sale or exchange of obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut, in the income year such loss was recognized; [,]

(vi) [to] To the extent deductible in determining federal adjusted gross income, any income taxes imposed by this state; [,]

(vii) [to] To the extent deductible in determining federal adjusted gross income, any interest on indebtedness incurred or continued to purchase or carry obligations or securities the interest on which is exempt from tax under this chapter; [,]

(viii) [expenses] Expenses paid or incurred during the taxable year for the production or collection of income which is exempt from taxation under this chapter or the management, conservation or maintenance of property held for the production of such income, and the amortizable bond premium for the taxable year on any bond the interest on which is exempt from tax under this chapter to the extent that such expenses and premiums are deductible in determining federal adjusted gross income; [,]

(ix) [for] For property placed in service after [September 10, 2001, but prior to September 11, 2004, in taxable years ending after September 10, 2001] September 27, 2017, any additional allowance for depreciation under subsection (k) of Section 168 of the Internal Revenue Code, [as provided by Section 101 of the Job Creation and Worker Assistance Act of 2002,] to the extent deductible in determining federal adjusted gross income; [,]

(x) [to] To the extent deductible in determining federal adjusted gross income, the deduction allowable as qualified domestic production activities income, pursuant to Section 199 of the Internal Revenue Code; [,]

(xi) [to] To the extent not properly includable in gross income for federal income tax purposes for the taxable year, any income from the discharge of indebtedness, in taxable years ending after December 31, 2008, in connection with any reacquisition, after December 31, 2008, and before January 1, 2011, of an applicable debt instrument or instruments, as those terms are defined in Section 108 of the Internal Revenue Code, as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009, the inclusion of which income in federal gross income for the taxable year is deferred, as provided by said Section 1231; [,]

(xii) [to] To the extent not properly includable in gross income for federal income tax purposes, an amount equal to (I) any distribution from a manufacturing reinvestment account not used in accordance with subdivision (3) of subsection (c) of section 32-9zz to the extent that a contribution to such account was subtracted from federal adjusted gross income pursuant to clause (xix) of subparagraph (B) of this subdivision in computing Connecticut adjusted gross income for the current or a preceding taxable year, and (II) any return of money from a manufacturing reinvestment account pursuant to subsection (d) of section 32-9zz to the extent that a contribution to such account was subtracted from federal adjusted gross income pursuant to clause (xix) of subparagraph (B) of this subdivision in computing Connecticut adjusted gross income for the current or a preceding taxable year; [, and]

(xiii) [to] To the extent not properly includable in gross income for federal income tax purposes, an amount equal to any compensation required to be recognized under Section 457A of the Internal Revenue Code that is attributable to services performed within this state; and

(xiv) For taxable years commencing on or after January 1, 2018, eighty per cent of any deduction claimed for federal purposes under Section 179 of the Internal Revenue Code.

(B) There shall be subtracted therefrom:

(i) [to] To the extent properly includable in gross income for federal income tax purposes, any income with respect to which taxation by any state is prohibited by federal law; [,]

(ii) [to] To the extent allowable under section 12-718, exempt dividends paid by a regulated investment company; [,]

(iii) To the extent properly includable in gross income for federal income tax purposes, the amount of any refund or credit for overpayment of income taxes imposed by this state, or any other state of the United States or a political subdivision thereof, or the District of Columbia; [, to the extent properly includable in gross income for federal income tax purposes,]

(iv) [to] To the extent properly includable in gross income for federal income tax purposes and not otherwise subtracted from federal adjusted gross income pursuant to clause (x) of this subparagraph in computing Connecticut adjusted gross income, any tier 1 railroad retirement benefits; [,]

(v) [to] To the extent any additional allowance for depreciation under Section 168(k) of the Internal Revenue Code [, as provided by Section 101 of the Job Creation and Worker Assistance Act of 2002,] for property placed in service after [December 31, 2001, but prior to September 10, 2004] September 27, 2017, was added to federal adjusted gross income pursuant to subparagraph (A)(ix) of this subdivision in computing Connecticut adjusted gross income, [for a taxable year ending after December 31, 2001,] twenty-five per cent of such additional allowance for depreciation in each of the four succeeding taxable years; [,]

(vi) [to] To the extent properly includable in gross income for federal income tax purposes, any interest income from obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut; [,]

(vii) [to] To the extent properly includable in determining the net gain or loss from the sale or other disposition of capital assets for federal income tax purposes, any gain from the sale or exchange of obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut, in the income year such gain was recognized; [,]

(viii) [any] Any interest on indebtedness incurred or continued to purchase or carry obligations or securities the interest on which is subject to tax under this chapter but exempt from federal income tax, to the extent that such interest on indebtedness is not deductible in determining federal adjusted gross income and is attributable to a trade or business carried on by such individual; [,]

(ix) [ordinary] Ordinary and necessary expenses paid or incurred during the taxable year for the production or collection of income which is subject to taxation under this chapter but exempt from federal income tax, or the management, conservation or maintenance of property held for the production of such income, and the amortizable bond premium for the taxable year on any bond the interest on which is subject to tax under this chapter but exempt from federal income tax, to the extent that such expenses and premiums are not deductible in determining federal adjusted gross income and are attributable to a trade or business carried on by such individual; [,]

(x) (I) [for] For taxable years commencing prior to January 1, 2019, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is less than fifty thousand dollars, or as a married individual filing separately whose federal adjusted gross income for such taxable year is less than fifty thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxable year is less than sixty thousand dollars or a person who files a return under the federal income tax as a head of household whose federal adjusted gross income for such taxable year is less than sixty thousand dollars, an amount equal to the Social Security benefits includable for federal income tax purposes;

(II) [for] For taxable years commencing prior to January 1, 2019, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is fifty thousand dollars or more, or as a married individual filing separately whose federal adjusted gross income for such taxable year is fifty thousand dollars or more, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income from such taxable year is sixty thousand dollars or more or for a person who files a return under the federal income tax as a head of household whose federal adjusted gross income for such taxable year is sixty thousand dollars or more, an amount equal to the difference between the amount of Social Security benefits includable for federal income tax purposes and the lesser of twenty-five per cent of the Social Security benefits received during the taxable year, or twenty-five per cent of the excess described in Section 86(b)(1) of the Internal Revenue Code;

(III) [for] For the taxable year commencing January 1, 2019, and each taxable year thereafter, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or as a married individual filing separately whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxable year is less than one hundred thousand dollars or a person who files a return under the federal income tax as a head of household whose federal adjusted gross income for such taxable year is less than one hundred thousand dollars, an amount equal to the Social Security benefits includable for federal income tax purposes; and

(IV) [for] For the taxable year commencing January 1, 2019, and each taxable year thereafter, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is seventy-five thousand dollars or more, or as a married individual filing separately whose federal adjusted gross income for such taxable year is seventy-five thousand dollars or more, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income from such taxable year is one hundred thousand dollars or more or for a person who files a return under the federal income tax as a head of household whose federal adjusted gross income for such taxable year is one hundred thousand dollars or more, an amount equal to the difference between the amount of Social Security benefits includable for federal income tax purposes and the lesser of twenty-five per cent of the Social Security benefits received during the taxable year, or twenty-five per cent of the excess described in Section 86(b)(1) of the Internal Revenue Code; [,]

(xi) [to] To the extent properly includable in gross income for federal income tax purposes, any amount rebated to a taxpayer pursuant to section 12-746; [,]

(xii) [to] To the extent properly includable in the gross income for federal income tax purposes of a designated beneficiary, any distribution to such beneficiary from any qualified state tuition program, as defined in Section 529(b) of the Internal Revenue Code, established and maintained by this state or any official, agency or instrumentality of the state; [,]

(xiii) [to] To the extent allowable under section 12-701a, contributions to accounts established pursuant to any qualified state tuition program, as defined in Section 529(b) of the Internal Revenue Code, established and maintained by this state or any official, agency or instrumentality of the state; [,]

(xiv) [to] To the extent properly includable in gross income for federal income tax purposes, the amount of any Holocaust victims' settlement payment received in the taxable year by a Holocaust victim; [,]

(xv) [to] To the extent properly includable in gross income for federal income tax purposes of an account holder, as defined in section 31-51ww, interest earned on funds deposited in the individual development account, as defined in section 31-51ww, of such account holder; [,]

(xvi) [to] To the extent properly includable in the gross income for federal income tax purposes of a designated beneficiary, as defined in section 3-123aa, interest, dividends or capital gains earned on contributions to accounts established for the designated beneficiary pursuant to the Connecticut Homecare Option Program for the Elderly established by sections 3-123aa to 3-123ff, inclusive; [,]

(xvii) [to] To the extent properly includable in gross income for federal income tax purposes, any income received from the United States government as retirement pay for a retired member of (I) the Armed Forces of the United States, as defined in Section 101 of Title 10 of the United States Code, or (II) the National Guard, as defined in Section 101 of Title 10 of the United States Code; [,]

(xviii) [to] To the extent properly includable in gross income for federal income tax purposes for the taxable year, any income from the discharge of indebtedness in connection with any reacquisition, after December 31, 2008, and before January 1, 2011, of an applicable debt instrument or instruments, as those terms are defined in Section 108 of the Internal Revenue Code, as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009, to the extent any such income was added to federal adjusted gross income pursuant to subparagraph (A)(xi) of this subdivision in computing Connecticut adjusted gross income for a preceding taxable year; [,]

(xix) [to] To the extent not deductible in determining federal adjusted gross income, the amount of any contribution to a manufacturing reinvestment account established pursuant to section 32-9zz in the taxable year that such contribution is made; [,]

(xx) [to] To the extent properly includable in gross income for federal income tax purposes, (I) for the taxable year commencing January 1, 2015, ten per cent of the income received from the state teachers' retirement system, (II) for the taxable years commencing January 1, 2016, January 1, 2017, and January 1, 2018, twenty-five per cent of the income received from the state teachers' retirement system, and (III) for the taxable year commencing January 1, 2019, and each taxable year thereafter, fifty per cent of the income received from the state teachers' retirement system or the percentage, if applicable, pursuant to clause (xxi) of this subparagraph; [,]

(xxi) [to] To the extent properly includable in gross income for federal income tax purposes, except for retirement benefits under clause (iv) of this subparagraph and retirement pay under clause (xvii) of this subparagraph, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or as a married individual filing separately whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or as a head of household whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxable year is less than one hundred thousand dollars, (I) for the taxable year commencing January 1, 2019, fourteen per cent of any pension or annuity income, (II) for the taxable year commencing January 1, 2020, twenty-eight per cent of any pension or annuity income, (III) for the taxable year commencing January 1, 2021, forty-two per cent of any pension or annuity income, (IV) for the taxable year commencing January 1, 2022, fifty-six per cent of any pension or annuity income, (V) for the taxable year commencing January 1, 2023, seventy per cent of any pension or annuity income, (VI) for the taxable year commencing January 1, 2024, eighty-four per cent of any pension or annuity income, and (VII) for the taxable year commencing January 1, 2025, any pension or annuity income; [,]

(xxii) [the] The amount of lost wages and medical, travel and housing expenses, not to exceed ten thousand dollars in the aggregate, incurred by a taxpayer during the taxable year in connection with the donation to another person of an organ for organ transplantation occurring on or after January 1, 2017; [, and]

(xxiii) [to] To the extent properly includable in gross income for federal income tax purposes, the amount of any financial assistance received from the Crumbling Foundations Assistance Fund or paid to or on behalf of the owner of a residential building pursuant to sections 8-442 and 8-443; and

(xxiv) To the extent any portion of a deduction under Section 179 of the Internal Revenue Code was added to federal adjusted gross income pursuant to subparagraph (A)(xiv) of this subdivision in computing Connecticut adjusted gross income, twenty-five per cent of such disallowed portion of the deduction in each of the four succeeding taxable years.

Sec. 12. Subsection (b) of section 12-217 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(b) (1) For purposes of determining net income under this section, the deduction allowed for depreciation shall be determined as provided under the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, provided in making such determination, the provisions of Section 168(k) of said code shall not apply.

(2) (A) For purposes of determining net income under this section for taxable years ending after December 31, 2008, and to the extent any income from the discharge of indebtedness, under Section 108 of the Internal Revenue Code, as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009, in connection with any reacquisition, after December 31, 2008, and before January 1, 2011, of an applicable debt instrument or instruments, as those terms are defined in said Section 108, as amended by said Section 1231, is not properly includable in gross income for federal income tax purposes for the taxable year, any deferral of the recognition of any such income shall not be allowed.

(B) To the extent that any income from the discharge of indebtedness in connection with any reacquisition, after December 31, 2008, and before January 1, 2011, of an applicable debt instrument or instruments, as those terms are defined in Section 108 of the Internal Revenue Code, as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009, is properly includable in gross income for federal income tax purposes for the taxable year, any such income shall be deductible in computing net income under this section for a taxable year ending after December 31, 2008, to the extent that the deferral of recognition of such income from such discharge was not allowed pursuant to subparagraph (A) of this subdivision in computing net income for a preceding taxable year.

(C) For income years commencing on or after January 1, 2018, eighty per cent of any deduction claimed under Section 179 of the Internal Revenue Code for federal income tax purposes shall be disallowed. To the extent such a deduction is disallowed for purposes of computing the tax under this chapter, twenty-five per cent of the disallowed portion of the deduction shall be allowed as a deduction in each of the four succeeding income years.

Sec. 13. Subdivision (2) of subsection (a) of section 12-217 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage and applicable to income years commencing on or after January 1, 2017):

(2) (A) No deduction shall be allowed for [(A)] (i) expenses related to dividends [which] that are allowable as a deduction or credit under the Internal Revenue Code, and [(B)] (ii) federal taxes on income or profits, losses of other calendar or fiscal years, retroactive to include all calendar or fiscal years beginning after January 1, 1935, interest received from federal, state and local government securities, if any such deductions are allowed by the federal government.

(B) For purposes of this subdivision, expenses related to dividends shall equal ten per cent of all dividends received by a company during an income year. The net income associated with the disallowance of expenses related to dividends shall be apportioned, if the company conducts business within and without the state or is required to apportion its income under section 12-218b, in accordance with this chapter. A company may petition the commissioner for an alternate percentage if the company believes the expenses related to dividends that were incurred during the income year and prior income years are less than ten per cent of such dividends. The company shall submit any such petition to the commissioner not later than sixty days prior to the due date of the return for the applicable income year, determined with regard to any extension of time granted for filing such return. The commissioner may grant the petition if the commissioner determines that the company has established by clear and convincing evidence that the company's proposed alternate percentage accurately reflects the company's expenses related to the dividends the company received. The commissioner shall grant or deny any such petition before such due date of the return.

Sec. 14. Subsection (g) of section 12-391 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(g) (1) With respect to the estates of decedents dying on or after January 1, 2005, but prior to January 1, 2010, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T1

Amount of Connecticut

 

T2

Taxable Estate

Rate of Tax

T3

Not over $2,000,000

None

T4

Over $2,000,000

 

T5

but not over $2,100,000

5.085% of the excess over $0

T6

Over $2,100,000

$106,800 plus 8% of the excess

T7

but not over $2,600,000

over $2,100,000

T8

Over $2,600,000

$146,800 plus 8.8% of the excess

T9

but not over $3,100,000

over $2,600,000

T10

Over $3,100,000

$190,800 plus 9.6% of the excess

T11

but not over $3,600,000

over $3,100,000

T12

Over $3,600,000

$238,800 plus 10.4% of the excess

T13

but not over $4,100,000

over $3,600,000

T14

Over $4,100,000

$290,800 plus 11.2% of the excess

T15

but not over $5,100,000

over $4,100,000

T16

Over $5,100,000

$402,800 plus 12% of the excess

T17

but not over $6,100,000

over $5,100,000

T18

Over $6,100,000

$522,800 plus 12.8% of the excess

T19

but not over $7,100,000

over $6,100,000

T20

Over $7,100,000

$650,800 plus 13.6% of the excess

T21

but not over $8,100,000

over $7,100,000

T22

Over $8,100,000

$786,800 plus 14.4% of the excess

T23

but not over $9,100,000

over $8,100,000

T24

Over $9,100,000

$930,800 plus 15.2% of the excess

T25

but not over $10,100,000

over $9,100,000

T26

Over $10,100,000

$1,082,800 plus 16% of the excess

T27

 

over $10,100,000

(2) With respect to the estates of decedents dying on or after January 1, 2010, but prior to January 1, 2011, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T28

Amount of Connecticut

 

T29

Taxable Estate

Rate of Tax

T30

Not over $3,500,000

None

T31

Over $3,500,000

7.2% of the excess

T32

but not over $3,600,000

over $3,500,000

T33

Over $3,600,000

$7,200 plus 7.8% of the excess

T34

but not over $4,100,000

over $3,600,000

T35

Over $4,100,000

$46,200 plus 8.4% of the excess

T36

but not over $5,100,000

over $4,100,000

T37

Over $5,100,000

$130,200 plus 9.0% of the excess

T38

but not over $6,100,000

over $5,100,000

T39

Over $6,100,000

$220,200 plus 9.6% of the excess

T40

but not over $7,100,000

over $6,100,000

T41

Over $7,100,000

$316,200 plus 10.2% of the excess

T42

but not over $8,100,000

over $7,100,000

T43

Over $8,100,000

$418,200 plus 10.8% of the excess

T44

but not over $9,100,000

over $8,100,000

T45

Over $9,100,000

$526,200 plus 11.4% of the excess

T46

but not over $10,100,000

over $9,100,000

T47

Over $10,100,000

$640,200 plus 12% of the excess

T48

 

over $10,100,000

(3) With respect to the estates of decedents dying on or after January 1, 2011, but prior to January 1, 2018, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T49

Amount of Connecticut

 

T50

Taxable Estate

Rate of Tax

T51

Not over $2,000,000

None

T52

Over $2,000,000

7.2% of the excess

T53

but not over $3,600,000

over $2,000,000

T54

Over $3,600,000

$115,200 plus 7.8% of the excess

T55

but not over $4,100,000

over $3,600,000

T56

Over $4,100,000

$154,200 plus 8.4% of the excess

T57

but not over $5,100,000

over $4,100,000

T58

Over $5,100,000

$238,200 plus 9.0% of the excess

T59

but not over $6,100,000

over $5,100,000

T60

Over $6,100,000

$328,200 plus 9.6% of the excess

T61

but not over $7,100,000

over $6,100,000

T62

Over $7,100,000

$424,200 plus 10.2% of the excess

T63

but not over $8,100,000

over $7,100,000

T64

Over $8,100,000

$526,200 plus 10.8% of the excess

T65

but not over $9,100,000

over $8,100,000

T66

Over $9,100,000

$634,200 plus 11.4% of the excess

T67

but not over $10,100,000

over $9,100,000

T68

Over $10,100,000

$748,200 plus 12% of the excess

T69

 

over $10,100,000

(4) With respect to the estates of decedents dying on or after January 1, 2018, but prior to January 1, 2019, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T70

Amount of Connecticut

 

T71

Taxable Estate

Rate of Tax

T72

Not over $2,600,000

None

T73

Over $2,600,000

7.2% of the excess

T74

but not over $3,600,000

over $2,600,000

T75

Over $3,600,000

$72,000 plus 7.8% of the excess

T76

but not over $4,100,000

over $3,600,000

T77

Over $4,100,000

$111,000 plus 8.4% of the excess

T78

but not over $5,100,000

over $4,100,000

T79

Over $5,100,000

$195,000 plus 10% of the excess

T80

but not over $6,100,000

over $5,100,000

T81

Over $6,100,000

$295,000 plus 10.4% of the excess

T82

but not over $7,100,000

over $6,100,000

T83

Over $7,100,000

$399,900 plus 10.8% of the excess

T84

but not over $8,100,000

over $7,100,000

T85

Over $8,100,000

$507,000 plus 11.2% of the excess

T86

but not over $9,100,000

over $8,100,000

T87

Over $9,100,000

$619,000 plus 11.6% of the excess

T88

but not over $10,100,000

over $9,100,000

T89

Over $10,100,000

$735,000 plus 12% of the excess

T90

 

over $10,100,000

(5) With respect to the estates of decedents dying on or after January 1, 2019, but prior to January 1, 2020, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T91

Amount of Connecticut

 

T92

Taxable Estate

Rate of Tax

T93

Not over $3,600,000

None

T94

Over $3,600,000

7.8% of the excess

T95

but not over $4,100,000

over $3,600,000

T96

Over $4,100,000

$39,000 plus 8.4% of the excess

T97

but not over $5,100,000

over $4,100,000

T98

Over $5,100,000

$123,000 plus 10% of the excess

T99

but not over $6,100,000

over $5,100,000

T100

Over $6,100,000

$223,000 plus 10.4% of the excess

T101

but not over $7,100,000

over $6,100,000

T102

Over $7,100,000

$327,000 plus 10.8% of the excess

T103

but not over $8,100,000

over $7,100,000

T104

Over $8,100,000

$435,000 plus 11.2% of the excess

T105

but not over $9,100,000

over $8,100,000

T106

Over $9,100,000

$547,000 plus 11.6% of the excess

T107

but not over $10,100,000

over $9,100,000

T108

Over $10,100,000

$663,000 plus 12% of the excess

T109

 

over $10,100,000

(6) With respect to the estates of decedents dying on or after January 1, 2020, but prior to January 1, 2021, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T110

[Amount of Connecticut

 

T111

Taxable Estate

Rate of Tax

T112

Not over the

None

T113

federal basic exclusion amount

 

T114

Over the

10% of the excess over the

T115

federal basic exclusion amount

federal basic exclusion amount

T116

but not over $6,100,000

 

T117

Over $6,100,000

10.4% of the excess over the

T118

but not over $7,100,000

federal basic exclusion amount

T119

Over $7,100,000

10.8% of the excess over the

T120

but not over $8,100,000

federal basic exclusion amount

T121

Over $8,100,000

11.2% of the excess over the

T122

but not over $9,100,000

federal basic exclusion amount

T123

Over $9,100,000

11.6% of the excess over the

T124

but not over $10,100,000

federal basic exclusion amount

T125

Over $10,100,000

12% of the excess over the

T126

 

federal basic exclusion amount]

T127

Amount of Connecticut

 

T128

Taxable Estate

Rate of Tax

T129

Not over $5,100,000

None

T130

Over $5,100,000

10% of the excess

T131

but not over $6,100,000

over $5,100,000

T132

Over $6,100,000

$100,000 plus 10.4% of the excess

T133

but not over $7,100,000

over $6,100,000

T134

Over $7,100,000

$204,000 plus 10.8% of the excess

T135

but not over $8,100,000

over $7,100,000

T136

Over $8,100,000

$312,000 plus 11.2% of the excess

T137

but not over $9,100,000

over $8,100,000

T138

Over $9,100,000

$424,000 plus 11.6% of the excess

T139

but not over $10,100,000

over $9,100,000

T140

Over $10,100,000

$540,000 plus 12% of the excess

T141

 

over $10,100,000

(7) With respect to the estates of decedents dying on or after January 1, 2021, but prior to January 1, 2022, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T142

Amount of Connecticut

 

T143

Taxable Estate

Rate of Tax

T144

Not over $7,100,000

None

T145

Over $7,100,000

10.8% of the excess

T146

but not over $8,100,000

over $7,100,000

T147

Over $8,100,000

$108,000 plus 11.2% of the excess

T148

but not over $9,100,000

over $8,100,000

T149

Over $9,100,000

$220,000 plus 11.6% of the excess

T150

but not over $10,100,000

over $9,100,000

T151

Over $10,100,000

$336,000 plus 12% of the excess

T152

 

over $10,100,000

(8) With respect to the estates of decedents dying on or after January 1, 2022, but prior to January 1, 2023, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T153

Amount of Connecticut

 

T154

Taxable Estate

Rate of Tax

T155

Not over $9,100,000

None

T156

Over $9,100,000

11.6% of the excess

T157

but not over $10,100,000

over $9,100,000

T158

Over $10,100,000

$116,000 plus 12% of the excess

T159

 

over $10,100,000

(9) With respect to the estates of decedents dying on or after January 1, 2023, the tax based on the Connecticut taxable estate shall be as provided in the following schedule:

T160

Amount of Connecticut

 

T161

Taxable Estate

Rate of Tax

T162

Not over the

None

T163

federal basic exclusion amount

 

T164

Over the

12% of the excess over the

T165

federal basic exclusion amount

federal basic exclusion amount

Sec. 15. Subsection (a) of section 12-642 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(a) (1) With respect to calendar years commencing prior to January 1, 2001, the tax imposed by section 12-640 for the calendar year shall be at a rate of the taxable gifts made by the donor during the calendar year set forth in the following schedule:

T166

Amount of Taxable Gifts

Rate of Tax

T167

Not over $25,000

1%

T168

Over $25,000

$250, plus 2% of the excess

T169

but not over $50,000

over $25,000

T170

Over $50,000

$750, plus 3% of the excess

T171

but not over $75,000

over $50,000

T172

Over $75,000

$1,500, plus 4% of the excess

T173

but not over $100,000

over $75,000

T174

Over $100,000

$2,500, plus 5% of the excess

T175

but not over $200,000

over $100,000

T176

Over $200,000

$7,500, plus 6% of the excess

T177

 

over $200,000

(2) With respect to the calendar years commencing January 1, 2001, January 1, 2002, January 1, 2003, and January 1, 2004, the tax imposed by section 12-640 for each such calendar year shall be at a rate of the taxable gifts made by the donor during the calendar year set forth in the following schedule:

T178

Amount of Taxable Gifts

Rate of Tax

T179

Over $25,000

$250, plus 2% of the excess

T180

but not over $50,000

over $25,000

T181

Over $50,000

$750, plus 3% of the excess

T182

but not over $75,000

over $50,000

T183

Over $75,000

$1,500, plus 4% of the excess

T184

but not over $100,000

over $75,000

T185

Over $100,000

$2,500, plus 5% of the excess

T186

but not over $675,000

over $100,000

T187

Over $675,000

$31,250, plus 6% of the excess

T188

 

over $675,000

(3) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2005, but prior to January 1, 2010, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, but prior to January 1, 2010, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision:

T189

Amount of Taxable Gifts

Rate of Tax

T190

Not over $2,000,000

None

T191

Over $2,000,000

 

T192

but not over $2,100,000

5.085% of the excess over $0

T193

Over $2,100,000

$106,800 plus 8% of the excess

T194

but not over $2,600,000

over $2,100,000

T195

Over $2,600,000

$146,800 plus 8.8% of the excess

T196

but not over $3,100,000

over $2,600,000

T197

Over $3,100,000

$190,800 plus 9.6% of the excess

T198

but not over $3,600,000

over $3,100,000

T199

Over $3,600,000

$238,800 plus 10.4% of the excess

T200

but not over $4,100,000

over $3,600,000

T201

Over $4,100,000

$290,800 plus 11.2% of the excess

T202

but not over $5,100,000

over $4,100,000

T203

Over $5,100,000

$402,800 plus 12% of the excess

T204

but not over $6,100,000

over $5,100,000

T205

Over $6,100,000

$522,800 plus 12.8% of the excess

T206

but not over $7,100,000

over $6,100,000

T207

Over $7,100,000

$650,800 plus 13.6% of the excess

T208

but not over $8,100,000

over $7,100,000

T209

Over $8,100,000

$786,800 plus 14.4% of the excess

T210

but not over $9,100,000

over $8,100,000

T211

Over $9,100,000

$930,800 plus 15.2% of the excess

T212

but not over $10,100,000

over $9,100,000

T213

Over $10,100,000

$1,082,800 plus 16% of the excess

T214

 

over $10,100,000

(4) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2010, but prior to January 1, 2011, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision or pursuant to subdivision (3) of this subsection, provided such credit shall not exceed the amount of tax imposed by this section:

T215

Amount of Taxable Gifts

Rate of Tax

T216

Not over $3,500,000

None

T217

Over $3,500,000

7.2% of the excess

T218

but not over $3,600,000

over $3,500,000

T219

Over $3,600,000

$7,200 plus 7.8% of the excess

T220

but not over $4,100,000

over $3,600,000

T221

Over $4,100,000

$46,200 plus 8.4% of the excess

T222

but not over $5,100,000

over $4,100,000

T223

Over $5,100,000

$130,200 plus 9.0% of the excess

T224

but not over $6,100,000

over $5,100,000

T225

Over $6,100,000

$220,200 plus 9.6% of the excess

T226

but not over $7,100,000

over $6,100,000

T227

Over $7,100,000

$316,200 plus 10.2% of the excess

T228

but not over $8,100,000

over $7,100,000

T229

Over $8,100,000

$418,200 plus 10.8% of the excess

T230

but not over $9,100,000

over $8,100,000

T231

Over $9,100,000

$526,200 plus 11.4% of the excess

T232

but not over $10,100,000

over $9,100,000

T233

Over $10,100,000

$640,200 plus 12% of the excess

T234

 

over $10,100,000

(5) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2011, but prior to January 1, 2018, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision or pursuant to subdivision (3) or (4) of this subsection, provided such credit shall not exceed the amount of tax imposed by this section:

T235

Amount of Taxable Gifts

Rate of Tax

T236

Not over $2,000,000

None

T237

Over $2,000,000

7.2% of the excess

T238

but not over $3,600,000

over $2,000,000

T239

Over $3,600,000

$115,200 plus 7.8% of the excess

T240

but not over $4,100,000

over $3,600,000

T241

Over $4,100,000

$154,200 plus 8.4% of the excess

T242

but not over $5,100,000

over $4,100,000

T243

Over $5,100,000

$238,200 plus 9.0% of the excess

T244

but not over $6,100,000

over $5,100,000

T245

Over $6,100,000

$328,200 plus 9.6% of the excess

T246

but not over $7,100,000

over $6,100,000

T247

Over $7,100,000

$424,200 plus 10.2% of the excess

T248

but not over $8,100,000

over $7,100,000

T249

Over $8,100,000

$526,200 plus 10.8% of the excess

T250

but not over $9,100,000

over $8,100,000

T251

Over $9,100,000

$634,200 plus 11.4% of the excess

T252

but not over $10,100,000

over $9,100,000

T253

Over $10,100,000

$748,200 plus 12% of the excess

T254

 

over $10,100,000

(6) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2018, but prior to January 1, 2019, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision or pursuant to subdivision (3), (4) or (5) of this subsection, provided such credit shall not exceed the amount of tax imposed by this section:

T255

Amount of Taxable Gifts

Rate of Tax

T256

Not over $2,600,000

None

T257

Over $2,600,000

7.2% of the excess

T258

but not over $3,600,000

over $2,600,000

T259

Over $3,600,000

$72,000 plus 7.8% of the excess

T260

but not over $4,100,000

over $3,600,000

T261

Over $4,100,000

$111,000 plus 8.4% of the excess

T262

but not over $5,100,000

over $4,100,000

T263

Over $5,100,000

$195,000 plus 10% of the excess

T264

but not over $6,100,000

over $5,100,000

T265

Over $6,100,000

$295,000 plus 10.4% of the excess

T266

but not over $7,100,000

over $6,100,000

T267

Over $7,100,000

$399,900 plus 10.8% of the excess

T268

but not over $8,100,000

over $7,100,000

T269

Over $8,100,000

$507,000 plus 11.2% of the excess

T270

but not over $9,100,000

over $8,100,000

T271

Over $9,100,000

$619,000 plus 11.6% of the excess

T272

but not over $10,100,000

over $9,100,000

T273

Over $10,100,000

$735,000 plus 12% of the excess

T274

 

over $10,100,000

(7) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2019, but prior to January 1, 2020, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision or pursuant to subdivision (3), (4), (5) or (6) of this subsection, provided such credit shall not exceed the amount of tax imposed by this section:

T275

Amount of Taxable Gifts

Rate of Tax

T276

Not over $3,600,000

None

T277

Over $3,600,000

7.8% of the excess

T278

but not over $4,100,000

over $3,600,000

T279

Over $4,100,000

$39,000 plus 8.4% of the excess

T280

but not over $5,100,000

over $4,100,000

T281

Over $5,100,000

$123,000 plus 10% of the excess

T282

but not over $6,100,000

over $5,100,000

T283

Over $6,100,000

$223,000 plus 10.4% of the excess

T284

but not over $7,100,000

over $6,100,000

T285

Over $7,100,000

$327,000 plus 10.8% of the excess

T286

but not over $8,100,000

over $7,100,000

T287

Over $8,100,000

$435,000 plus 11.2% of the excess

T288

but not over $9,100,000

over $8,100,000

T289

Over $9,100,000

$547,000 plus 11.6% of the excess

T290

but not over $10,100,000

over $9,100,000

T291

Over $10,100,000

$663,000 plus 12% of the excess

T292

 

over $10,100,000

(8) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2020, but prior to January 1, 2021, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision or pursuant to subdivision (3), (4), (5), (6) or (7) of this subsection, provided such credit shall not exceed the amount of tax imposed by this section:

T293

[Amount of Taxable Gifts

Rate of Tax

T294

Not over the

None

T295

federal basic exclusion amount,

 

T296

as defined in section 12-643

 

T297

Over the

10% of the excess over the

T298

federal basic exclusion amount

federal basic exclusion amount

T299

but not over $6,100,000

 

T300

Over $6,100,000

10.4% of the excess over the

T301

but not over $7,100,000

federal basic exclusion amount

T302

Over $7,100,000

10.8% of the excess over the

T303

but not over $8,100,000

federal basic exclusion amount

T304

Over $8,100,000

11.2% of the excess over the

T305

but not over $9,100,000

federal basic exclusion amount

T306

Over $9,100,000

11.6% of the excess over the

T307

but not over $10,100,000

federal basic exclusion amount

T308

Over $10,100,000

12% of the excess over the

T309

 

federal basic exclusion amount]

T310

Amount of Taxable Gifts

Rate of Tax

T311

Not over $5,100,000

None

T312

Over $5,100,000

10% of the excess

T313

but not over $6,100,000

over $5,100,000

T314

Over $6,100,000

$100,000 plus 10.4% of the excess

T315

but not over $7,100,000

over $6,100,000

T316

Over $7,100,000

$204,000 plus 10.8% of the excess

T317

but not over $8,100,000

over $7,100,000

T318

Over $8,100,000

$312,000 plus 11.2% of the excess

T319

but not over $9,100,000

over $8,100,000

T320

Over $9,100,000

$424,000 plus 11.6% of the excess

T321

but not over $10,100,000

over $9,100,000

T322

Over $10,100,000

$540,000 plus 12% of the excess

T323

 

over $10,100,000

(9) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2021, but prior to January 1, 2022, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision or pursuant to subdivision (3), (4), (5), (6), (7) or (8) of this subsection, provided such credit shall not exceed the amount of tax imposed by this section:

T324

Amount of Taxable Gifts

Rate of Tax

T325

Not over $7,100,000

None

T326

Over $7,100,000

10.8% of the excess

T327

but not over $8,100,000

over $7,100,000

T328

Over $8,100,000

$108,000 plus 11.2% of the excess

T329

but not over $9,100,000

over $8,100,000

T330

Over $9,100,000

$220,000 plus 11.6% of the excess

T331

but not over $10,100,000

over $9,100,000

T332

Over $10,100,000

$336,000 plus 12% of the excess

T333

 

over $10,100,000

(10) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2022, but prior to January 1, 2023, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision or pursuant to subdivision (3), (4), (5), (6), (7), (8) or (9) of this subsection, provided such credit shall not exceed the amount of tax imposed by this section:

T334

Amount of Taxable Gifts

Rate of Tax

T335

Not over $9,100,000

None

T336

Over $9,100,000

11.6% of the excess

T337

but not over $10,100,000

over $9,100,000

T338

Over $10,100,000

$116,000 plus 12% of the excess

T339

 

over $10,100,000

(11) With respect to Connecticut taxable gifts, as defined in section 12-643, made by a donor during a calendar year commencing on or after January 1, 2023, including the aggregate amount of all Connecticut taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005, the tax imposed by section 12-640 for the calendar year shall be at the rate set forth in the following schedule, with a credit allowed against such tax for any tax previously paid to this state pursuant to this subdivision or pursuant to subdivision (3), (4), (5), (6), (7), (8), (9) or (10) of this subsection, provided such credit shall not exceed the amount of tax imposed by this section:

T340

Amount of Taxable Gifts

Rate of Tax

T341

Not over the

None

T342

federal basic exclusion amount

 

T343

Over the

12% of the excess over the

T344

federal basic exclusion amount

federal basic exclusion amount

Sec. 16. Subdivision (3) of subsection (b) of section 12-392 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(3) (A) A tax return shall be filed, in the case of every decedent who died prior to January 1, 2005, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state, whenever the personal representative of the estate is required by the laws of the United States to file a federal estate tax return.

(B) A tax return shall be filed, in the case of every decedent who dies on or after January 1, 2005, but prior to January 1, 2010, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over two million dollars, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is two million dollars or less, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

(C) A tax return shall be filed, in the case of every decedent who dies on or after January 1, 2010, but prior to January 1, 2011, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over three million five hundred thousand dollars, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is three million five hundred thousand dollars or less, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

(D) A tax return shall be filed, in the case of every decedent who dies on or after January 1, 2011, but prior to January 1, 2018, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over two million dollars, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is two million dollars or less, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

(E) A tax return shall be filed, in the case of every decedent who dies on or after January 1, 2018, but prior to January 1, 2019, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over two million six hundred thousand dollars, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is two million six hundred thousand dollars or less, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

(F) A tax return shall be filed, in the case of every decedent who dies on or after January 1, 2019, but prior to January 1, 2020, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over three million six hundred thousand dollars, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is three million six hundred thousand dollars or less, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

(G) A tax return shall be filed, in the case of every decedent who dies on or after January 1, 2020, but prior to January 1, 2021, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over five million one hundred thousand dollars, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is five million one hundred thousand dollars or less, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

(H) A tax return shall be filed, in the case of every decedent who dies on or after January 1, 2021, but prior to January 1, 2022, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over seven million one hundred thousand dollars, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is seven million one hundred thousand dollars or less, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

(I) A tax return shall be filed, in the case of every decedent who dies on or after January 1, 2022, but prior to January 1, 2023, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over nine million one hundred thousand dollars, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is nine million one hundred thousand dollars or less, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

[(G)] (J) A tax return shall be filed, in the case of every decedent who dies on or after January 1, [2020] 2023, and at the time of death was (i) a resident of this state, or (ii) a nonresident of this state whose gross estate includes any real property situated in this state or tangible personal property having an actual situs in this state. If the decedent's Connecticut taxable estate is over the federal basic exclusion amount, such tax return shall be filed with the Commissioner of Revenue Services and a copy of such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated. If the decedent's Connecticut taxable estate is equal to or less than the federal basic exclusion amount, such return shall be filed with the court of probate for the district within which the decedent resided at the date of his or her death or, if the decedent died a nonresident of this state, the court of probate for the district within which such real property or tangible personal property is situated, and no such return shall be filed with the Commissioner of Revenue Services. The judge of probate for the district in which such return is filed shall review each such return and shall issue a written opinion to the estate representative in each case in which the judge determines that the estate is not subject to tax under this chapter.

Sec. 17. (Effective from passage) Notwithstanding subsection (f) of section 16-245mm of the general statutes, the obligation of the Connecticut Green Bank to make basic rental payments, consisting of a principal component and an interest component, under the equipment lease-purchase agreement entered into by said bank in December, 2017, for the installation of solar equipment at various locations of the Connecticut State Colleges and Universities, may be secured by a special capital reserve fund, provided said bank obtains the approvals described in said subsection after the issuance of such obligation and notwithstanding that such obligation is set forth in the form of a lease agreement.

Sec. 18. (Effective from passage) The Commissioner of Economic and Community Development shall conduct a study to identify best practices for marketing the benefits of qualified opportunity zones, as defined in 26 USC 1400Z-1, to increase investment in distressed census tracts and municipalities. Not later than January 1, 2019, the commissioner shall submit the results of such study, in accordance with the provisions of section 11-4a of the general statutes, to the joint standing committees of the General Assembly having cognizance of matters relating to commerce, finance, revenue and bonding and municipalities.

This act shall take effect as follows and shall amend the following sections:

Section 1

from passage and applicable to taxable years commencing on or after January 1, 2018

New section

Sec. 2

from passage and applicable to taxable years commencing on or after January 1, 2018

New section

Sec. 3

from passage

12-719(b)(1)

Sec. 4

from passage

12-719(c)(1)

Sec. 5

from passage and applicable to taxable years commencing on or after January 1, 2018

12-726

Sec. 6

from passage and applicable to taxable years commencing on or after January 1, 2018

12-733(b)

Sec. 7

from passage

4-30a(a)

Sec. 8

May 15, 2018

3-20(aa)(1)

Sec. 9

from passage

3-114g

Sec. 10

July 1, 2018

New section

Sec. 11

from passage and applicable to taxable years commencing on or after January 1, 2017

12-701(a)(20)(A) and (B)

Sec. 12

from passage

12-217(b)

Sec. 13

from passage and applicable to income years commencing on or after January 1, 2017

12-217(a)(2)

Sec. 14

from passage

12-391(g)

Sec. 15

from passage

12-642(a)

Sec. 16

from passage

12-392(b)(3)

Sec. 17

from passage

New section

Sec. 18

from passage

New section

FIN

Joint Favorable Subst.

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 19 $

FY 20 $

Department of Revenue Services

GF - Revenue Impact

See Below

See Below

Department of Revenue Services

GF - Cost

Less than 100,000

None

Note: GF=General Fund

Municipal Impact:

Municipalities

Effect

FY 19 $

FY 20 $

Various Municipalities

See Below

See Below

See Below

Explanation

The bill makes a number of tax-related and other changes, the fiscal impact of which is detailed in a section-by-section analysis below:

Sections 1-9 establish a new Pass-Through Entity Tax (PET) and an offsetting Personal Income Tax credit. This may result in a minimal revenue gain beginning in FY 19; however the credit is anticipated to offset nearly the entire amount of revenue gained under the PET. This also results in a one-time cost to the Department of Revenue Services (DRS) of less than $100,000 in FY 19 to implement the PET and associated credit.

Section 10 allows municipalities to provide a property tax credit to taxpayers who make voluntary donations to a “community supporting organization” approved by the municipality. It is assumed that the net budgetary impact of any town choosing to utilize this option would be neutral and thus this does not result in any fiscal impact to municipalities.

Sections 11-12 establish alternative depreciation and asset expensing schedules for certain property and assets impacted by federal bonus depreciation and asset expensing rules. This precludes a deferral of revenue that would have reduced revenue in the early years and increased revenue in later years due to the accelerated depreciation of capital and other assets. The total annual amount of state revenue impacted by the alternative bonus depreciation and asset expensing provisions is estimated to be less than $50 million and less than $20 million, respectively.

Section 13 provides that expenses related to dividends equal 10% of all dividends received by a company during an income year, except when DRS agrees to a different percentage as petitioned by a taxpayer. The revenue impact of this provision is uncertain as affected companies would have had to add back related expenses in the absence of this provision and it is unclear how those amounts would compare to the 10% provided under the bill.

Sections 14-16 extend, by three years, the phase-in of the Estate and Gift Tax threshold to the federal threshold. This results in a revenue gain of $28.3 million in FY 21 and $15.1 million in FY 22, and a diminishing revenue gain through FY 24 (at which point the state exemption level would be equal to the federal exemption level).

Section 17 allows the Connecticut Green Bank to secure its obligations under a lease-purchase agreement entered into in December 2017. This does not result in any fiscal impact as this validates an existing contract.

Section 18 requires the Department of Economic and Community Development to study various aspects of federal qualified opportunity zones and report findings to the Commerce, Planning and Development, and Finance committees. This does not result in any fiscal impact as it is anticipated that the agency has the expertise to complete such study without additional agency resources.

The Out Years

See above.

Sources:

Department of Revenue Services

 

Joint Committee on Taxation Analysis of 2017 Tax Cuts and Jobs Act

OLR Bill Analysis

sSB 11

AN ACT CONCERNING CONNECTICUT'S RESPONSE TO FEDERAL TAX REFORM.

SUMMARY

This bill makes various changes to state and local tax laws. Specifically, the bill:

The bill also moves up the deadline by which DRS must receive corporate income tax receipts in order for the comptroller to record them as revenue for a fiscal year, making it the same as the deadline that applies to other taxes (i.e., five business days after July 31, rather than after August 15, immediately following the fiscal year) (9). The bill also applies this deadline to entity tax receipts.

Lastly, the bill makes technical and conforming changes.

EFFECTIVE DATE: Upon passage, unless noted otherwise below.

1-8 — PASS-THROUGH ENTITY TAX

The bill imposes a new income tax on most pass-through businesses (i.e., “affected business entities”) at the entity-level (i.e., entity tax). The tax is (1) levied at the top personal income tax rate of 6.99% and (2) offset by a credit at the personal or corporate income tax level.

Under current law, pass-through businesses doing business in the state do not pay income tax at the entity level; instead, their profits “pass-through” to their owners and are taxed as part of the owners' personal income tax returns. Paying taxes at the entity level as required under the bill, instead of at the personal income tax level, may provide pass-through income with favorable federal tax treatment, given recent tax changes that limit the amount of state and local taxes (SALT) that can be deducted for federal personal income tax purposes, (see BACKGROUND).

Under the bill, the entity tax applies to each pass-through business that is required by state law to file a return with DRS containing information about its finances and its resident and nonresident members (CGS 12-726). Such businesses must file an entity tax return on or before the 15th day of the third month following the close of each entity's taxable year for federal income tax purposes (i.e., taxable year).

The bill requires pass-through businesses to make estimated entity tax payments and gives DRS authority to enforce the entity tax and the estimated payments.

The bill also incorporates entity tax revenue into the volatility cap that was passed in PA 17-2, June Special Session (JSS) (see BACKGROUND).

EFFECTIVE DATE: Upon passage, and applicable to taxable years beginning on or after January 1, 2018, except that the conforming change to the volatility cap bond covenant provision ( 8) is effective May 15, 2018.

Affected Business Entities and Members

Under the bill, an “affected business entity” (“pass-through businesses”) is (1) any entity, including a limited liability company (LLC), that is considered a partnership for federal income tax purposes or (2) any corporation treated as an S corporation for federal tax purposes. It does not include publicly-traded partnerships that have agreed to file an annual return reporting the name, address, Social Security or federal employer identification number, and other DRS-required information for each unitholder whose income from Connecticut sources was more than $500.

“Member” refers to (1) an S corporation shareholder; (2) a partner in a general partnership, limited partnership, or limited liability partnership; or (3) a member of an LLC treated as a partnership for federal tax purposes.

Tax Calculation

Under the bill, a business's entity tax liability equals (1) its taxable income, or the alternative tax base (see below), (2) multiplied by 6.99% (i.e., the top marginal personal income tax rate). The business's taxable income equals:

In determining their taxable income, pass-through businesses must use sourcing rules that currently apply to the personal income tax to determine whether their income, gains, losses, or deductions are derived from, or are connected to, Connecticut sources. If the business's net income results in a net loss, the business may carry the loss forward until it is fully used.

Tiered Business Entities. The bill requires pass-through businesses to adjust their income to account for instances where one business is a member of another business. Specifically, if a pass-through business (which the bill calls the lower-tier entity) is a member of another pass-through business (which the bill calls the upper-tier entity), the lower-tier entity must subtract or add, as applicable, its distributive share of the upper tier entity's loss or income from Connecticut sources when calculating its taxable income.

Alternative Tax Base. The bill allows businesses to calculate their tax on an alternative basis. The alternative tax base equals a business's “resident portion of unsourced income” plus its “modified Connecticut source income.”

Each taxable year, any business electing to calculate entity tax on the alternative basis must notify the DRS commissioner, in writing, by the tax's due date or extended due date (if applicable). The bill specifies that the election does not affect the calculation of any other state taxes due, except for the calculation of the tax credits the bill authorizes (see “offsetting credits” below).

The bill defines “modified Connecticut source income” as the business's taxable (i.e., Connecticut-sourced) income, calculated as described above, multiplied by a percentage equal to the sum of ownership interests in the business that are held by members that are (1) subject to personal income tax or (2) pass-through businesses subject to the entity tax, to the extent such businesses are directly or indirectly owned by people subject to the income tax. Members that are pass-through businesses are assumed to be directly or indirectly owned as such, unless the business can establish otherwise through clear and convincing evidence satisfactory to the DRS commissioner.

Under the bill, the “resident portion of unsourced income” equals “unsourced income” multiplied by a percentage equal to the sum of the ownership interests in the pass-through business that belong to Connecticut residents. “Unsourced income” equals:

Nonresidents

Under the bill, nonresident members of pass-through businesses are generally not required to file a Connecticut personal income tax return for taxable years in which (1) the pass-through business is the only source of Connecticut income for the member or the member's spouse and (2) the pass-through business has paid the entity tax. However, nonresident members must still file a return if (1) the pass-through entity of which they are a member chooses to file on a combined basis (see below) and (2) the member's personal income tax liability would not be entirely satisfied by the offsetting credit the member earns for the business's entity tax payment (see below).

Under current law, a pass-through business is generally required to file an income tax return and pay the tax on behalf of any nonresident member for whom the business is the only source of Connecticut income. For taxable years beginning on or after January 1, 2018, the bill eliminates these requirements.

Offsetting Credits

The bill authorizes offsetting corporate and personal income tax credits for individuals and companies that are members of pass-through businesses that pay the entity tax or a substantially similar tax in another state.

Personal Income Tax. If the pass-through business member is an individual subject to the personal income tax, the bill allows the person to claim a credit equal to his or her direct and indirect pro rata share of the tax paid by the pass-through business of which he or she is a member, multiplied by 93.01%. The bill makes this credit refundable and requires the DRS commissioner to treat the amount by which the person's credit exceeds his or her personal income tax liability as a tax overpayment, unless the excess must be held for certain obligations (e.g., past due taxes).

The bill also authorizes a personal income tax credit for members of pass-through businesses that have paid taxes to other states or the District of Columbia that are substantially similar, in the DRS commissioner's determination, to the entity tax imposed under this bill. The credit is for the member's direct and indirect pro rata share of such taxes paid by the pass-through business and is calculated in a manner prescribed by the DRS commissioner, which must be consistent with the calculation for the credit for personal income taxes paid to another state.

Under the bill, neither of these tax credits may be applied against the withholding tax.

Corporation Business Tax. If a pass-through business member is a company subject to the corporation tax, the bill allows the company to claim a credit equal to its direct and indirect pro rata share of the tax paid by the pass-through business of which it is a member, multiplied by 93.01%.

The company must apply this credit after all other tax credits are applied, and the credit is not subject to the corporation business tax credit cap, which generally prohibits a business from using tax credits to reduce its corporation tax liability by more than a specified percentage (e.g., 65% for the 2018 income year) (CGS 12-217zz). Unused credits must be carried forward, indefinitely, until fully used.

Tax Collection, Enforcement, and Penalties

Upon the failure of any pass-through business to pay the entity tax within 30 days of its due date, the bill allows the DRS commissioner to collect the entity tax by taking any action that he can currently take to collect money owed to the state. This means he (or another authorized agent) can levy on the property or sign a warrant to take control of the business, including operating it to secure its income for the state, forcing an end to its operations. Additionally, the attorney general may start civil proceedings to collect the tax.

From last day of the last month of a business's taxable year next preceding the tax's due date until the tax is paid, the tax plus the interest and penalty act as a lien against any real estate the taxpayer owns in the state. A lien certificate, signed by the commissioner, may be recorded on the land record in the town where the property is located. However, the lien is not effective against a bona fide purchaser or the interest of any qualified encumbrancer. And if any interested party asks, the commissioner must file a certificate discharging the lien on the same land record.

Under the bill, the attorney general can foreclose the lien by bringing an action in the Superior Court of the judicial district where the property is located. If located in two or more districts, the attorney general may file suit in any one. At the conclusion of any such action, the court can limit the redemption period, order the property sold, or issue any other equitable decree.

If entity taxes are not paid by their due date, the bill imposes an interest penalty of 1% per month or part of a month.

The bill additionally applies provisions related to tax collection and enforcement that apply to other taxes under current law (i.e., the admissions and dues tax). Under these provisions, the DRS commissioner can, among other things, (1) assess tax deficiencies where necessary; (2) require the businesses to keep certain records and examine all of their records; (3) administer oaths, subpoena witnesses, and receive testimony; and (4) extend the tax due date for reasonable cause. Businesses can file for a refund for tax overpayments, request a hearing on the amount of taxes they are required to pay, and appeal the hearing decision if aggrieved. Lastly, an additional penalty may be imposed on businesses for willful violations or filing fraudulent returns.

Combined Return Election

The bill allows pass-through businesses to file a combined return with one or more commonly-owned pass-through businesses that are subject to the entity tax. (“Commonly-owned” means that more than 80% of the voting control of a pass-through business is directly owned or indirectly owned, as determined under federal tax law, by a common owner or owners.) Each taxable year, any business that chooses to file in this manner must notify the DRS commissioner, in writing and along with the written consent of the other commonly-owned businesses, by the tax's due date or extended due date (if applicable).

The bill generally requires pass-through businesses filing a combined return to net their taxable incomes after such amounts are separately allocated by each business. If the combined group elects to calculate the tax due on the alternative basis (see above), the businesses must instead net their alternative tax bases.

Under the bill, each business electing to file a combined return is jointly and separately liable for the entity taxes due. The election does not affect the calculation of any other state taxes due, except for the calculation of the tax credits the bill authorizes.

Reporting Of Members' Shares of Entity Tax Payments

The bill requires pass-through businesses to report, for each taxable year, each member's (1) direct pro rata share of entity tax imposed on the business and (2) indirect pro rata share of the entity tax imposed on any upper-tier entities of which the business is a member.

Businesses that elect to file a combined report must report to the DRS commissioner the direct and indirect pro rata share of the entity tax paid under the combined return that is allocated to each of their members. The report must be filed with the combined return and the allocation is irrevocable.

The bill makes corresponding changes to require that this information be included in the returns that pass-through businesses doing business in the state must file with the DRS commissioner. It also moves up, from the fourth to the third month following the taxable year, the date by which these returns must be filed.

Estimated Payments

By law, Connecticut income tax payers must make estimated income tax payments throughout the tax year through withholding, estimated payments, or both (CGS 12-722). When calculating estimated income tax payments, taxpayers may take into account any tax credits they expect to receive, among other things. Currently, members of pass-through businesses typically make estimated payments on the income they expect to receive from such businesses.

The bill requires pass-through businesses to make estimated entity tax payments on a quarterly basis, in a similar manner to the estimated income tax payments under existing law. (Presumably, because pass-through business members receive offsetting credits for the entity taxes the business pays, such members will no longer be required to make quarterly payments on the income they receive from the pass-through business.)

Under the bill, the business's quarterly estimated payments are (1) generally equal to 25% of the “required annual payment” and (2) due on the 15th day of the taxable year's fourth, sixth, and ninth month, and on the 15th day of the first month of the next taxable year. The “required annual payment” means the lesser of (1) 90% of the entity tax reported or due for the current taxable year or (2) 100% of the entity tax reported on the entity tax return for the preceding taxable year, if the pass-through business filed a return for that year that covered a 12-month period.

The bill allows businesses to make payments based on the “annualized income installment” calculation if, for any required installment, such a calculation results in a lower installment payment. Under the bill, the annualized income installment is the amount by which the product of the applicable percentage (see Table 1) and the amount of entity tax that would be due if the business's taxable income for the months in the taxable year prior to the installment's due date exceeds the aggregate amount of any prior required installments for the taxable year. Any installment reduction that results from such a calculation must be recaptured by increasing the next required installment and, if the reduction has not been recaptured, subsequent installments.

Table 1: Applicable Percentages of Annualized Installment Calculation

If a pass-through business underpays the required estimated tax, the bill imposes an interest penalty of 1% of the underpayment amount per month, or part of a month, of the underpayment period. The underpayment amount is the amount by which the required installment exceeds the payment made, if any, on or before the installment's due date. The underpayment period runs from the installment's due date to the earlier of (1) the 15th day of the third month of the next succeeding taxable year or (2) the date on which the underpayment is paid. Estimated tax payments must be credited against unpaid or underpaid installments in the order in which the installments must be paid.

The bill allows businesses to make any required payment before its due date. Under the bill, estimated entity tax payments are considered payments toward the business's annual entity tax liability.

For taxable years of fewer than 12 months, the bill specifies that its provisions apply in a manner consistent with the income tax regulations pertaining to the relevant taxable years.

10 — PROPERTY TAX CREDIT FOR DONATIONS TO COMMUNITY SUPPORTING ORGANIZATIONS

The bill allows municipalities to provide a property tax credit to eligible taxpayers who make voluntary, unrestricted, and irrevocable contributions to a community supporting organization (organization) approved by the municipality (see BACKGROUND).

Under the bill, a “community supporting organization” is a charitable nonprofit that is organized exclusively to support municipal spending on programs and services, such as public education. A “municipality” is any town, city, borough, consolidated town and city, or consolidated town and borough.

Under the bill, the credit applies only to taxes on “residential property,” which the bill defines as (1) buildings with three or fewer dwelling units, the parcel of land on which the building is situated, and any accessory buildings or other improvements on the parcel; (2) residential condominiums; and (3) common interest communities.

EFFECTIVE DATE: July 1, 2018

Municipal Approval of Credit

The bill requires a municipality to annually approve the credit by a vote of its legislative body, or the board of selectman if the municipality's legislative body is a town meeting. In its approval, the municipality may include a residency requirement or other requirements that it deems necessary or desirable. The municipality must approve the credit by October first in order to provide the tax credit in the following fiscal year.

Under the bill, the municipality determines the tax credit amount, which may not exceed the lesser of:

Community Supporting Organization and Municipal Grants

The bill requires a municipality that approves a credit to designate a single organization to receive qualifying cash donations. Municipalities can appropriate and spend grant funds received from the organization.

The municipality's chief executive must enter into an agreement with the organization the municipality selects, which must require the:

Donations and Credit Application

Upon the municipality's approval of the tax credit, the bill allows a residential property owner, or a person on his or her behalf, to make a donation to the organization designated by the municipality.

In order to receive the property tax credit, the bill requires a taxpayer to apply, to the tax collector in the municipality in which the property is located, between January 1 and April 1 of the fiscal year prior to the fiscal year for which the taxpayer will claim the credit. The application must include (1) evidence, satisfactory to the tax collector, of the amount of the taxpayer's donations to the organization in the preceding calendar year and (2) an affidavit, on an Office of Policy and Management-prescribed form, affirming that the taxpayer's donations were made in cash and were voluntary, unrestricted, and irrevocable.

Upon receiving the application and required documentation, the tax collector must apply the tax credit, subject to any limits the municipality applied to the tax credit in its authorizing ordinance, to the property tax due for the fiscal year for which the application was made. The bill prohibits taxpayers from using a donation made to an organization to claim a tax credit for more than one fiscal year.

Under the bill, a taxpayer who knowingly submits false records or makes a false affidavit in order to claim a tax credit must (1) pay a fine of up to $500 and (2) refund to the municipality the entire amount of the tax credit the taxpayer improperly received.

11 & 12 — BONUS DEPRECIATION AND ASSET EXPENSING DEDUCTIONS

The bill requires taxpayers to make certain adjustments to federal business tax deductions for bonus depreciation and asset expensing for purposes of state personal income and corporation business tax (see BACKGROUND).

Beginning with the 2017 tax year, the bill requires individuals receiving income from pass-through businesses (e.g., limited liability partnerships and limited liability corporations) to add back the federal bonus depreciation deduction for property placed in service after September 27, 2017, when calculating their Connecticut adjusted gross income for the state personal income tax. But it allows them to deduct 25% of the disallowed deduction for each of the four succeeding tax years. Existing law, unchanged by the bill, disallows the federal bonus depreciation deduction for state corporation business tax purposes.

The bill also requires individuals and corporations, for state personal income and corporation business tax purposes respectively, to apportion the federal deduction for the cost of qualifying property (“section 179 property”) over a five-year period. They must do so for tax years (for personal income tax) or income years (for corporation business tax) beginning on or after January 1, 2018. Under the bill, individuals and corporations (1) must add back 80% of the federal deduction in the first year and (2) may deduct 25% of the disallowed portion of the deduction in each of the four succeeding tax years (i.e., 20% a year for five years).

EFFECTIVE DATE: Upon passage; the personal income tax provisions are applicable to tax years beginning on or after January 1, 2017.

13 — DIVIDENDS RECEIVED DEDUCTION

Existing law generally allows corporations to deduct from their gross income the dividends they receive from other corporations in which they have an ownership stake. But the law disallows any deduction for expenses related to those dividends. The bill provides that expenses related to dividends equal 10% of all dividends received by a company during an income year, except as described below. For multi-state companies or financial service companies, the bill requires the net income associated with the disallowed expenses to be apportioned according to the existing statutory requirements for doing so.

Alternate Percentage

The bill allows companies to petition the DRS commissioner for a different percentage if the company believes that the dividend-related expenses it incurred during the income year and prior income years are less than 10% of such dividends. The company must submit its petition to the commissioner within 60 days before its tax return for the applicable income year is due, taking into account any filing extensions granted for the return. The commissioner may grant the petition if he determines that the company has established, by clear and convincing evidence, that the company's proposed alternate percentage accurately reflects its dividend-related expenses. The commissioner must grant or deny the petition before the return's due date.

EFFECTIVE DATE: Upon passage, and applicable to income years beginning on or after January 1, 2017.

14-16 — GIFT AND ESTATE TAX

The bill extends, by three years, the phase-in of the estate and gift tax threshold to the federal threshold. Under current law, the estate and gift tax threshold increases over three years, from $2.6 million in 2018, to $3.6 million in 2019, and to the federal basic exclusion amount in 2020 and thereafter. As Tables 2 and 3 show, the bill extends the phase-in to 2023 by setting the gift and estate tax threshold at $5.1 million for 2020, $7.1 million for 2021, $9.1 million for 2022, and the federal basic exclusion amount for 2023 and thereafter.

The federal Tax Cuts and Jobs Act of 2017 doubled the federal threshold (to $11 million in 2018, after adjusting for inflation).

Table 2: Estate and Gift Tax Rates, 2020 to 2022

Value of Taxable Estate or Gift

Rates

Current Law

Bill

2020 and after*

2020

2021

2022

Up to $5,100,000

None

None

None

None

$5,100,001 to federal threshold

10%

Federal threshold to $6,100,000

10%

$6,100,001 to $7,100,000

10.4%

10.4%

$7,100,001 to $8,100,000

10.8%

10.8%

10.8%

$8,100,001 to $9,100,000

11.2%

11.2%

11.2%

$9,100,001 to $10,100,000

11.6%

11.6%

11.6%

11.6%

Over $10,100,000

12%

12%

12%

12%

*Rates apply to the excess over the federal threshold

Table 3: Estate and Gift Tax Rates Under the Bill, 2023 and Thereafter

Value of Taxable Estate and Gift

Rate for 2023 and Thereafter

Up to federal threshold

None

Over federal threshold

12%

The bill makes conforming changes to requirements for filing tax returns with the Department of Revenue Services (DRS) and the probate court. By law, all estates, regardless of their gross value, must file an estate tax return. If the estate's value is more than the taxable threshold, the executor must file the return with DRS, with a copy to the probate court for the district where the decedent lived or, if the decedent was not a Connecticut resident, where the Connecticut property is located. If the estate's value is below the tax threshold, the return must be filed only with the appropriate probate court. The probate judge must review the return and issue a written opinion to the estate's representative if the judge determines it is not subject to the estate tax.

Under current law, for deaths on or after January 1, 2020, the threshold for filing an estate tax return only with the probate court is the federal estate tax threshold. The bill instead sets the threshold at:

17 — CONNECTICUT GREEN BANK

Existing law allows the Green Bank to issue bonds secured by a SCRF, subject to the (1) approval of the Office of Policy and Management (OPM) secretary and state treasurer, or their deputies, and (2) Green Bank determining and documenting that project revenue will be sufficient to pay the bond principal and interest and other specified costs.

The bill authorizes the Green Bank to secure with a SCRF its obligations to make basic rental payments, consisting of principal and interest, under the equipment lease-purchase agreement it entered into in December 2017 for the installation of solar equipment at various locations of the Connecticut State Colleges and Universities. The authorization applies as long as the Green Bank obtains the required approvals after the obligation's issuance and regardless that the obligation is established in the form of a lease agreement.

18 — OPPORTUNITY ZONES STUDY

The bill requires the Department of Economic and Community Development commissioner to conduct a study identifying best practices for marketing the benefits of qualified “opportunity zones,” as defined by federal law, in order to increase investment in distressed census tracts and municipalities. By January 1, 2019, the commissioner must report the findings to the Commerce; Planning and Development; and Finance, Revenue and Bonding committees.

The federal Tax Cuts and Jobs Act of 2017 allows state chief executive officers to nominate low-income communities for designation as a qualified opportunity zone and establishes tax incentives for investing in the designated zones through a qualified fund.

BACKGROUND

SALT Deduction

The federal SALT (i.e., state and local taxes) deduction allows taxpayers to reduce their taxable income by the amount they paid in certain state and local taxes during the tax year. Under prior law, taxpayers could claim the deduction (with no dollar limit) for four types of nonbusiness taxes, including state personal income taxes and property taxes. Under the federal Tax Cuts and Jobs Act, for the 2018 to 2025 tax years, the deduction is limited to $10,000 ($5,000 for married taxpayers filing separately) for such taxes paid or accrued in the tax year. Taxpayers may still claim a deduction with no dollar limit for state and local property taxes related to a business (e.g., property taxes paid for rental property) (26 U.S.C.A. 164, as amended by P.L. 115-97, 11042).

Volatility Cap

Established under PA 17-2, JSS ( 704, 707, 708 & 729), the “volatility cap” is a mechanism for diverting volatile tax revenue to the Budget Reserve Fund (BRF). It effectively caps at $3.15 billion the amount of personal income tax estimated and final payments that may be used to balance the budget, thus requiring any excess amounts to be transferred to the BRF after the close of General Fund accounts each fiscal year. It also requires certain state bonds to include a pledge to bondholders that the state will comply with the BRF law, except in limited circumstances.

Bonus Depreciation Deduction (26 USC 168(k))

The federal Tax Cuts and Jobs Act of 2017 authorizes a first-year bonus depreciation deduction of 100% on qualified new and used property businesses place in service after September 27, 2017, and before January 1, 2023 (the rate phases down by 20% each year thereafter). Prior law generally provided for a 50% bonus depreciation deduction in 2017, 40% in 2018, and 30% in 2019.

Asset Expensing (26 USC 179)

Under federal law, businesses can elect to treat the cost of qualifying property (“section 179 property”) as a deductible expense rather than a capital expenditure, subject to a maximum deduction and investment limitation. The federal Tax Cuts and Jobs Act of 2017 expands the type of property that taxpayers may elect to treat as section 179 property and increases the (1) maximum deduction for section 179 expensing from $510,000 to $1 million and (2) investment limitation from $2.03 million to $2.5 million. (The investment limitation reduces the maximum deduction allowed, dollar for dollar, by the amount of section 179 property placed in service during the tax year that exceeds the limit.)

Related Bills

HB 5581, favorably reported by the Finance, Revenue and Bonding Committee, requires business taxpayers to add back half of their federal bonus depreciation and asset expensing deductions and deduct the disallowed portion in the succeeding tax year.

COMMITTEE ACTION

Finance, Revenue and Bonding Committee

Joint Favorable Substitute

Yea

44

Nay

7

(04/05/2018)

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