OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

sHB-5584

AN ACT ESTABLISHING A TAX CREDIT FOR EMPLOYERS THAT PROVIDE PAID FAMILY AND MEDICAL LEAVE BENEFITS AND CONCERNING FAMILY AND MEDICAL LEAVE ACCOUNTS.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 19 $

FY 20 $

Department of Revenue Services

GF - Revenue Loss

None

Up to $2.5 million

Department of Revenue Services

GF - Cost

Less than 74,525

59,367

State Comptroller - Fringe Benefits1

GF - Cost

16,176

21,568

Treasurer

GF - Cost

At least 75,000

See Below

Note: GF=General Fund

Municipal Impact: None

Explanation

The bill, which establishes a Family and Medical Leave Act (FMLA) trust account and a business tax credit for paid FMLA benefits, results in an annualized revenue loss of up to $2.5 million in FY 20 and various costs outlined in detail below.

The new tax credit for small employers that provide paid FMLA benefits results in a revenue loss of up to $2.5 million annually beginning in FY 20. This also results in: 1) a one-time cost of less than $30,000 to the Department of Revenue Services (DRS) in FY 19 associated with updates to the online Taxpayer Service Center and the agency's Integrated Tax Administration System, and 2) an ongoing cost to DRS of $60,701 in FY 19 and $80,935 ($59,367 for salary and $21,568 for fringe costs) in FY 20 and annually thereafter associated with one Revenue Examiner to receive and verify applications for credits and to administer the overall tax credit cap established in the bill.

The bill requires the Treasurer to set up and administer a Connecticut Family and Medical Benefit Trust (FMBT) account program. There is expected to be one-time start-up costs to the Treasurer of up to $75,000 in FY 19. Once established, the Treasurer's costs of ongoing administration would be dependent on the number of accounts opened under the program and the total amount of participants' deposits available to be invested, along with other indeterminate factors surrounding use of the program.

Like other elective, tax-advantaged savings plans administered by the Office of the Treasurer, it is expected that the office would enter into a contract with a third party for administration of the program, to the extent that the program has the participation necessary to warrant use of an outside provider. Administrative and investment costs of similar programs are often paid using a portion of the fund's investment gains. However, the investment potential for the FMBT, like other investment programs at their start, is expected to be limited without significant initial capitalization funds available. Therefore, it is likely that administrative costs would be paid, partially or completely, by the General Fund until such time sufficient funds are available via investment gains.

The Out Years

The annualized ongoing cost impact identified above would continue into the future subject to inflation.

Additionally, the bill specifies that money in the FMBT account and any interest earnings on it is exempt from taxation. This results in a potential minimal revenue loss from the Personal Income Tax beginning in FY 21.

1 The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes is 36.33% of payroll in FY 19 and FY 20.