Substitute Senate Bill No. 416
Substitute Senate Bill No. 416
PUBLIC ACT NO. 98-110
AN ACT PROVIDING FOR REDUCTIONS IN TAXES FOR
INDIVIDUALS AND BUSINESSES.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. Subsection (b) of section 7 of
public act 97-309, as amended by section 4 of
public act 97-322, is repealed and the following
is substituted in lieu thereof:
(b) The credit allowed under this section
shall not exceed two hundred fifteen dollars for
the taxable year commencing January 1, 1997, and
for taxable years commencing on or after January
1, 1998, [two hundred eighty-five] THREE HUNDRED
FIFTY dollars of the property tax first becoming
due and actually paid during the taxpayer's
taxable year. In the case of any husband and wife
who file a return under the federal income tax for
such taxable year as married individuals filing a
joint return, the credit allowed shall not exceed
such amounts for each such taxable year, in the
aggregate, of the property tax first becoming due
and actually paid during the taxable year of such
husband and wife.
Sec. 2. (NEW) (a) Any taxpayer subject to tax
pursuant to chapter 229 of the general statutes,
who files a Connecticut income tax return for the
taxable year commencing January 1, 1997, on or
before May 1, 1998, or, for a taxpayer who has
been granted an extension to file such return,
October 16, 1998, and has paid property tax, which
first became due and was paid in such income year,
to a Connecticut political subdivision on the
taxpayer's primary residence or motor vehicle,
shall be entitled to a rebate in accordance with
the following schedule:
(1) For any person who files a return under
the federal income tax for such taxable year as an
unmarried individual or as a married individual
filing separately, an amount equal to the lesser
of the taxpayer's income tax liability as shown on
such return or seventy-five dollars, but in no
case less than fifty dollars;
(2) For any person who files a return under
the federal income tax for such taxable year as a
head of household, an amount equal to the lesser
of the taxpayer's income tax liability as shown on
such return or one hundred twenty dollars, but in
no case less than fifty dollars;
(3) For any husband and wife who file a
return under the federal income tax for such
taxable year as married individuals filing jointly
or a person who files a return under the federal
income tax as a surviving spouse, an amount equal
to the lesser of the taxpayer's income tax
liability as shown on such return or one hundred
fifty dollars, but in no case less than fifty
dollars.
(b) This section shall not apply to trusts
and estates.
(c) Amounts rebated pursuant to this section
shall be subject to the provisions for set-off as
provided in sections 12-739 and 12-742 of the
general statutes.
(d) As used in this section, "income tax
liability as shown on such return" means the
liability after application of the credit for
property taxes allowed and taken on such return
pursuant to section 7 of public act 97-309, as
amended by section 4 of public act 97-322, as
corrected for mathematical error by the
Commissioner of Revenue Services on the original
return filed by such taxpayer.
(e) Amounts rebated pursuant to this section
shall not be considered income for purposes of
sections 8-119l, 12-170d, 12-170aa, 17b-490,
17b-550, 17b-812, 47-88d and 47-287 of the general
statutes.
Sec. 3. (NEW) The Commissioner of Revenue
Services shall notify the State Comptroller of the
amount of the rebates pursuant to section 2 of
this act, and the State Comptroller shall draw an
order on the State Treasurer in the amount thereof
for payment to the taxpayer. For taxpayers who
have filed a Connecticut income tax return for the
taxable year commencing January 1, 1997, on or
before May 1, 1998, such rebates shall be issued
no later than July 31, 1998. All remaining rebates
shall be issued no later than December 15, 1998.
Sec. 4. Subdivision (20) of subsection (a) of
section 12-701 of the general statutes, as amended
by section 9 of public act 97-309, is repealed and
the following is substituted in lieu thereof:
(20) "Connecticut adjusted gross income"
means adjusted gross income, with the following
modifications: (A) There shall be added thereto
(i) 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 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 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 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 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 the extent deductible in
determining federal adjusted gross income, any
income taxes imposed by this state, (vii) 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 and (viii)
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. (B)
There shall be subtracted therefrom (i) 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 the extent
allowable under section 12-718, exempt dividends
paid by a regulated investment company, (iii) 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
or any province of Canada, to the extent properly
includable in gross income for federal income tax
purposes, (iv) to the extent properly includable
in gross income for federal income tax purposes,
any tier 1 railroad retirement benefits, (v) with
respect to any natural person who is a shareholder
of an S corporation which is carrying on, or which
has the right to carry on, business in this state,
as said term is used in section 12-214, the amount
of such shareholder's pro rata share of such
corporation's nonseparately computed items, as
defined in Section 1366 of the Internal Revenue
Code, that is subject to tax under chapter 208, in
accordance with subsection (c) of section 12-217,
multiplied by such corporation's apportionment
fraction, if any, as determined in accordance with
section 12-218, (vi) 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 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
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 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,
[and] (x) an amount equal to the difference
between the amount of Social Security benefits
includable for federal income tax purposes under
the provisions of Section 13215 of the Omnibus
Budget Reconciliation Act of 1993 and fifty per
cent of the amount of such Social Security
benefits includable for federal income tax
purposes under the provisions of the Internal
Revenue Code of 1986, or any subsequent
corresponding internal revenue code of the United
States, as from time to time amended, prior to
August 10, 1993, AND (xi) TO THE EXTENT PROPERLY
INCLUDABLE IN GROSS INCOME FOR FEDERAL INCOME TAX
PURPOSES, ANY AMOUNT REBATED TO A TAXPAYER
PURSUANT TO SECTIONS 2 AND 3 OF THIS ACT. With
respect to a person who is the beneficiary of a
trust or estate, there shall be added or
subtracted, as the case may be, from adjusted
gross income such person's share, as determined
under section 12-714, in the Connecticut fiduciary
adjustment.
Sec. 5. Subsections (8) and (9) of section
12-407 of the general statutes, as amended by
section 13 of public act 97-243 and section 7 of
public act 97-316, are repealed and the following
is substituted in lieu thereof:
(8) (A) "Sales price" means the total amount
for which tangible personal property is sold by a
retailer, the total amount of rent for which
occupancy of a room is transferred by an operator,
the total amount for which any service described
in subsection (2) of this section is rendered by a
retailer or the total amount of payment or
periodic payments for which tangible personal
property is leased by a retailer, VALUED IN MONEY,
WHETHER PAID IN MONEY OR OTHERWISE, which amount
is due and owing to the retailer or operator and,
subject to the provisions of subsection (1) of
section 12-408, AS AMENDED BY THIS ACT, whether or
not actually received by the retailer or operator,
without any deduction on account of any of the
following: (i) The cost of the property sold; (ii)
the cost of materials used, labor or service cost,
interest charged, losses or any other expenses;
(iii) for any sale occurring on or after July 1,
1993, any charges by the [seller] RETAILER to the
purchaser for shipping or delivery,
notwithstanding whether such charges are
separately stated in a written contract, or on a
bill or invoice rendered to such purchaser or
whether such shipping or delivery is provided by
the [seller] RETAILER or a third party. The
provisions of subparagraph (A) (iii) shall not
apply to any item exempt from taxation pursuant to
section 12-412, AS AMENDED BY THIS ACT. Such total
[amounts include] AMOUNT INCLUDES any services
that are a part of the sale; EXCEPT AS OTHERWISE
PROVIDED IN SUBPARAGRAPH (B)(v) OR (B)(vi) OF THIS
SUBSECTION, any amount for which credit is given
to the purchaser by the [seller] RETAILER, and all
compensation and all employment-related expenses,
whether or not separately stated, paid to or on
behalf of employees of a retailer of any service
described in subsection (2) of this section. (B)
"Sales price" does not include any of the
following: (i) Cash discounts allowed and taken on
sales; (ii) any portion of the amount charged for
property returned by [customers] PURCHASERS, which
upon rescission of the contract of sale is
refunded either in cash or credit, provided the
property is returned within ninety days from the
date of purchase; (iii) the amount of any tax, not
including any manufacturers' or importers' excise
tax, imposed by the United States upon or with
respect to retail sales whether imposed upon the
retailer or the [consumer] PURCHASER; (iv) the
amount charged for labor rendered in installing or
applying the property sold, provided such charge
is separately stated and exclusive of such charge
for any service rendered within the purview of
subparagraph (I) of subdivision (i) of subsection
(2) of this section; (v) UNLESS THE PROVISIONS OF
SUBSECTION (4) OF SECTION 12-430 OR OF SECTION
12-430a ARE APPLICABLE, ANY AMOUNT FOR WHICH
CREDIT IS GIVEN TO THE PURCHASER BY THE RETAILER,
PROVIDED SUCH CREDIT IS GIVEN SOLELY FOR PROPERTY
OF THE SAME KIND ACCEPTED IN PART PAYMENT BY THE
RETAILER AND INTENDED BY THE RETAILER TO BE
RESOLD; (vi) THE FULL FACE VALUE OF ANY COUPON
USED BY A PURCHASER TO REDUCE THE PRICE PAID TO A
RETAILER FOR AN ITEM OF TANGIBLE PERSONAL
PROPERTY, WHETHER OR NOT THE RETAILER WILL BE
REIMBURSED FOR SUCH COUPON, IN WHOLE OR IN PART,
BY THE MANUFACTURER OF THE ITEM OF TANGIBLE
PERSONAL PROPERTY OR BY A THIRD PARTY; [(v)] (vii)
the amount charged for separately stated
compensation, fringe benefits, workers'
compensation and payroll taxes or assessments paid
to or on behalf of employees of a retailer who has
contracted to manage a service recipient's
property or business premises and renders
management services described in subdivision (i)
of subsection (2) of this section, provided, the
employees perform such services solely for the
service recipient at its property or business
premises and "sales price" shall include the
separately stated compensation, fringe benefits,
workers' compensation and payroll taxes or
assessments paid to or on behalf of any employee
of the retailer who is an officer, director or
owner of more than five per cent of the
outstanding capital stock of the retailer.
Determination whether an employee performs
services solely for a service recipient at its
property or business premises for purposes of this
subdivision shall be made by reference to such
employee's activities during the time period
beginning on the later of the commencement of the
management contract, the date of the employee's
first employment by the retailer or the date which
is six months immediately preceding the date of
such determination; [and (vi)] (viii) the amount
charged for separately stated compensation, fringe
benefits, workers' compensation and payroll taxes
or assessments paid to or on behalf of a leased
employee. For purposes of this subparagraph, an
employee shall be treated as a leased employee if
[(1)] the employee is provided to the client at
the commencement of an agreement with an employee
leasing organization under which at least
seventy-five per cent of the employees provided to
the client at the commencement of such initial
agreement qualify as leased employees pursuant to
Section 414(n) of the Internal Revenue Code of
1986, or any subsequent corresponding internal
revenue code of the United States, as from time to
time amended, or [(2)] the employee is added to
the client's workforce by the employee leasing
organization subsequent to the commencement of
such initial agreement and qualifies as a leased
employee pursuant to Section 414(n) of said
Internal Revenue Code of 1986 without regard to
subparagraph (B) of paragraph (2) thereof. A
leased employee shall not include any employee who
is hired by a temporary help service and assigned
to support or supplement the workforce of a
temporary help service's client; AND (ix) ANY
AMOUNT RECEIVED BY A RETAILER FROM A PURCHASER AS
THE BATTERY DEPOSIT THAT IS REQUIRED TO BE PAID
UNDER SUBSECTION (a) OF SECTION 22a-245h; THE
REFUND VALUE OF A BEVERAGE CONTAINER THAT IS
REQUIRED TO BE PAID UNDER SUBSECTION (a) OF
SECTION 22a-244; OR A DEPOSIT THAT IS REQUIRED BY
LAW TO BE PAID BY THE PURCHASER TO THE RETAILER
AND THAT IS REQUIRED BY LAW TO BE REFUNDED TO THE
PURCHASER BY THE RETAILER WHEN THE SAME OR SIMILAR
TANGIBLE PERSONAL PROPERTY IS DELIVERED AS
REQUIRED BY LAW TO THE RETAILER BY THE PURCHASER,
IF SUCH AMOUNT IS SEPARATELY STATED ON THE BILL OR
INVOICE RENDERED BY THE RETAILER TO THE PURCHASER.
(9) (A) "Gross receipts" means the total
amount of the sales price from retail sales of
tangible personal property by a retailer, the
total amount of the rent from transfers of
occupancy of rooms by an operator, the total
amount of the sales price from retail sales of any
service described in subsection (2) of this
section by a retailer of services, or the total
amount of payment or periodic payments from leases
or rentals of tangible personal property by a
retailer, valued in money, whether received in
money or otherwise, which amount is due and owing
to the retailer or operator and, subject to the
provisions of subsection (1) of section 12-408, AS
AMENDED BY THIS ACT, whether or not actually
received by the retailer or operator, without any
deduction on account of any of the following: (i)
The cost of the property sold; however, in
accordance with such regulations as the
Commissioner of Revenue Services may prescribe, a
deduction may be taken if the retailer has
purchased property for some other purpose than
resale, has reimbursed his vendor for tax which
the vendor is required to pay to the state or has
paid the use tax with respect to the property, and
has resold the property prior to making any use of
the property other than retention, demonstration
or display while holding it for sale in the
regular course of business. If such a deduction is
taken by the retailer, no refund or credit will be
allowed to his vendor with respect to the sale of
the property; (ii) the cost of the materials used,
labor or service cost, interest paid, losses or
any other expense; (iii) for any sale occurring on
or after July 1, 1993, EXCEPT FOR ANY ITEM EXEMPT
FROM TAXATION PURSUANT TO SECTION 12-412, AS
AMENDED BY THIS ACT, any charges by the [seller]
RETAILER to the purchaser for shipping or
delivery, notwithstanding whether such charges are
separately stated in the written contract, or on a
bill or invoice rendered to such purchaser or
whether such shipping or delivery is provided by
the [seller] RETAILER or a third party. [The
provisions of subdivision (c) of this subsection
shall not apply to any item exempt from taxation
pursuant to section 12-412.] The total amount of
the sales price includes any services that are a
part of the sale; [,] all receipts, cash, credits
and property of any kind; [,] EXCEPT AS OTHERWISE
PROVIDED IN SUBPARAGRAPH (B)(v) OR (B)(vi) OF THIS
SUBSECTION, any amount for which credit is allowed
by the [seller] RETAILER to the purchaser; [,] and
all compensation and all employment-related
expenses, whether or not separately stated, paid
to or on behalf of employees of a retailer of any
service described in subsection (2) of this
section. (B) "Gross receipts" do not include any
of the following: (i) Cash discounts allowed and
taken on sales; (ii) any portion of the sales
price of property returned by [customers]
PURCHASERS, which upon rescission of the contract
of sale is refunded either in cash or credit,
provided the property is returned within ninety
days from the date of sale; (iii) the amount of
any tax, not including any manufacturers' or
importers' excise tax, imposed by the United
States upon or with respect to retail sales
whether imposed upon the retailer or the
[consumer] PURCHASER; (iv) the amount charged for
labor rendered in installing or applying the
property sold, provided such charge is separately
stated and exclusive of such charge for any
service rendered within the purview of
subparagraph (I) of subdivision (i) of subsection
(2) of this section; (v) UNLESS THE PROVISIONS OF
SUBSECTION (4) OF SECTION 12-430 OR OF SECTION
12-430a ARE APPLICABLE, ANY AMOUNT FOR WHICH
CREDIT IS GIVEN TO THE PURCHASER BY THE RETAILER,
PROVIDED SUCH CREDIT IS GIVEN SOLELY FOR PROPERTY
OF THE SAME KIND ACCEPTED IN PART PAYMENT BY THE
RETAILER AND INTENDED BY THE RETAILER TO BE
RESOLD; (vi) THE FULL FACE VALUE OF ANY COUPON
USED BY A PURCHASER TO REDUCE THE PRICE PAID TO
THE RETAILER FOR AN ITEM OF TANGIBLE PERSONAL
PROPERTY, WHETHER OR NOT THE RETAILER WILL BE
REIMBURSED FOR SUCH COUPON, IN WHOLE OR IN PART,
BY THE MANUFACTURER OF THE ITEM OF TANGIBLE
PERSONAL PROPERTY OR BY A THIRD PARTY; [(v)] (vii)
the amount charged for separately stated
compensation, fringe benefits, workers'
compensation and payroll taxes or assessments paid
to or on behalf of employees of a retailer who has
contracted to manage a service recipient's
property or business premises and renders
management services described in subdivision (i)
of subsection (2) of this section, provided the
employees perform such services solely for the
service recipient at its property or business
premises and "gross receipts" shall include the
separately stated compensation, fringe benefits,
workers' compensation and payroll taxes or
assessments paid to or on behalf of any employee
of the retailer who is an officer, director or
owner of more than five per cent of the
outstanding capital stock of the retailer.
Determination whether an employee performs
services solely for a service recipient at its
property or business premises for purposes of this
subdivision shall be made by reference to such
employee's activities during the time period
beginning on the later of the commencement of the
management contract, the date of the employee's
first employment by the retailer or the date which
is six months immediately preceding the date of
such determination; [and (vi)] (viii) the amount
charged for separately stated compensation, fringe
benefits, workers' compensation and payroll taxes
or assessments paid to or on behalf of a leased
employee. For purposes of this subparagraph, an
employee shall be treated as a leased employee if
[(1)] the employee is provided to the client at
the commencement of an agreement with an employee
leasing organization under which at least
seventy-five per cent of the employees provided to
the client at the commencement of such initial
agreement qualify as leased employees pursuant to
Section 414(n) of the Internal Revenue Code of
1986, or any subsequent corresponding internal
revenue code of the United States, as from time to
time amended, or [(2)] the employee is added to
the client's workforce by the employee leasing
organization subsequent to the commencement of
such initial agreement and qualifies as a leased
employee pursuant to Section 414(n) of said
Internal Revenue Code of 1986 without regard to
subparagraph (B) of paragraph (2) thereof. A
leased employee shall not include any employee who
is hired by a temporary help service and assigned
to support or supplement the workforce of a
temporary help service's client; AND (ix) AMOUNT
RECEIVED BY A RETAILER FROM A PURCHASER AS THE
BATTERY DEPOSIT THAT IS REQUIRED TO BE PAID UNDER
SUBSECTION (a) OF SECTION 22a-256h; THE REFUND
VALUE OF A BEVERAGE CONTAINER THAT IS REQUIRED TO
BE PAID UNDER SUBSECTION (a) of SECTION 22a-244 OR
A DEPOSIT THAT IS REQUIRED BY LAW TO BE PAID BY
THE PURCHASER TO THE RETAILER AND THAT IS REQUIRED
BY LAW TO BE REFUNDED TO THE PURCHASER BY THE
RETAILER WHEN THE SAME OR SIMILAR TANGIBLE
PERSONAL PROPERTY IS DELIVERED AS REQUIRED BY LAW
TO THE RETAILER BY THE PURCHASER, IF SUCH AMOUNT
IS SEPARATELY STATED ON THE BILL OR INVOICE
RENDERED BY THE RETAILER TO THE PURCHASER.
Sec. 6. Subsection (1) of section 12-408 of
the general statutes, as amended by section 17 of
public act 97-243, is repealed and the following
is substituted in lieu thereof:
(1) For the privilege of making any sales as
defined in subsection (2) of section 12-407, AS
AMENDED, at retail, in this state for a
consideration, a tax is hereby imposed on all
retailers at the rate of six per cent of the gross
receipts of any retailer from the sale of all
tangible personal property sold at retail or from
the rendering of any services constituting a sale
in accordance with subsection (2) of section
12-407, AS AMENDED, except, in lieu of said rate
of six per cent, [(A) at a rate of five and
one-half per cent of the gross receipts of any
retailer from the sale of any repair or
replacement parts exclusively for use in
machinery, as defined in subsection (34) of
section 12-412, used directly in a manufacturing
production process, (B)] (A) at a rate of twelve
per cent with respect to each transfer of
occupancy, from the total amount of rent received
for such occupancy of any room or rooms in a hotel
or lodging house for the first period not
exceeding thirty consecutive calendar days, [(C)]
(B) with respect to the sale of a motor vehicle to
any individual who is a member of the armed forces
of the United States and is on full-time active
duty in Connecticut and who is considered, under
50 App USC 574, a resident of another state, at a
rate of four and one-half per cent of the gross
receipts of any retailer from such sales, provided
such retailer requires and maintains an affidavit
or other evidence, satisfactory to the
commissioner, concerning the purchaser's state of
residence under 50 App USC 574, [(D)] (C) with
respect to the sale of a vessel to any individual
who does not maintain a permanent place of abode
in this state and who is a resident of another
state and who does not present such vessel for
registration with the Department of Motor Vehicles
in this state, at a rate which is the lesser of:
(i) Six per cent of the gross receipts of any
retailer from such sales or (ii) the percentage of
such gross receipts that is payable as a state
sales tax by retailers engaged in business in the
purchaser's state of residence, provided such
retailer requires and maintains an affidavit or
other evidence, satisfactory to the commissioner,
concerning the purchaser's state of residence,
[(E)] (D) with respect to the sales of computer
and data processing services occurring on or after
July 1, 1997, and prior to July 1, 1998, at the
rate of five per cent, on or after July 1, 1998,
and prior to July 1, 1999, at the rate of four per
cent, on or after July 1, 1999, and prior to July
1, 2000, at the rate of three per cent, on or
after July 1, 2000, and prior to July 1, 2001, at
the rate of two per cent, on and after July 1,
2001, and prior to July 1, 2002, at the rate of
one per cent and on and after July 1, 2002, such
services shall be exempt from such tax, and [(F)]
(E) with respect to the sales of repair or
maintenance services on vessels as defined in
section 15-127, occurring on or after July 1,
1997, and prior to July 1, 1998, at the rate of
four per cent, on or after July 1, 1998, and prior
to July 1, 1999, at the rate of two per cent and
on and after July 1, 1999, such services shall be
exempt from such tax. The rate of tax imposed by
this chapter shall be applicable to all retail
sales upon the effective date of such rate, except
that a new rate which represents an increase in
the rate applicable to the sale shall not apply to
any sales transaction wherein a binding sales
contract without an escalator clause has been
entered into prior to the effective date of the
new rate and delivery is made within ninety days
after the effective date of the new rate. For the
purposes of payment of the tax imposed under this
section, any retailer of services taxable under
subdivision (i) of subsection (2) of section
12-407, AS AMENDED, who computes taxable income,
for purposes of taxation under the Internal
Revenue Code of 1986, or any subsequent
corresponding internal revenue code of the United
States, as from time to time amended, on an
accounting basis which recognizes only cash or
other valuable consideration actually received as
income and who is liable for such tax only due to
the rendering of such services may make payments
related to such tax for the period during which
such income is received, without penalty or
interest, without regard to when such service is
rendered. Information about the state sales tax
rate of other states shall, upon request, be
furnished by the commissioner.
Sec. 7. Subsection (1) of section 12-411 of
the general statutes, as amended by section 19 of
public act 97-243, is repealed and the following
is substituted in lieu thereof:
(1) An excise tax is hereby imposed on the
storage, acceptance, consumption or any other use
in this state of tangible personal property
purchased from any retailer for storage,
acceptance, consumption or any other use in this
state, the acceptance or receipt of any services
constituting a sale in accordance with subsection
(2) of section 12-407, AS AMENDED, purchased from
any retailer for consumption or use in this state,
or the storage, acceptance, consumption or any
other use in this state of tangible personal
property which has been manufactured, fabricated,
assembled or processed from materials by a person,
either within or without this state, for storage,
acceptance, consumption or any other use by such
person in this state, to be measured by the sales
price of materials, at the rate of six per cent of
the sales price of such property or services,
except, in lieu of said rate of six per cent, [(A)
with respect to the storage, acceptance,
consumption or use of any repair or replacement
parts purchased from any retailer for storage,
acceptance, consumption or use in this state, at
the rate of five and one-half per cent of the
sales price of such parts, provided such parts are
exclusively for use in machinery, as defined in
subsection (34) of section 12-412, that is used
directly in a manufacturing production process,
(B)] (A) at a rate of twelve per cent of the rent
paid for occupancy of any room or rooms in a hotel
or lodging house for the first period of not
exceeding thirty consecutive calendar days, [(C)]
(B) with respect to the storage, acceptance,
consumption or use in this state of a motor
vehicle purchased from any retailer for storage,
acceptance, consumption or use in this state by
any individual who is a member of the armed forces
of the United States and is on full-time active
duty in Connecticut and who is considered, under
50 App USC 574, a resident of another state, at a
rate of four and one-half per cent of the sales
price of such vehicle, provided such retailer
requires and maintains an affidavit or other
evidence, satisfactory to the commissioner,
concerning the purchaser's state of residence
under 50 App USC 574, [(D)] (C) with respect to
the storage, acceptance, consumption or use in
this state of a vessel purchased from any retailer
for storage, acceptance, consumption or any other
use in this state by any individual who does not
maintain a permanent place of abode in this state
and who is a resident of another state and who
does not present such vessel for registration with
the Department of Motor Vehicles in this state, at
a rate which is the lesser of: (i) Six per cent of
the sales price of such vessel or (ii) the
percentage of such sales price that is payable as
a state use tax by purchasers making purchases in
the purchaser's state of residence, provided the
retailer requires and maintains an affidavit or
other evidence, satisfactory to the commissioner,
concerning the purchaser's state of residence,
[(E)] (D) with respect to the sales of repair or
maintenance services on vessels as defined in
section 15-127, occurring on or after July 1,
1997, and prior to July 1, 1998, at the rate of
four per cent, on or after July 1, 1998, and prior
to July 1, 1999, at the rate of two per cent and
on and after July 1, 1999, such services shall be
exempt from such tax, and [(F)] (E) with respect
to the acceptance or receipt in this state of
computer and data processing services purchased
from any retailer for consumption or use in this
state occurring on or after July 1, 1997, and
prior to July 1, 1998, at the rate of five per
cent of such services, on or after July 1, 1998,
and prior to July 1, 1999, at the rate of four per
cent of such services, on or after July 1, 1999,
and prior to July 1, 2000, at the rate of three
per cent of such services, on or after July 1,
2000, and prior to July 1, 2001, at the rate of
two per cent of such services, on and after July
1, 2001, and prior to July 1, 2002, at the rate of
one per cent of such services and on and after
July 1, 2002, such services shall be exempt from
such tax. Information about the state use tax rate
of other states shall, upon request, be furnished
by the commissioner.
Sec. 8. Subsection (6) of section 12-412 of
the general statutes is repealed and the following
is substituted in lieu thereof:
(6) (A) Sales of magazines, including
publications which only contain puzzles, by
subscription; (B) sales of newspapers. [by
subscription.]
Sec. 9. Subsection (34) of section 12-412 of
the general statutes is repealed and the following
is substituted in lieu thereof:
(34) Sales of and the storage, use or other
consumption of machinery used directly in a
manufacturing production process. The word
"machinery" as used in this subsection means the
basic machine itself, [including] AND INCLUDES all
of its component parts and contrivances, such as
belts, pulleys, shafts, moving parts, operating
structures and [all] equipment or devices, WHICH
COMPONENT PARTS AND CONTRIVANCES ARE used or
required to control, regulate or operate the
machinery OR TO ENHANCE OR ALTER ITS PRODUCTIVITY
OR FUNCTIONALITY, WHETHER SUCH COMPONENT PARTS AND
CONTRIVANCES ARE PURCHASED SEPARATELY OR IN
CONJUNCTION WITH SUCH MACHINE AND ALL REPLACEMENT
AND REPAIR PARTS FOR THE BASIC MACHINE OR FOR ITS
COMPONENT PARTS AND CONTRIVANCES, WHETHER SUCH
REPLACEMENT OR REPAIR PARTS ARE PURCHASED
SEPARATELY OR IN CONJUNCTION WITH SUCH MACHINE.
For the purposes of this subsection, "machinery"
includes machinery used exclusively to control or
monitor an activity occurring during the
manufacturing production process and machinery
used exclusively during the manufacturing
production process to test or measure materials
and products being manufactured but shall not
include office equipment or data processing
equipment other than numerically controlled
machinery used directly in the manufacturing
process.
Sec. 10. Section 12-412j of the general
statutes is repealed and the following is
substituted in lieu thereof:
In any sale at retail of any NEW OR
remanufactured part OF AN ITEM OF TANGIBLE
PERSONAL PROPERTY to [the owner of a truck or a
motor bus] A PURCHASER, which sale is made by a
retailer of such parts who [accepts] WILL ACCEPT
in return from such purchaser a core component or
core part of [a transmission, rear axle carrier,
engine or air brake system] SUCH TANGIBLE PERSONAL
PROPERTY, the sales or use tax with respect to
such sale shall be imposed on the difference
between the purchase price and the amount allowed
by the retailer on the returned core component or
core part, PROVIDED THE RETAILER SHALL COLLECT THE
TAX, AT THE TIME OF SALE, ON THE PURCHASE PRICE
AND, WHEN THE CORE COMPONENT OR CORE PART IS
RETURNED, SHALL REFUND SUCH TAX ON THE AMOUNT
ALLOWED BY THE RETAILER ON THE RETURNED CORE
COMPONENT OR CORE PART. When any such core
component or core part traded in is subsequently
sold to a consumer or user, the taxes imposed
under this chapter shall be applicable to such
sale. [For the purposes of this section,
"remanufactured part" means a transmission, a rear
axle carrier, engine or air brake system; "truck"
means a truck, as defined in section 14-1, with a
gross vehicle weight rating in excess of
twenty-six thousand pounds; "motor bus" means a
motor bus operating pursuant to a permit issued
under section 13b-89; and "owner" means the owner
of the truck or motor bus, or, if the truck or
motor bus is operated under a lease of more than
thirty days' duration, the lessee of the truck.]
Sec. 11. (NEW) (a) For purposes of this
section:
(1) "Administrative services" includes, but
is not limited to, clerical, fund or investment or
account holder accounting, participant record
keeping, transfer agency, bookkeeping, data
processing, custodial, internal auditing, legal
and tax services performed for an investment
entity, pension fund or retirement account but
only if the provider of such service or services
during the income year in which such service or
services are provided also provides, or is a
related person of a person that provides,
management or distribution services to such an
investment entity, pension fund or retirement
account.
(2) "Billing address" means the location
indicated in the books and records of the taxpayer
or, as applicable, the investment entity, pension
fund or retirement fund on the first day of the
taxable year or on such later date in the taxable
year when the relationship with the customer or,
in the case of an investment entity, pension fund
or retirement account, investor or participant
began as the address where any notice, statement
or bill relating to a customer's, investor's or
participant's account is mailed.
(3) "Borrower located in this state" means
(A) a borrower that is engaged in a trade or
business which maintains its commercial domicile
in this state, or (B) a borrower that is not
engaged in a trade or business whose billing
address is in this state.
(4) "Commercial domicile" means the
headquarters of the trade or business, that is,
the place from which the trade or business is
principally managed and directed.
(5) "Distribution services" means the
services of advertising, servicing, marketing or
selling interests in an investment entity, pension
fund or retirement account, but, in the case of
advertising, servicing or marketing interests,
only where such service is performed by a person
that is, or, in the case of a closed-end company,
was, either engaged in the service of selling such
interests or a related person of a person that is
engaged in the service of selling such interests.
(6) "Financial service company" means:
(A) Any corporation or other business entity
registered under the laws of any state as a bank
holding company or registered under the federal
Bank Holding Company Act of 1956, as amended, or
registered as a savings and loan holding company
under the federal National Housing Act, as
amended;
(B) A national bank organized and existing as
a national bank association pursuant to the
provisions of the National Bank Act, 12 USC
Section 21 et seq.;
(C) A savings association or federal savings
bank, as defined in the Federal Deposit Insurance
Act, 12 USC 1813(b)(1);
(D) Any bank, banking association, trust
company, savings and loan association or thrift
institution incorporated or organized under the
laws of any state, or any other corporation or
other business entity, the deposits or accounts of
which are insured under the Federal Deposit
Insurance Act or by the Federal Deposit Insurance
Corporation;
(E) Any corporation organized under the
provisions of 12 USC 611 to 631;
(F) Any foreign bank that has an agency or
branch, as defined in 12 USC 3101;
(G) A credit union organized under the laws
of any state the loan assets of which exceed fifty
million dollars as of the first day of its income
year;
(H) A production credit association organized
under the federal Farm Credit Act of 1933, all of
whose stock held by the Federal Production Credit
Corporation has been retired;
(I) Any company whose voting stock is more
than fifty per cent owned, directly or indirectly,
by any person described in subparagraphs (A) to
(H), inclusive, of this subdivision or by an
insurance company, other than an insurance company
or a company that has more than fifty per cent of
its gross income from one or more of the following
sources other than from sales to a related person:
Manufacturing, construction, mining,
transportation and public utilities, retail or
wholesale trade, other than the retail or
wholesale delivery of the services described in
subparagraph (J) of this subdivision, or
agriculture, forestry and fishing;
(J) (i) Any company, other than an insurance
company or a real estate broker, which derives
fifty per cent or more of its gross income from
one or more of the following sources or
activities: Loans; letters of credit and
acceptance of drafts; underwriting, purchase,
placement, sale or brokerage of securities,
commodities contracts or other financial
instruments or contracts on its own account or for
the account of others; exchanges, exchange
clearinghouses and other services allied with the
exchange of securities or commodities contracts;
investment advisory or management services;
investment banking services, corporate trust and
escrow services; securities information
processing; securities and financial rating agency
services; transfer agent, clearing agent,
securities custodial and depository services;
securities exchange or quotation services; any of
the services described in subsection (f) of
section 12-218 of the general statutes; any of the
services described in subsection (g) of section
12-218 of the general statutes, as amended;
management, distribution or administrative
services to or on behalf of an investment entity;
management, distribution or administrative
services to or on behalf of pension funds or
retirement accounts; leasing or acting as an
agent, broker or adviser in connection with
leasing real and personal property that is the
functional equivalent of an extension of credit
and that transfers substantially all of the
benefits and risks incident to the ownership of
property, including any direct financing lease or
leverage lease that meets the criteria of
Financial Accounting Standards Board Statement No.
13, "Accounting for Leases" or any other lease
that is accounted for as a financing by a lessor
under generally accepted accounting principles;
activities of a Morris plan company; credit card
activities; third party insurance administration
services, claim administration services, claim
adjusting services, premium billing and collection
services, or employee benefit plan administration
services; insurance underwriting or policy
issuance services; actuarial services; trust
company services; financial planning services;
insurance brokerage services; or risk management
services;
(ii) Any company which derives fifty per cent
or more of its gross income from an activity in
which a person described in subparagraphs (B) to
(H), inclusive, of this subdivision is authorized
to transact;
(iii) Whether a company is classified as a
financial service company for any income year by
virtue of this subparagraph shall be determined
based upon the sources of such taxpayer's gross
income, other than gross income from nonrecurring,
extraordinary transactions, for such income year,
except that any taxpayer classified as a financial
service company solely by virtue of this
subparagraph for any income year shall continue to
be classified as a financial service company until
the second consecutive year the taxpayer would not
otherwise qualify as a financial service company.
(K) (i) Any person described in subparagraph
(J) of this subdivision may petition the
commissioner to apportion its income without
regard to the provisions of this section upon such
person proving, by clear and convincing evidence,
that the income producing activity of such person
is not in substantial competition with a financial
service company without regard to subparagraph (I)
of this subdivision.
(ii) Any person may petition the commissioner
to apportion its income in accordance with the
provisions of this section upon such person
proving by clear and convincing evidence, that the
income producing activity is substantially similar
to the income producing activities of a financial
service company without regard to subparagraph (I)
of this subdivision.
(7) "Gross rents" means the actual sum of
money or other consideration payable for the use
or possession of property, including, but not be
limited to, (A) any amount payable for the use or
possession of real property or tangible property
whether designated as a fixed sum of money or as a
percentage of receipts, profits, or otherwise, (B)
any amount payable as additional rent or in lieu
of rent, such as interest, taxes, insurance,
repairs or any other amount required to be paid by
the terms of a lease or other arrangement, and (C)
a proportionate part of the cost of any
improvement to real property made by or on behalf
of the taxpayer which reverts to the owner or
lessor upon termination of a lease or other
arrangement. The amount to be included in gross
rents is the amount of amortization or
depreciation allowed in computing the taxable
income base for the income year, provided where a
building is erected on leased land by or on behalf
of the taxpayer, the value of the land is
determined by multiplying the gross rent by eight
and the value of the building is determined in the
same manner as if owned by the taxpayer. "Gross
rents" shall not include reasonable amounts
payable as separate charges for water and electric
service furnished by the lessor, reasonable
amounts payable as service charges for janitorial
services furnished by the lessor, reasonable
amounts payable to storage, provided such amounts
are payable for space not designated and not under
the control of the taxpayer, and that portion of
any rental payment which is applicable to the
space subleased from the taxpayer and not used by
it.
(8) "Insurance company" means any
corporation, limited liability company,
association, partnership or combination of persons
doing any kind or form of insurance business other
than a fraternal benefit society, including a
receiver, trustee or other fiduciary of any
insurance company when the context reasonably
permits.
(9) "Investment entity" means (A) an
investment partnership, a real estate investment
trust, as defined in Section 856 of the Internal
Revenue Code, a real estate mortgage investment
conduit, as defined in Section 860D of the
Internal Revenue Code, a financial asset
securitization investment trust, as defined in
Section 860L of the Internal Revenue Code, or a
similar investment entity which is exempt from, or
is not subject to, federal income tax, or (B) a
separate account of an insurance company.
(10) "Loan" means any extension of credit
resulting from direct negotiations between the
taxpayer and its customer, or the purchase or
receipt, in whole or in part, of such extension of
credit from another. Loans include participations,
syndications, and leases treated as loans for
federal income tax purposes. Loans shall not
include: (A) Futures or forward contracts; (B)
options; (C) notional principal contracts such as
swaps; (D) credit card receivables, including
purchased credit card relationships; (E)
noninterest bearing balances due from depository
institutions; (F) cash items in the process of
collection; (G) federal funds sold; (H) securities
purchased under agreements to resell; (I) assets
held in a trading account; (J) securities; (K)
interests in a real estate mortgage investment
conduit, as defined in Section 860D of the
Internal Revenue Code or other mortgage-backed or
asset-backed security; and (L) other similar
items.
(11) "Loan secured by real property" means
that fifty per cent or more of the aggregate value
of the collateral used to secure a loan or other
obligation, when valued at fair market value as of
the time the original loan or obligation was
incurred, was real property.
(12) "Management services" means the
rendering of investment advice directly or
indirectly to an investment entity, pension fund
or retirement account, making determinations as to
when sales and purchases of property are to be
made on behalf of the investment entity, pension
fund or retirement account, or the selling or
purchasing of property constituting assets of an
investment entity, pension fund or retirement
account and related activities, but only where
such activity or activities are performed (A)
pursuant to a contract with the investment entity,
pension fund or retirement account, (B) for a
person that has entered into such contract with
the investment entity, pension fund or retirement
account, or (C) for a person that is a related
person of a person that has entered into such
contract with an investment entity, pension fund
or retirement account.
(13) "Participation" means an extension of
credit in which an undivided ownership interest is
held on a pro rata basis in a single loan or pool
of loans and related collateral. In a loan
participation, the credit originator initially
makes the loan and then subsequently resells all
or a portion of it to other lenders. The
participation may or may not be known to the
borrower.
(14) "Pension fund or retirement fund" means
any fund, trust, plan, account, annuity or
contract referred to in subsection (a) of section
52-321a of the general statutes, or other fund,
trust, plan, account, annuity or contract
established pursuant to the Internal Revenue Code
or any other federal or state statute, including,
but not limited to, funds held in an insurance
company general or separate account, which is
designed to provide pension or retirement
benefits.
(15) "Principal base of operations", with
respect to transportation property, means the
place of more or less permanent nature from which
said property is regularly directed or controlled.
(16) "Real property owned" and "tangible
personal property owned" means real and tangible
personal property, respectively, (A) on which the
taxpayer may claim depreciation for federal income
tax purposes, or (B) property to which the
taxpayer holds legal title and on which no other
person may claim depreciation for federal income
tax purposes or could claim depreciation if
subject to federal income tax. Real and tangible
personal property does not include coin, currency
or property acquired in lieu of or pursuant to a
foreclosure.
(17) "Regular place of business" means an
office at which the taxpayer carries on its
business in a regular and systematic manner and
which is continuously maintained, occupied and
used by employees of the taxpayer.
(18) "Related person" means (A) a
corporation, limited liability company,
partnership, association or trust controlled by
the taxpayer, (B) an individual, corporation,
limited liability company, partnership,
association or trust that is in control of the
taxpayer, (C) a corporation, limited liability
company, partnership, association or trust
controlled by an individual, corporation, limited
liability company, partnership, association or
trust that is in control of the taxpayer, or (D) a
member of the same controlled group as the
taxpayer. For purposes of this subdivision,
"control", with respect to a corporation, means
ownership, directly or indirectly, of stock
possessing fifty per cent or more of the total
combined voting power of all classes of the stock
of such corporation entitled to vote. "Control",
with respect to a trust, means ownership, directly
or indirectly, of fifty per cent or more of the
beneficial interest in the principal or income of
such trust. The ownership of stock in a
corporation, of a capital or profits interest in a
partnership or association or of a beneficial
interest in a trust shall be determined in
accordance with the rules for constructive
ownership of stock provided in Section 267(c) of
the Internal Revenue Code other than paragraph (3)
of said section.
(19) "State" means a state of the United
States, the District of Columbia, the Commonwealth
of Puerto Rico, any territory or possession of the
United States or any foreign country.
(20) "Syndication" means an extension of
credit in which two or more persons fund and each
person is at risk only up to a specified
percentage of the total extension of credit or up
to a specified dollar amount.
(21) "Transportation property" means vehicles
and vessels capable of moving under their own
power, such as aircraft, trains, water vessels and
motor vehicles, as well as any equipment or
containers attached to such property, such as
rolling stock, barges, trailers or the like.
(b) (1) Except as otherwise specifically
provided, a financial service company whose
business activity is taxable within this state,
whether or not it is taxable outside this state,
shall apportion its net income from business
carried on within this state in accordance with
this section. The net income of a financial
service company shall be apportioned to this state
by multiplying such income by the receipts factor.
The receipts factor for a financial service
company is a fraction, the numerator of which is
the receipts of the taxpayer in this state during
the income year and the denominator of which is
the receipts of the taxpayer within and without
this state during the income year. The method of
calculating receipts for purposes of the
denominator is the same as the method used in
determining receipts for purposes of the
numerator.
(2) Any receipts attributable to an
international banking facility, as defined in
section 12-217 of the general statutes, as
amended, shall not be included in the numerator or
denominator of the receipts factor. In lieu of
such exclusion of receipts attributable to an
international banking facility, the taxpayer,
pursuant to the provisions of subdivision (3) of
this subsection, may, on or before the due date
or, if applicable, the extended due date, of its
corporation business tax return, make an election
on its corporation business tax return, to exclude
receipts attributable to an international banking
facility from the numerator of its receipts factor
and to include such receipts in the denominator of
its receipts factor.
(3) If the taxpayer makes the election under
subdivision (2) of this subsection, the taxpayer
may not, in arriving at its net income, deduct the
gross income attributable to the international
banking facility from its gross income, but
expenses or losses attributable to the
international banking facility, to the extent
deductible under the Internal Revenue Code, may be
deducted from its gross income. The election, if
made by the taxpayer, shall be irrevocable for,
and applicable for, five successive income years.
(c) The numerator of the receipts factor
includes receipts from the lease or rental of real
property owned by the taxpayer if the property is
located within this state and receipts from the
sublease of real property if the property is
located within this state.
(d) (1) Except as described in subdivision
(2) of this subsection, the numerator of the
receipts factor includes receipts from the lease
or rental of tangible personal property owned by
the taxpayer if the property is located within
this state when it is first placed in service by
the lessee.
(2) Receipts from the lease or rental of
transportation property owned by the taxpayer are
included in the numerator of the receipts factor
to the extent that the property is used in this
state. The extent an aircraft will be deemed to be
used in this state and the amount of receipts that
is to be included in the numerator of this state's
receipts factor is determined by multiplying all
the receipts from the lease or rental of the
aircraft by a fraction, the numerator of which is
the number of landings of the aircraft in this
state and the denominator of which is the total
number of landings of the aircraft. If the extent
of the use of any transportation property within
this state cannot be determined, the property
shall be deemed to be used wholly in the state in
which the property has its principal base of
operations. A motor vehicle shall be deemed to be
used wholly in the state in which it is
registered.
(e) (1) The numerator of the receipts factor
includes interest and fees or penalties in the
nature of interest from loans secured by real
property if the property is located within this
state. If the property is located both within this
state and one or more other states, the receipts
described in this subsection are included in the
numerator of the receipts factor if more than
fifty per cent of the fair market value of the
real property is located within this state. If
more than fifty per cent of the fair market value
of the real property is not located within any one
state, the receipts described in this subsection
shall be included in the numerator of the receipts
factor if the borrower is located in this state.
(2) The determination of whether the real
property securing a loan is located within this
state shall be made as of the time the original
agreement was made and all subsequent
substitutions of collateral shall be disregarded.
(f) The numerator of the receipts factor
includes interest and fees or penalties in the
nature of interest from loans not secured by real
property if the borrower is located in this state.
(g) (1) The numerator of the receipts factor
includes net gains from the sale of loans. Net
gains from the sale of loans includes income
recorded under the coupon stripping rules of
Section 1286 of the Internal Revenue Code.
(2) The amount of net gains, but not less
than zero, from the sale of loans secured by real
property included in the numerator is determined
by multiplying such net gains by a fraction the
numerator of which is the amount included in the
numerator of the receipts factor pursuant to
subsection (e) of this section and the denominator
of which is the total amount of interest and fees
or penalties in the nature of interest from loans
secured by real property.
(3) The amount of net gains, but not less
than zero, from the sale of loans not secured by
real property included in the numerator is
determined by multiplying such net gains by a
fraction the numerator of which is the amount
included in the numerator of the receipts factor
pursuant to subsection (f) of this section and the
denominator of which is the total amount of
interest and fees or penalties in the nature of
interest from loans not secured by real property.
(h) (1) The numerator of the receipts factor
includes loan servicing fees derived from loans
secured by real property multiplied by a fraction
the numerator of which is the amount included in
the numerator of the receipts factor pursuant to
subsection (e) of this section and the denominator
of which is the total amount of interest and fees
or penalties in the nature of interest from loans
secured by real property.
(2) The numerator of the receipts factor
includes loan servicing fees derived from loans
not secured by real property multiplied by a
fraction the numerator of which is the amount
included in the numerator of the receipts factor
pursuant to subsection (f) of this section and the
denominator of which is the total amount of
interest and fees or penalties in the nature of
interest from loans not secured by real property.
(3) In circumstances in which the taxpayer
receives loan servicing fees for servicing either
the secured or the unsecured loans of another, the
numerator of the receipts factor shall include
such fees if the borrower is located in this
state.
(i) (1) Interest, dividends, net gains, but
not less than zero, and other income from
investment assets and activities and from trading
assets and activities shall be included in the
receipts factor. Investment assets and activities
and trading assets and activities include, but are
not limited to, investment securities, trading
account assets, federal funds, securities
purchased and sold under agreements to resell or
repurchase, options, futures contracts, forward
contracts, notional principal contracts such as
swaps, equities, and foreign currency
transactions. With respect to the investment and
trading assets and activities described in
subparagraphs (A) and (B) of this subdivision, the
receipts factor shall include the amounts
described in said subparagraphs (A) and (B).
(A) The receipts factor shall include the
amount by which interest from federal funds sold
and securities purchased under resale agreements
exceeds interest expense on federal funds
purchased and securities sold under repurchase
agreements.
(B) The receipts factor shall include the
amount by which interest, dividends, gains and
other income from trading assets and activities,
including, but not limited to, assets and
activities in the matched book, in the arbitrage
book, and foreign currency transactions, exceed
amounts paid in lieu of interest, amounts paid in
lieu of dividends and losses from such assets and
activities.
(2) The numerator of the receipts factor
includes interest, dividends, net gains, but not
less than zero, and other income from investment
assets and activities and from trading assets and
activities described in subdivision (1) of this
subsection that are attributable to this state.
(A) The amount of interest, dividends, net
gains, but not less than zero, and other income
from investment assets and activities in the
investment account to be attributed to this state
and included in the numerator is determined by
multiplying all such income from such assets and
activities by a fraction, the numerator of which
is the average value of such assets which are
properly assigned to a regular place of business
of the taxpayer within this state and the
denominator of which is the average value of all
such assets.
(B) The amount of interest from federal funds
sold and purchased and from securities purchased
under resale agreements and securities sold under
repurchase agreements attributable to this state
and included in the numerator is determined by
multiplying the amount described in subparagraph
(A) of subdivision (1) of this subsection from
such funds and such securities by a fraction, the
numerator of which is the average value of federal
funds sold and securities purchased under
agreements to resell which are properly assigned
to a regular place of business of the taxpayer
within this state and the denominator of which is
the average value of all such funds and such
securities.
(C) The amount of interest, dividends, gains
and other income from trading assets and
activities, including, but not limited to, assets
and activities in the matched book, in the
arbitrage book and foreign currency transactions,
but excluding amounts described in subparagraph
(A) or (B) of this subdivision, attributable to
this state and included in the numerator is
determined by multiplying the amount described in
subparagraph (B) of subdivision (1) of this
subsection by a fraction, the numerator of which
is the average value of such trading assets which
are properly assigned to a regular place of
business of the taxpayer within this state and the
denominator of which is the average value of all
such assets.
(D) For purposes of this subdivision, the
average value of property owned by the taxpayer is
computed on an annual basis by adding the value of
the property on the first day of the income year
and the value on the last day of the income year
and dividing the sum by two. If averaging on this
basis does not properly reflect average value, the
commissioner may require averaging on a more
frequent basis. The taxpayer may elect to average
on a more frequent basis. When averaging on a more
frequent basis is required by the commissioner or
is elected by the taxpayer, the same method of
valuation must be used consistently by the
taxpayer with respect to property within and
without this state and on all subsequent returns
unless the taxpayer receives prior permission from
the commissioner or the commissioner requires a
different method of determining average value.
(3) In lieu of using the method set forth in
subdivision (2) of this subsection, the taxpayer
may elect, or the commissioner may require in
order to fairly represent the business activity of
the taxpayer in this state, the use of the method
set forth in this subdivision.
(A) The amount of interest, dividends, net
gains, but not less than zero, and other income
from investment assets and activities in the
investment account to be attributed to this state
and included in the numerator is determined by
multiplying all such income from such assets and
activities by a fraction, the numerator of which
is the gross income from such assets and
activities which are properly assigned to a
regular place of business of the taxpayer within
this state and the denominator of which is the
gross income from all such assets and activities.
(B) The amount of interest from federal funds
sold and purchased and from securities purchased
under resale agreements and securities sold under
repurchase agreements attributable to this state
and included in the numerator is determined by
multiplying the amount described in subparagraph
(A) of subdivision (1) of this subsection from
such funds and such securities by a fraction, the
numerator of which is the gross income from such
funds and such securities which are properly
assigned to a regular place of business of the
taxpayer within this state and the denominator of
which is the gross income from all such funds and
securities.
(C) The amount of interest, dividends, gains
and other income from trading assets and
activities, including, but not limited to, assets
and activities in the matched book, in the
arbitrage book and foreign currency transactions,
but excluding amounts described in subparagraph
(A) or (B) of this subdivision, attributable to
this state and included in the numerator is
determined by multiplying the amount described in
subparagraph (B) of subdivision (1) of this
subsection by a fraction, the numerator of which
is the gross income from such trading assets and
activities which are properly assigned to a
regular place of business of the taxpayer within
this state and the denominator of which is the
gross income from all such assets and activities.
(4) If the taxpayer elects or is required by
the commissioner to use the method set forth in
subdivision (3) of this subsection, it shall use
this method on all subsequent returns unless the
taxpayer receives prior permission from the
commissioner to use, or the commissioner requires
a different method.
(5) The taxpayer shall have the burden of
proving that an investment asset or activity or
trading asset or activity was properly assigned to
a regular place of business outside of this state
by demonstrating that the day-to-day decisions
regarding the asset or activity occurred at a
regular place of business outside this state.
Where the day-to-day decisions regarding an
investment asset or activity or trading asset or
activity occur at more than one regular place of
business and one such regular place of business is
in this state and one such regular place of
business is outside this state, such asset or
activity shall be considered to be located at the
regular place of business of the taxpayer where
the investment or trading policies or guidelines
with respect to the asset or activity are
established. Unless the taxpayer demonstrates to
the contrary, such policies and guidelines shall
be presumed to be established at the commercial
domicile of the taxpayer.
(j) (1) The numerator of the receipts factor
includes receipts received for management,
distribution and administrative services performed
on behalf of an investment entity in an amount
equal to the product of such receipts for the
income year multiplied by a fraction (A) the
numerator of which shall be the average of (i) the
fair market value of the interests in the
investment entity issued and outstanding on the
first day of such investment entity's taxable year
for federal income tax purposes, which ends within
or at the same time as the income year of the
financial service company, that are owned by
investors in such investment entity if the billing
address of such investors is in this state, and
(ii) the fair market value of the interests in the
investment entity issued and outstanding on the
last day of such investment entity's taxable year
for federal income tax purposes, which ends within
or at the same time as the income year of the
financial service company, that are owned by
investors in such investment entity if the billing
address of such investors is in this state; and
(B) the denominator of which shall be the average
of the fair market value of the interests in the
investment entity issued and outstanding that are
owned by investors in such investment entity on
such dates.
(2) The numerator of the receipts factor
includes receipts received for management,
distribution and administrative services performed
on behalf of a pension fund or retirement account
in an amount equal to the product of such receipts
for the income year multiplied by a fraction (A)
the numerator of which shall be the average of (i)
the number of participants with an interest in the
pension fund or retirement account on the first
day of the pension fund or retirement account
taxable year, for federal income tax purposes,
which ends within or at the same time as the
income year of the financial service company,
whose billing address is in this state, and (ii)
the number of participants with an interest in the
pension fund or retirement account on the last day
of the pension fund or retirement account taxable
year, for federal income tax purposes, which ends
within or at the same time as the income year of
the financial service company, whose billing
address is in this state; and (B) the denominator
of which shall be the total number of participants
with an interest in the pension fund or retirement
account on such dates. In lieu of using the
billing addresses of the participants with an
interest in the pension fund or retirement account
as provided in this subdivision, the taxpayer may
elect to determine receipts in the manner provided
for in this subsection based upon the average of
the fair market value of funds under management in
each income year allocated to the commercial
domicile of the sponsor of the pension fund or
retirement account and, where there is no sponsor
for a particular pension fund or retirement
account, the billing address of the participant.
The election, if made by the taxpayer, shall be
irrevocable for, and applicable for, five
successive income years and shall be applicable to
all receipts from the rendering of management,
distribution or administrative services performed
for any pension fund or retirement account.
(3) In the case of a separate account of an
insurance company, to the extent that both
subdivisions (1) and (2) of this subsection may be
applicable, then subdivision (2) shall apply.
(k) This section shall not apply to net
income from services or activities described in
subsection (f), (g) or (j) of section 12-218 of
the general statutes, as amended by this act,
which income shall be apportioned in accordance
with said subsection (f), (g) or (j), whether or
not the taxpayer is taxable outside this state,
or, for income years commencing prior to January
1, 2002, in the case of net income from activities
described in said subsection (j) that is earned by
a taxpayer that is either not eligible to make the
election described in said subsection (j) or does
not make the election described in said subsection
(j) which income shall be apportioned in
accordance with subsection (b) of said section
12-218.
(l) For all other receipts not otherwise
sourced by this subsection, the numerator of the
receipts factor includes all other receipts if the
billing address of the customer is in this state;
otherwise the numerator will include all other
receipts pursuant to the provisions of section
12-218 of the general statutes, as amended by this
act.
Sec. 12. Subsection (a) of section 12-213 of
the general statutes, as amended by section 3 of
public act 97-295, is repealed and the following
is substituted in lieu thereof:
(a) When used in this part, unless the
context otherwise requires:
(1) "Taxpayer" and "company" [mean] MEANS any
corporation, foreign municipal electric utility,
as defined in section 12-59, joint stock company
or association or any fiduciary thereof [but not
a] AND ANY DISSOLVED CORPORATION WHICH CONTINUES
TO CONDUCT BUSINESS BUT DOES NOT INCLUDE A PASSIVE
INVESTMENT COMPANY OR municipal utility, as
defined in chapter 212 and chapter 212a; [, and
any dissolved corporation which continues to
conduct business;]
(2) "Dissolved corporation" means any company
which has terminated its corporate existence by
resolution, expiration, decree or forfeiture;
(3) "Commissioner of Revenue Services" or
"commissioner" means the Commissioner of Revenue
Services;
(4) "Tax year" means the calendar year in
which the tax is payable;
(5) "Income year" means the calendar year
upon the basis of which net income is computed
under this part, unless a fiscal year other than
the calendar year has been established for federal
income tax purposes, in which case it means the
fiscal year so established or a period of less
than twelve months ending as of the date on which
liability under this chapter ceases to accrue by
reason of dissolution, forfeiture, withdrawal,
merger or consolidation;
(6) "Fiscal year" means the income year
ending on the last day of any month other than
December or an annual period which varies from
fifty-two to fifty-three weeks elected by the
taxpayer in accordance with the provisions of the
Internal Revenue Code;
(7) "Paid" means "paid or accrued" or "paid
or incurred", construed according to the method of
accounting upon the basis of which net income is
computed under this part;
(8) "Received" means "received" or "accrued",
construed according to the method of accounting
upon the basis of which net income is computed
under this part;
(9) (A) "Gross income" means gross income, as
defined in the Internal Revenue Code, and, in
addition, means any interest or exempt interest
dividends, as defined in Section 852(b)(5) of the
Internal Revenue Code, received by the taxpayer or
losses of other calendar or fiscal years,
retroactive to include all calendar or fiscal
years beginning after January 1, 1935, incurred by
the taxpayer which are excluded from gross income
for purposes of assessing the federal corporation
net income tax, and in addition, notwithstanding
any other provision of law, means interest or
exempt interest dividends, as defined in said
Section 852(b)(5) of the Internal Revenue Code,
accrued on or after the application date, as
defined in section 12-242ff, with respect to any
obligation issued by or on behalf of the state,
its agencies, authorities, commissions and other
instrumentalities, or by or on behalf of its
political subdivisions and their agencies,
authorities, commissions and other
instrumentalities;
(B) "Gross income" shall not include the
amount which for federal income tax purposes is
treated as a dividend received by a domestic
United States corporation from a foreign
corporation on account of foreign taxes deemed
paid by such domestic corporation, when such
domestic corporation elects the foreign tax credit
for federal income tax purposes;
(C) "GROSS INCOME" SHALL NOT INCLUDE ANY
AMOUNT WHICH FOR FEDERAL INCOME TAX PURPOSES IS
TREATED AS A DIVIDEND RECEIVED DIRECTLY OR
INDIRECTLY BY A TAXPAYER FROM A PASSIVE INVESTMENT
COMPANY;
(10) "Net income" means net earnings received
during the income year and available for
contributors of capital, whether they are
creditors or stockholders, computed by subtracting
from gross income the deductions allowed by the
terms of section 12-217, except that in the case
of a domestic insurance company which is a life
insurance company "net income" means life
insurance company taxable income (A) increased by
any amount or amounts which have been deducted in
the computation of gain or loss from operations in
respect of (i) the life insurance company's share
of tax-exempt interest, (ii) operations loss
carry-backs and capital loss carry-backs and (iii)
operations loss carry-overs and capital loss
carry-overs arising in any taxable year commencing
prior to January 1, 1973, and (B) reduced by any
amount or amounts which have been deducted as
operations loss carry-backs or capital loss
carry-backs in the computation of gain or loss
from operations for any taxable year commencing on
or after January 1, 1973, but only to the extent
that such amount or amounts, would, for federal
tax purposes, have been deductible in the taxable
year as operations loss carry-overs or capital
loss carry-overs if they had not been deducted in
a previous taxable year as carry-backs and
provided no expense related to income, the
taxation of which by the state of Connecticut is
prohibited by the law or Constitution of the
United States, as applied, or by the law or
Constitution of this state, as applied, shall be
deducted under this chapter and provided further
no item may, directly or indirectly be excluded or
deducted more than once;
(11) "Life insurance company" has the same
meaning as it has under the Internal Revenue Code;
(12) "Life insurance company taxable income"
has the same meaning as it has under the Internal
Revenue Code;
(13) "Life insurance company's share" has the
same meaning as it has under the Internal Revenue
Code;
(14) "Operations loss carry-over", with
respect to a life insurance company, has the same
meaning as it has under the Internal Revenue Code;
(15) "Operations loss carry-back", with
respect to a life insurance company, has the same
meaning as it has under the Internal Revenue Code;
(16) "Capital loss carry-over", with respect
to a life insurance company, has the same meaning
as it has under the Internal Revenue Code;
(17) "Capital loss carry-back", with respect
to a life insurance company, has the same meaning
as it has under the Internal Revenue Code;
(18) "Gain or loss from operations", with
respect to a life insurance company, has the same
meaning as it has under the Internal Revenue Code;
(19) "Fiduciary" means any receiver,
liquidator, referee, trustee, assignee or other
fiduciary or officer or agent appointed by any
court or by any other authority, except the
Commissioner of Banking acting as receiver or
liquidator under the authority of the provisions
of sections 36a-210 and 36a-218 to 36a-239,
inclusive;
(20) "Carrying on or doing business" means
and includes each and every act, power or
privilege exercised or enjoyed in this state, as
an incident to, or by virtue of, the powers and
privileges acquired by the nature of any
organization whether the form of existence is
corporate, associate, joint stock company or
fiduciary, except that a company that has
contracted with a commercial printer for printing
and distribution of printed material shall not be
deemed to be carrying on or doing business in this
state because of (A) the ownership or leasing by
that company of tangible or intangible personal
property located at the premises of the commercial
printer in this state, (B) the sale by that
company of property of any kind produced or
processed at and shipped or distributed from the
premises of the commercial printer in this state,
(C) the activities of that company's employees or
agents at the premises of the commercial printer
in this state, which activities relate to quality
control, distribution or printing services
performed by the printer, or (D) the activities of
any kind performed by the commercial printer in
this state for or on behalf of that company;
(21) "Alternative energy system" means design
systems, equipment or materials which utilize as
their energy source solar, wind, water or biomass
energy in providing space heating or cooling,
water heating or generation of electricity, but
shall not include wood-burning stoves;
(22) "S corporation" means any corporation
which is an S corporation for federal income tax
purposes;
(23) "Internal Revenue Code" means the
Internal Revenue Code of 1986, or any subsequent
internal revenue code of the United States, as
from time to time amended, effective and in force
on the last day of the income year;
(24) "Partnership" means a partnership, as
defined in the Internal Revenue Code, and includes
a limited liability company that is treated as a
partnership for federal income tax purposes;
(25) "Partner" means a partner, as defined in
the Internal Revenue Code, and includes a member
of a limited liability company that is treated as
a partnership for federal income tax purposes;
(26) "Investment partnership" means a limited
partnership that meets the gross income
requirement of Section 851(b)(2) of the Internal
Revenue Code, except that income and gains from
commodities that are not described in Section
1221(1) of the Internal Revenue Code or from
futures, forwards and options with respect to such
commodities shall be included in income which
qualifies to meet such gross income requirement,
provided such commodities are of a kind
customarily dealt with in an organized commodity
exchange and the transaction is of a kind
customarily consummated at such place, as required
by Section 864(b)(2)(B)(iii) of the Internal
Revenue Code. To the extent that such a
partnership has income and gains from commodities
that are not described in Section 1221(1) of the
Internal Revenue Code or from futures, forwards
and options with respect to such commodities, such
income and gains must be derived by a partnership
which is not a dealer in commodities and is
trading for its own account as described in
Section 864(b)(2)(B)(ii) of the Internal Revenue
Code. The term "investment partnership" does not
include a dealer, within the meaning of Section
1236 of the Internal Revenue Code, in stocks or
securities;
(27) "PASSIVE INVESTMENT COMPANY" MEANS ANY
CORPORATION WHICH IS A RELATED PERSON TO A
FINANCIAL SERVICE COMPANY, AS DEFINED IN SECTION
11 OF THIS ACT, OR TO AN INSURANCE COMPANY, AS
DEFINED IN SECTION 11 OF THIS ACT, AND (A) EMPLOYS
NOT LESS THAN FIVE FULL-TIME EQUIVALENT EMPLOYEES
IN THE STATE; (B) MAINTAINS AN OFFICE IN THE
STATE; AND (C) CONFINES ITS ACTIVITIES TO THE
PURCHASE, RECEIPT, MAINTENANCE, MANAGEMENT AND
SALE OF ITS INTANGIBLE INVESTMENTS, AND THE
COLLECTION AND DISTRIBUTION OF THE INCOME FROM
SUCH INVESTMENTS, INCLUDING, BUT NOT LIMITED TO,
INTEREST AND GAINS FROM THE SALE, TRANSFER OR
ASSIGNMENT OF SUCH INVESTMENTS OR FROM THE
FORECLOSURE UPON OR SALE, TRANSFER OR ASSIGNMENT
OF THE COLLATERAL SECURING SUCH INVESTMENTS. FOR
PURPOSES OF THIS SUBDIVISION, "INTANGIBLE
INVESTMENTS" SHALL BE LIMITED TO LOANS SECURED BY
REAL PROPERTY, AS DEFINED IN SECTION 11 OF THIS
ACT, INCLUDING A LINE OF CREDIT WHICH IS A LOAN
SECURED BY REAL PROPERTY AND WHICH PERMITS FUTURE
ADVANCES BY THE PASSIVE INVESTMENT COMPANY; THE
COLLATERAL OR AN INTEREST IN THE COLLATERAL THAT
SECURED SUCH LOANS IF THE SALE OF SUCH COLLATERAL
OR INTEREST IS ACTIVELY MARKETED BY OR ON BEHALF
OF THE PASSIVE INVESTMENT COMPANY; AND ANY
SHORT-TERM INVESTMENT OF CASH HELD BY THE PASSIVE
INVESTMENT COMPANY WHICH CASH IS REASONABLY
NECESSARY FOR THE OPERATIONS OF SUCH PASSIVE
INVESTMENT COMPANY.
Sec. 13. Subsection (a) of section 12-214 of
the general statutes is repealed and the following
is substituted in lieu thereof:
(a) (1) Every mutual savings bank, savings
and loan association and every company engaged in
the business of carrying passengers for hire over
the highways of this state in common carrier motor
vehicles doing business in this state, and every
other company carrying on, or having the right to
carry on, business in this state, including a
dissolved corporation which continues to conduct
business, except those companies described in
subdivision (2) of this subsection, shall pay,
annually, a tax or excise upon its franchise for
the privilege of carrying on or doing business,
owning or leasing property within the state in a
corporate capacity or as an unincorporated
association taxable as a corporation for federal
income tax purposes or maintaining an office
within the state, such tax to be measured by the
entire net income as herein defined received by
such corporation or association from business
transacted within the state during the income year
and to be assessed for each income year commencing
prior to January 1, 1995, at the rate of eleven
and one-half per cent, for income years commencing
on or after January 1, 1995, and prior to January
1, 1996, at the rate of eleven and one-quarter per
cent, for income years commencing on or after
January 1, 1996, and prior to January 1, 1997, at
the rate of ten and three-fourths per cent, for
income years commencing on or after January 1,
1997, and prior to January 1, 1998, at the rate of
ten and one-half per cent, for income years
commencing on or after January 1, 1998, and prior
to January 1, 1999, at the rate of nine and
one-half per cent, for income years commencing on
or after January 1, 1999, and prior to January 1,
2000, at the rate of eight and one-half per cent,
and for income years commencing on or after
January 1, 2000, at the rate of seven and one-half
per cent. The exemption of companies described in
subparagraphs (G) and (H) of subdivision (2) of
this subsection shall not be allowed with respect
to any income year of any such company commencing
on or after January 1, 1998, and any such company
claiming such exemption for any income years
commencing on or after January 1, 1985, but prior
to January 1, 1998, shall be required to file a
corporation business tax return in accordance with
section 12-222 for each such income year.
(2) The following companies shall be exempt
from the tax imposed under this chapter: (A)
Insurance companies incorporated or organized
under the laws of any other state or foreign
government AND FOR INCOME YEARS COMMENCING ON OR
AFTER JANUARY 1, 1999, DOMESTIC INSURANCE
COMPANIES, (B) companies exempt by the federal
corporation net income tax law, and any company
which qualifies as a domestic international sales
corporation (DISC), as defined in Section 992 of
the Internal Revenue Code [of 1986, or any
subsequent corresponding internal revenue code of
the United States, as from time to time amended,]
and as to which a valid election under subsection
(b) of said Section 992 to be treated as a DISC is
effective, but excluding companies, other than any
company which so qualifies as, and so elects to be
treated as, a DISC, which elect not to be subject
to such tax under any provision of said Internal
Revenue Code other than said subsection (b) of
Section 992; (C) companies subject to gross
earnings taxes under chapter 210; (D) companies
all of whose properties in this state are operated
by companies subject to gross earnings taxes under
chapter 210; (E) cooperative housing corporations,
as defined for federal income tax purposes; (F)
any organization or association of two or more
persons established and operated for the exclusive
purpose of promoting the success or defeat of any
candidate for public office or of any political
party or question or constitutional amendment to
be voted upon at any state or national election or
for any other political purpose; (G) any company
which is not owned or controlled, directly or
indirectly, by any other company, the gross annual
revenues of which in the most recently completed
year did not exceed one hundred million dollars
and which engaged in the research, design,
manufacture, sale or installation of alternative
energy systems or motor vehicles powered in whole
or in part by electricity, natural gas or solar
energy including their parts and components,
provided at least seventy-five per cent of the
gross annual revenues of such company are derived
from such research, design, manufacture, sale or
installation; and (H) any company which engages in
the research, design, manufacture or sale in
Connecticut of aero-derived gas turbine systems in
advanced industrial applications, which
applications are developed after October 1, 1992,
which are limited to simply-cycle systems, humid
air, steam or water injection, recuperation or
intercooling technologies, including their parts
and components, to the extent that such company's
net income is directly attributable to such
purposes.
(3) (A) A company is carrying on or doing
business in this state if it is a general partner
of a partnership that does business, owns or
leases property or maintains an office in this
state. (B) A company is carrying on or doing
business in this state if it is a limited partner
of a limited partnership, other than an investment
partnership, that does business, owns or leases
property or maintains an office in this state. (C)
A company that is not otherwise carrying on or
doing business in this state, either directly or
by virtue of being a partner in a partnership
described in subparagraph (A) or (B) of this
subdivision is not carrying on or doing business
in this state solely by virtue of being a limited
partner of one or more investment partnerships.
Sec. 14. Subsection (f) of section 12-218 of
the general statutes is repealed and the following
is substituted in lieu thereof:
(f) (1) [Any] EACH taxpayer that provides
management, distribution or administrative
services, as defined in this subsection, to or on
behalf of a regulated investment company, as
defined in Section 851 of the Internal Revenue
Code [of 1986, or any subsequent corresponding
internal revenue code of the United States, as
from time to time amended,] may elect, on or
before the due date or, if applicable, the
extended due date, of its corporation business tax
return for an income year commencing on or after
January 1, 1996, to apportion its net income
derived, directly or indirectly, from providing
management, distribution or administrative
services to or on behalf of a regulated investment
company, including net income received directly or
indirectly from trustees, and sponsors or
participants of employee benefit plans which have
accounts in a regulated investment company, in the
manner provided in this subsection. The election,
if made by the taxpayer, shall be irrevocable for,
and applicable for, five successive income years.
Income derived by such taxpayer from sources other
than the providing of management, distribution or
administrative services to or on behalf of a
regulated investment company shall be apportioned
as provided in this [section] CHAPTER.
(2) The numerator of the apportionment
fraction shall consist of the sum of the
Connecticut receipts, as described in subdivision
(3) of this subsection. The denominator of the
apportionment fraction shall consist of the total
receipts from the sale of management, distribution
or administrative services to or on behalf of all
the regulated investment companies. For purposes
of this subsection, "receipts" means receipts
computed according to the method of accounting
used by the taxpayer in the computation of net
income.
(3) For purposes of this subsection,
Connecticut receipts shall be determined by
multiplying receipts from the rendering of
management, distribution or administrative
services to or on behalf of each separate
regulated investment company by a fraction (A) the
numerator of which shall be the average of (i) the
number of shares on the first day of such
regulated investment company's taxable year, for
federal income tax purposes, which ends within or
at the same time as the taxable year of the
taxpayer, that are owned by shareholders of such
regulated investment company then domiciled in
this state and (ii) the number of shares on the
last day of such regulated investment company's
taxable year, for federal income tax purposes,
which ends within or at the same time as the
taxable year of the taxpayer, that are owned by
shareholders of such regulated investment company
then domiciled in this state; and (B) the
denominator of which shall be the average of the
number of shares that are owned by shareholders of
such regulated investment company on such dates.
(4) (A) For purposes of this subsection,
"management services" [include] INCLUDES, but
[are] IS not limited to, the rendering of
investment advice directly or indirectly to a
regulated investment company, making
determinations as to when sales and purchases of
securities are to be made on behalf of the
regulated investment company, or the selling or
purchasing of securities constituting assets of a
regulated investment company, and related
activities, but only where such activity or
activities are performed (i) pursuant to a
contract with the regulated investment company
entered into pursuant to 15 USC [Section]
80a-15(a), as from time to time amended, (ii) for
a person that has entered into such contract with
the regulated investment company, or (iii) for a
person that is affiliated with a person that has
entered into such contract with a regulated
investment company.
(B) For purposes of this subsection,
"distribution services" [include] INCLUDES, but
[are] IS not limited to, the services of
advertising, servicing, marketing or selling
shares of a regulated investment company, but, in
the case of advertising, servicing or marketing
shares, only where such service is performed by a
person that is, or, in the case of a closed end
company, was, either engaged in the service of
selling such shares or affiliated with a person
that is engaged in the service of selling such
shares. In the case of an open end company, such
service of selling shares shall be performed
pursuant to a contract entered into pursuant to 15
USC [Section] 80a-15(b), as from time to time
amended.
(C) For purposes of this subsection,
"administrative services" [include] INCLUDES, but
[are] IS not limited to, clerical, fund or
shareholder accounting, participant record
keeping, transfer agency, bookkeeping, data
processing, custodial, internal auditing, legal
and tax services performed for a regulated
investment company but only if the provider of
such service or services during the income year in
which such service or services are provided also
provides, or is affiliated with a person that
provides, management or distribution services to
such regulated investment company.
(D) For purposes of this subsection, a person
is "affiliated" with another person if each person
is a member of the same affiliated group, as
defined under Section 1504 of the Internal Revenue
Code [of 1986, or any subsequent corresponding
internal revenue code of the United States, as
from time to time amended,] without regard to
subsection (b) of [such] SAID section.
(E) [(i)] For purposes of this subsection,
[except as provided in (ii) of this subparagraph,]
the domicile of a shareholder shall be presumed to
be such shareholder's mailing address as shown in
the records of the regulated investment company
except [(ii)] THAT for purposes of this
subsection, if the shareholder of record is an
insurance company which holds the shares of the
regulated investment company as depositor for the
benefit of a separate account, then the taxpayer
may elect, in the same manner and at the same time
as the election under subdivision (1) of this
subsection, to treat as the shareholders the
contract owners or policyholders of the contracts
or policies supported by such separate account. An
election made under this subparagraph shall apply
to all shareholders that are insurance companies
and shall be irrevocable for, and applicable for,
five successive income years. In any year that
such an election is applicable, it shall be
presumed that the domicile of a shareholder is the
mailing address of the contract owner or
policyholder as shown in the records of the
insurance company.
Sec. 15. Subsection (f) of section 12-218 of
the general statutes, as amended by section 14 of
this act, is repealed and the following is
substituted in lieu thereof:
(f) (1) Each taxpayer that provides
management, distribution or administrative
services, as defined in this subsection, to or on
behalf of a regulated investment company, as
defined in Section 851 of the Internal Revenue
Code [may elect, on or before the due date or, if
applicable, the extended due date, of its
corporation business tax return for an income year
commencing on or after January 1, 1996, to] SHALL
apportion its net income derived, directly or
indirectly, from providing management,
distribution or administrative services to or on
behalf of a regulated investment company,
including net income received directly or
indirectly from trustees, and sponsors or
participants of employee benefit plans which have
accounts in a regulated investment company, in the
manner provided in this subsection. [The election,
if made by the taxpayer, shall be irrevocable for,
and applicable for, five successive income years.]
Income derived by such taxpayer from sources other
than the providing of management, distribution or
administrative services to or on behalf of a
regulated investment company shall be apportioned
as provided in this chapter.
(2) The numerator of the apportionment
fraction shall consist of the sum of the
Connecticut receipts, as described in subdivision
(3) of this subsection. The denominator of the
apportionment fraction shall consist of the total
receipts from the sale of management, distribution
or administrative services to or on behalf of all
the regulated investment companies. For purposes
of this subsection, "receipts" means receipts
computed according to the method of accounting
used by the taxpayer in the computation of net
income.
(3) For purposes of this subsection,
Connecticut receipts shall be determined by
multiplying receipts from the rendering of
management, distribution or administrative
services to or on behalf of each separate
regulated investment company by a fraction (A) the
numerator of which shall be the average of (i) the
number of shares on the first day of such
regulated investment company's taxable year, for
federal income tax purposes, which ends within or
at the same time as the taxable year of the
taxpayer, that are owned by shareholders of such
regulated investment company then domiciled in
this state and (ii) the number of shares on the
last day of such regulated investment company's
taxable year, for federal income tax purposes,
which ends within or at the same time as the
taxable year of the taxpayer, that are owned by
shareholders of such regulated investment company
then domiciled in this state; and (B) the
denominator of which shall be the average of the
number of shares that are owned by shareholders of
such regulated investment company on such dates.
(4) (A) For purposes of this subsection,
"management services" includes, but is not limited
to, the rendering of investment advice directly or
indirectly to a regulated investment company,
making determinations as to when sales and
purchases of securities are to be made on behalf
of the regulated investment company, or the
selling or purchasing of securities constituting
assets of a regulated investment company, and
related activities, but only where such activity
or activities are performed (i) pursuant to a
contract with the regulated investment company
entered into pursuant to 15 USC 80a-15(a), as from
time to time amended, (ii) for a person that has
entered into such contract with the regulated
investment company, or (iii) for a person that is
affiliated with a person that has entered into
such contract with a regulated investment company.
(B) For purposes of this subsection,
"distribution services" includes, but is not
limited to, the services of advertising,
servicing, marketing or selling shares of a
regulated investment company, but, in the case of
advertising, servicing or marketing shares, only
where such service is performed by a person that
is, or, in the case of a closed end company, was,
either engaged in the service of selling such
shares or affiliated with a person that is engaged
in the service of selling such shares. In the case
of an open end company, such service of selling
shares shall be performed pursuant to a contract
entered into pursuant to 15 USC 80a-15(b), as from
time to time amended.
(C) For purposes of this subsection,
"administrative services" includes, but is not
limited to, clerical, fund or shareholder
accounting, participant record keeping, transfer
agency, bookkeeping, data processing, custodial,
internal auditing, legal and tax services
performed for a regulated investment company but
only if the provider of such service or services
during the income year in which such service or
services are provided also provides, or is
affiliated with a person that provides, management
or distribution services to such regulated
investment company.
(D) For purposes of this subsection, a person
is "affiliated" with another person if each person
is a member of the same affiliated group, as
defined under Section 1504 of the Internal Revenue
Code without regard to subsection (b) of said
section.
(E) For purposes of this subsection, the
domicile of a shareholder shall be presumed to be
such shareholder's mailing address as shown in the
records of the regulated investment company except
that for purposes of this subsection, if the
shareholder of record is an insurance company
which holds the shares of the regulated investment
company as depositor for the benefit of a separate
account, then the taxpayer may elect [, in the
same manner and at the same time as the election
under subdivision (1) of this subsection,] to
treat as the shareholders the contract owners or
policyholders of the contracts or policies
supported by such separate account. An election
made under this subparagraph shall apply to all
shareholders that are insurance companies and
shall be irrevocable for, and applicable for, five
successive income years. In any year that such an
election is applicable, it shall be presumed that
the domicile of a shareholder is the mailing
address of the contract owner or policyholder as
shown in the records of the insurance company.
Sec. 16. Subsection (g) of section 12-218 of
the general statutes, as amended by section 10 of
public act 97-243, is repealed and the following
is substituted in lieu thereof:
(g) (1) [Any] EACH taxpayer that provides
securities brokerage services, as defined in this
subsection, [may elect, on or before the due date
or, if applicable, the extended due date, of its
corporation business tax return for an income year
commencing on or after January 1, 1996, to] SHALL
apportion its net income derived, directly or
indirectly, from rendering securities brokerage
services in the manner provided in this
subsection. [The election, if made by the
taxpayer, shall be irrevocable for, and applicable
for, five successive income years.] Income derived
by such taxpayer from sources other than the
rendering of securities brokerage services shall
be apportioned as provided in this [section]
CHAPTER.
(2) The numerator of the apportionment
fraction shall consist of the brokerage
commissions and total margin interest paid on
behalf of brokerage accounts owned by the
taxpayer's customers who are domiciled in this
state during such taxpayer's income year, computed
according to the method of accounting used in the
computation of net income. The denominator of the
apportionment fraction shall consist of brokerage
commissions and total margin interest paid on
behalf of brokerage accounts owned by all of the
taxpayer's customers, wherever domiciled, during
such taxpayer's income year, computed according to
the method of accounting used in the computation
of net income.
(3) For purposes of this subsection: [,
"security brokerage services"] (A) "SECURITY
BROKERAGE SERVICES" means services and activities
including all aspects of the purchasing and
selling of securities rendered by [(A)] a broker,
as defined in 15 USC [Section] 78c(a)(4) and
registered under the provisions of 15 USC
[Sections] 78a to 78kk, inclusive, as from time to
time amended, to effectuate transactions in
securities for the account of others, and [(B)] a
dealer, as defined in 15 USC [Section] 78c(a)(5)
and registered under the provisions of 15 USC
[Sections] 78a to 78kk, inclusive, as from time to
time amended, to buy and sell securities, through
a broker or otherwise. Security brokerage services
shall not include services rendered by [a bank,
or] any [other] person buying or selling
securities for such person's own account, either
individually or in some fiduciary capacity, but
not as part of a regular business carried on by
such person.
[(4) For purposes of this subsection,
"securities"] (B) "SECURITIES" means security, as
defined in 15 USC [Section] 78c(a)(10), as from
time to time amended.
[(5) For purposes of this subsection,
"brokerage commission" includes, but is not
limited to, all sales fees on agency or principal
transactions whether charged explicitly or
implicitly.] (C) "BROKERAGE COMMISSION" MEANS ALL
COMPENSATION RECEIVED FOR EFFECTING PURCHASES AND
SALES FOR THE ACCOUNT OR ON ORDER OF OTHERS,
WHETHER IN A PRINCIPAL OR AGENCY TRANSACTION, AND
WHETHER CHARGED EXPLICITLY OR IMPLICITLY AS A FEE,
COMMISSION, SPREAD, MARKUP OR OTHERWISE.
[(6)] (4) For purposes of this subsection,
the domicile of a customer shall be presumed to be
such customer's mailing address as shown in the
records of the taxpayer.
Sec. 17. Subdivision (1) of subsection (j) of
section 12-218 of the general statutes, as amended
by section 10 of public act 97-243 and section 1
of public act 97-4 of the June 18 special session,
is repealed and the following is substituted in
lieu thereof:
(j) (1) Any taxpayer described in subdivision
(2) of this subsection may elect, on or before the
due date or, if applicable, the extended due date,
of its corporation business tax return for an
income year commencing on or after January 1,
1997, to apportion its net income derived from
credit card activities in the manner provided in
this subsection. The election, if made by the
taxpayer, shall be irrevocable for, and applicable
for, five successive income years. Income derived
by such taxpayer from sources other than credit
card activities shall be apportioned as provided
in this [section] CHAPTER. A taxpayer so electing
shall, for purposes of subsection (a) of this
section, be deemed to be taxable in another state
if, under the laws of such state, such taxpayer is
subject to a net income tax, a franchise tax for
the privilege of doing business, or a corporate
stock tax on such taxpayer's net income derived
from credit card activities, and such state does,
in fact, impose such a tax on such net income.
Sec. 18. Subsection (j) of section 12-218 of
the general statutes, as amended by section 1 of
public act 97-4 of the June 18 special session and
section 17 of this act, is repealed and the
following is substituted in lieu thereof:
(j) (1) [Any taxpayer described in
subdivision (2) of this subsection may elect, on
or before the due date or, if applicable, the
extended due date, of its corporation business tax
return for an income year commencing on or after
January 1, 1997, to] ANY FINANCIAL SERVICE COMPANY
AS DEFINED IN SECTION 11 OF THIS ACT, THAT HAS NET
INCOME DERIVED FROM CREDIT CARD ACTIVITIES, AS
DEFINED IN THIS SUBSECTION SHALL apportion its net
income derived from credit card activities in the
manner provided in this subsection. [The election,
if made by the taxpayer, shall be irrevocable for,
and applicable for, five successive income years.]
Income derived by such taxpayer from sources other
than credit card activities shall be apportioned
as provided in this chapter. [A taxpayer so
electing shall, for purposes of subsection (a) of
this section, be deemed to be taxable in another
state if, under the laws of such state, such
taxpayer is subject to a net income tax, a
franchise tax for the privilege of doing business,
or a corporate stock tax on such taxpayer's net
income derived from credit card activities, and
such state does, in fact, impose such a tax on
such net income.]
[(2) A taxpayer is eligible to make the
election provided by subdivision (1) of this
subsection if it is (A) an institution whose
activities are limited to those described in 12
USC Section 1841(c)(2)(F), as from time to time
amended, (B) a bank whose deposits are insured by
the Federal Deposit Insurance Corporation and
which issues credit cards and regularly engages in
credit card activities, or (C) a wholly-owned
subsidiary of a bank that is described in
subparagraph (B) of this subdivision, if such
subsidiary is engaged in purchasing, holding,
selling, assigning, transferring, pledging or
otherwise dealing with (i) revolving credit card
accounts and credit card receivables, (ii)
passthrough or asset-backed certificates
evidencing interests in one or more trusts or
pools of credit card receivables, or (iii) related
letters of credit, indentures, evidences of
indebtedness and agreements including, but not
limited to, agreements with originators or
servicers of credit card receivables, and if both
such subsidiary and such bank have made the
election provided by subdivision (1) of this
subsection for the same five successive income
years. Notwithstanding the provisions of this
subdivision, a taxpayer shall be eligible to make
the election provided by subdivision (l) of this
subsection for income years commencing on or after
January 1, 1997, and prior to January 1, 2002,
only if its principal credit card activities
during such income years are located in a
distressed municipality as defined in subsection
(b) of section 32-9p. For income years commencing
on or after January 1, 2002, a taxpayer shall be
eligible to make the election without regard to
the location of its principal credit card
activities.]
[(3)] (2) The numerator of the apportionment
fraction shall consist of the Connecticut
receipts, as described in subdivision [(4)] (3) of
this subsection. The denominator of the
apportionment fraction shall consist of (A) the
total amount of interest and fees or penalties in
the nature of interest from credit card
receivables, (B) receipts from fees charged to
card holders, including, but not limited to,
annual fees, irrespective of the billing address
of the card holder, (C) net gains from the sale of
credit card receivables, irrespective of the
billing address of the card holder, and (D) all
credit card issuer's reimbursement fees,
irrespective of the billing address of the card
holder.
[(4)] (3) For purposes of this subsection,
"Connecticut receipts" shall be determined by
adding (A) interest and fees or penalties in the
nature of interest from credit card receivables
and receipts from fees charged to card holders,
including, but not limited to, annual fees, where
the billing address of the card holder is in this
state and (B) the product of (i) the sum of net
gains from the sale of credit card receivables and
all credit card issuer's reimbursement fees
multiplied by (ii) a fraction, the numerator of
which shall be interest and fees or penalties in
the nature of interest from credit card
receivables and receipts from fees charged to card
holders, including, but not limited to, annual
fees, where the billing address of the card holder
is in this state, and the denominator of which
shall be the total amount of interest and fees or
penalties in the nature of interest from credit
card receivables and receipts from fees charged to
card holders, including, but not limited to,
annual fees, irrespective of the billing address
of the card holder.
[(5)] (4) For purposes of this subsection:
(A) "Credit card" means a credit, travel, or
entertainment card;
(B) "Receipts" means receipts computed
according to the method of accounting used by the
taxpayer in the computation of net income;
(C) "Credit card issuer's reimbursement fee"
means the fee that a taxpayer receives from a
merchant's bank because one of the persons to whom
the taxpayer OR A RELATED PERSON, AS DEFINED IN
SECTION 11 OF THIS ACT, has issued a credit card
has charged merchandise or services to the credit
card;
(D) "Net income derived from credit card
activities" means (i) interest and fees or
penalties in the nature of interest from credit
card receivables and receipts from fees charged to
card holders, including, but not limited to,
annual fees, net gains from the sale of credit
card receivables, credit card issuer's
reimbursement fees, and credit card receivables
servicing fees received in connection with credit
cards issued by the taxpayer OR A RELATED PERSON,
AS DEFINED IN SECTION 11 OF THIS ACT, less (ii)
expenses related to such income, to the extent
deductible under chapter 208; [and]
(E) "Billing address" shall be presumed to be
the location indicated in the books and records of
the taxpayer as the address where any notice,
statement or bill relating to a card holder is to
be mailed, as of the date of such mailing; [.] AND
(F) "Credit card activities" means those
activities involving the underwriting and approval
of credit card relationships or other business
activities generally associated with the conduct
of business by an issuer of credit cards from
which it derives income.
[(6)] (5) The Commissioner of Revenue
Services may adopt regulations, in accordance with
chapter 54, to permit a [taxpayer described in
subdivision (2) of this subsection] FINANCIAL
SERVICE COMPANY that is an owner of a financial
asset securitization investment trust, as defined
in Section 860H(a) of the Internal Revenue Code,
to elect to apportion its share of the net income
from credit card activities carried on by such
trust, and to provide rules for apportioning such
share of net income that are consistent with this
subsection.
Sec. 19. Section 12-219 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) (1) Each company subject to the
provisions of this part [, except savings banks,
Morris plan companies, corporations qualified
under the laws of the United States as small
business investment companies and state banks and
trust companies incorporated under the laws of
this state and production credit associations and
savings and loan associations and banks
incorporated under the laws of the federal
government and the Connecticut Development Credit
Corporation,] shall pay for the privilege of
carrying on or doing business within the state,
the larger of the tax, if any, imposed by section
12-214 and the tax calculated under this
subsection. [(1) In the case of a company other
than a regulated investment company or real estate
investment trust, the] THE tax calculated under
this section shall be [: A] A tax of three and
one-tenth mills per dollar for each income year of
the amount derived (A) by adding (i) the average
value of the issued and outstanding capital stock,
including treasury stock at par or face value,
fractional shares, scrip certificates convertible
into shares of stock and amounts received on
subscriptions to capital stock, computed on the
balances at the beginning and end of the taxable
year or period, the average value of surplus and
undivided profit computed on the balances at the
beginning and end of the taxable year or period,
and (ii) the average value of all surplus reserves
computed on the balances at the beginning and end
of the taxable year or period, (B) by subtracting
from the sum so calculated (i) the average value
of any deficit carried on the balance sheet
computed on the balances at the beginning and end
of the taxable year or period, and (ii) the
average value of any holdings of stock of private
corporations including treasury stock shown on the
balance sheet computed on the balances at the
beginning and end of the taxable year or period,
and (C) by apportioning the remainder so derived
between this and other states under the provisions
of section 12-219a, provided in no event shall the
tax so calculated exceed one million dollars or be
less than two hundred fifty dollars. (2) For
purposes of this subsection, in the case of a new
domestic company, the balances at the beginning of
its first fiscal year or period shall be the
balances immediately after its organization or
immediately after it commences business
operations, whichever is earlier; and in the case
of a foreign company, the balances at the
beginning of its first fiscal year or period in
which it becomes liable for the filing of a return
in this state shall be the balances as established
at the beginning of the fiscal year or period for
tax purposes. In the case of a domestic company
dissolving or limiting its existence, the balances
at the end of the fiscal year or period shall be
the balances immediately prior to the final
distribution of all its assets; and in the case of
a foreign company filing a certificate of
withdrawal, the balances at the end of the fiscal
year or period shall be the balances immediately
prior to the withdrawal of all of its assets. When
a taxpayer has carried on or had the right to
carry on business within the state for eleven
months or less of the income year, the tax
calculated under this subsection shall be reduced
in proportion to the fractional part of the year
during which business was carried on by such
taxpayer. The tax calculated under this subsection
shall, in no case, be less than two hundred fifty
dollars for each income year. The taxpayer shall
report the items set forth in this subsection at
the amounts at which such items appear upon its
books; provided, when, in the opinion of the
Commissioner of Revenue Services, the books of the
taxpayer do not disclose a reasonable valuation of
such items, the commissioner may require any
additional information which may be necessary for
a reasonable determination of the tax calculated
under this subsection and shall, on the basis of
the best information available, calculate such tax
and notify the taxpayer thereof.
[(b) (1) Each savings bank, Morris plan
company, corporation qualified under the laws of
the United States as a small business investment
company, state bank and trust company incorporated
under the laws of this state, production credit
association, savings and loan association, bank
incorporated under the laws of the federal
government and the Connecticut Development Credit
Corporation shall pay for the privilege of
carrying on or doing business within the state the
larger of the tax, if any, imposed by section
12-214 and the tax calculated under this
subsection. (2) For such banking and other
financial institutions other than state banks and
trust companies, national banks, mutual savings
banks, and savings and loan associations, the tax
calculated under this subsection shall be two
hundred fifty dollars for each income year. (3)
For state banks and trust companies, national
banks, mutual savings banks, and savings and loan
associations the tax calculated under this
subsection shall be an amount equal to four per
cent for each income year of the amount of
interest or dividends credited by them on savings
accounts of depositors or account holders during
the taxable year preceding that in which such tax
became due, provided, in determining such amount,
each interest or dividend credit to the savings
account of a depositor or account holder shall be
deemed to be the interest or dividend actually
credited or the interest or dividend which would
have been credited if it had been computed and
credited at the rate of one-eighth of one per cent
per annum, whichever is less.]
[(c)] (b) (1) With respect to income years
commencing on or after January 1, 1989, and prior
to January 1, 1992, the additional tax imposed on
any company and calculated in accordance with
subsection (a) [or subsection (b)] of this section
shall, for each such income year, except when the
tax so calculated is equal to two hundred fifty
dollars, be increased by adding thereto an amount
equal to twenty per cent of the additional tax so
calculated for such income year, without reduction
of the additional tax so calculated by the amount
of any credit against such tax. The increased
amount of tax payable by any company under this
section, as determined in accordance with this
subsection, shall become due and be paid,
collected and enforced as provided in this
chapter.
(2) With respect to income years commencing
on or after January 1, 1992, and prior to January
1, 1993, the additional tax imposed on any company
and calculated in accordance with subsection (a)
[or subsection (b)] of this section shall, for
each such income year, except when the tax so
calculated is equal to two hundred fifty dollars,
be increased by adding thereto an amount equal to
ten per cent of the additional tax so calculated
for such income year, without reduction of the tax
so calculated by the amount of any credit against
such tax. The increased amount of tax payable by
any company under this section, as determined in
accordance with this subsection, shall become due
and be paid, collected and enforced as provided in
this chapter.
[(d)] (c) The tax imposed by this section
shall be assessed and collected and be first
applicable at the time or times herein provided
for the tax measured by net income. This section
shall not apply to insurance companies, real
estate investment trusts, [or] regulated
investment companies, [or to] interlocal risk
management agencies formed pursuant to chapter
113a OR FINANCIAL SERVICE COMPANIES, AS DEFINED IN
SECTION 11 OF THIS ACT.
Sec. 20. (NEW) (a) As used in this section:
(1) "Affiliated group" has the same meaning
as in Section 1504 of the Internal Revenue Code.
(2) "Intangible expenses and costs" includes
(A) expenses, losses and costs for, related to, or
in connection directly or indirectly with the
direct or indirect acquisition, use, maintenance
or management, ownership, sale, exchange, or any
other disposition of intangible property to the
extent such amounts are allowed as deductions or
costs in determining taxable income before
operating loss deduction and special deductions
for the taxable year under the Internal Revenue
Code; (B) losses related to or incurred in
connection directly or indirectly with factoring
transactions or discounting transactions; (C)
royalty, patent, technical and copyright fees; (D)
licensing fees; and (E) other similar expenses and
costs.
(3) "Intangible property" means patents,
patent applications, trade names, trademarks,
service marks, copyrights and similar types of
intangible assets.
(4) "Interest expenses and costs" means
amounts directly or indirectly allowed as
deductions under Section 163 of the Internal
Revenue Code for purposes of determining taxable
income under the Internal Revenue Code to the
extent such expenses and costs are directly or
indirectly for, related to, or in connection with
the direct or indirect acquisition, maintenance,
management, ownership, sale, exchange or
disposition of intangible property.
(5) "Related member" means a person that,
with respect to the taxpayer during all or any
portion of the taxable year, is a related entity,
as defined in this subsection, a component member
as defined in Section 1563(b) of the Internal
Revenue Code, or is a person to or from whom there
is attribution of stock ownership in accordance
with Section 1563(e) of the Internal Revenue Code.
(6) "Related entity" means (A) a stockholder
who is an individual, or a member of the
stockholder's family enumerated in Section 318 of
the Internal Revenue Code, if the stockholder and
the members of the stockholder's family own,
directly, indirectly, beneficially or
constructively, in the aggregate, at least fifty
per cent of the value of the taxpayer's
outstanding stock; (B) a stockholder, or a
stockholder's partnership, limited liability
company, estate, trust or corporation, if the
stockholder and the stockholder's partnerships,
limited liability companies, estates, trusts and
corporations own directly, indirectly,
beneficially or constructively, in the aggregate,
at least fifty per cent of the value of the
taxpayer's outstanding stock; or (C) a
corporation, or a party related to the corporation
in a manner that would require an attribution of
stock from the corporation to the party or from
the party to the corporation under the attribution
rules of Section 318 of the Internal Revenue Code,
if the taxpayer owns, directly, indirectly,
beneficially or constructively, at least fifty per
cent of the value of the corporation's outstanding
stock. The attribution rules on Section 318 of the
Internal Revenue Code shall apply for purposes of
determining whether the ownership requirements of
this subdivision have been met.
(b) For purposes of computing its net income
under section 12-217 of the general statutes, as
amended, a corporation shall add back otherwise
deductible interest expenses and costs and
intangible expenses and costs directly or
indirectly paid, accrued or incurred to, or in
connection directly or indirectly with one or more
direct or indirect transactions with, one or more
related members.
(c) (1) The adjustments required in
subsection (b) of this section shall not apply if
the corporation establishes by clear and
convincing evidence that the adjustments are
unreasonable, or the corporation and the
Commissioner of Revenue Services agree in writing
to the application or use of an alternative method
of apportionment under section 12-221a of the
general statutes. Nothing in this subdivision
shall be construed to limit or negate the
commissioner's authority to otherwise enter into
agreements and compromises otherwise allowed by
law.
(2) The adjustments required in subsection
(b) of this section shall not apply to such
portion of interest expenses and costs and
intangible expenses and costs that the corporation
can establish by the preponderance of the evidence
meets both of the following: (A) The related
member during the same income year directly or
indirectly paid, accrued or incurred such portion
to a person who is not a related member, and (B)
the transaction giving rise to the interest
expenses and costs or the intangible expenses and
costs between the corporation and the related
member did not have as a principal purpose the
avoidance of any portion of the tax due under
chapter 208 of the general statutes.
(3) The adjustments required in subsection
(b) of this section shall apply except to the
extent that increased tax, if any, attributable to
such adjustments would have been avoided if both
the corporation and the related member had been
eligible to make and had timely made the election
to file a combined return under subsection (a) of
section 12-223a of the general statutes, as
amended by this act.
(d) Nothing in this section shall require a
corporation to add to its net income more than
once any amount of interest expenses and costs or
intangible expenses and costs that the corporation
pays, accrues or incurs to a related member
described in subsection (b) of this section.
(e) Nothing in this section shall be
construed to limit or negate the commissioner's
authority to make adjustments under section
12-221a or 12-226a of the general statutes.
Sec. 21. Section 12-223a of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1)] (a) Any taxpayer included in a
consolidated return with one or more other
corporations for federal income tax purposes may
elect to file a combined return under this chapter
together with such other companies subject to the
tax imposed thereunder as are included in the
federal consolidated corporation income tax return
and such combined return shall be filed in such
form and setting forth such information as the
Commissioner of Revenue Services may require.
Notice of an election made pursuant to the
provisions of this subsection and consent to such
election must be submitted in written form to the
Commissioner of Revenue Services by each
corporation so electing not later than the due
date of returns due from the electing corporations
for the initial income year for which the election
to file a combined return is made.
[(2)] (b) Any taxpayer, other than a
corporation filing a combined return with one or
more other corporations under subsection [(1)] (a)
of this section, which owns or controls either
directly or indirectly substantially all the
capital stock of one or more corporations, or
substantially all the capital stock of which is
owned or controlled either directly or indirectly
by one or more other corporations or by interests
which own or control either directly or indirectly
substantially all the capital stock of one or more
other corporations, may, in the discretion of the
Commissioner of Revenue Services, be required or
permitted by written approval of the Commissioner
of Revenue Services to make a return on a combined
basis covering any such other corporations and
setting forth such information as the Commissioner
of Revenue Services may require, provided no
combined return covering any corporation not a
taxpayer shall be required unless the Commissioner
of Revenue Services deems such a return necessary,
because of intercompany transactions or some
agreement, understanding, arrangement or
transaction referred to in section 12-226a, in
order properly to reflect the tax liability under
this part.
[(3)] (c) (1) In the case of a combined
return, the tax shall be measured by the sum of
the separate net income or loss of each
corporation included or the minimum tax base of
the included corporations but only to the extent
that said income, loss or minimum tax base of any
included corporation is separately apportioned to
Connecticut in accordance with the provisions of
section 12-218, AS AMENDED BY THIS ACT, 12-219a or
12-244, whichever is applicable. In computing said
net income or loss, intercorporate dividends shall
be eliminated, and in computing the combined
additional tax base, intercorporate stockholdings
shall be eliminated. IN COMPUTING SAID NET INCOME
OR LOSS, ANY INTANGIBLE EXPENSES AND COSTS, AS
DEFINED IN SECTION 20 OF THIS ACT, ANY INTEREST
EXPENSES AND COSTS, AS DEFINED IN SECTION 20 OF
THIS ACT, AND ANY INCOME ATTRIBUTABLE TO SUCH
INTANGIBLE EXPENSES AND COSTS OR TO SUCH INTEREST
EXPENSES AND COSTS SHALL BE ELIMINATED PROVIDED
THE CORPORATION THAT IS REQUIRED TO MAKE
ADJUSTMENTS UNDER SECTION 20 OF THIS ACT FOR SUCH
INTANGIBLE EXPENSES AND COSTS OR FOR SUCH INTEREST
EXPENSES AND COSTS, AND THE RELATED MEMBER OR
MEMBERS, AS DEFINED IN SECTION 20 OF THIS ACT, ARE
INCLUDED IN SUCH COMBINED RETURN.
(2) If the method of determining the combined
measure of such tax in accordance with this
subsection for two or more affiliated companies
validly electing to file a combined return under
the provisions of subsection [(1)] (a) of this
section is deemed by such companies to unfairly
attribute an undue proportion of their total
income or minimum tax base to this state, said
companies may submit a petition in writing to the
Commissioner of Revenue Services for approval of
an alternate method of determining the combined
measure of their tax not later than sixty days
prior to the due date of the combined return to
which the petition applies and said commissioner
shall grant or deny such approval before said due
date. In deciding whether or not the companies
included in such combined return should be granted
approval to employ the alternate method proposed
in such petition, the Commissioner of Revenue
Services shall consider approval only in the event
that the petitioners have clearly established to
the satisfaction of said commissioner that all the
companies included in such combined return are, in
substance, parts of a unitary business engaged in
a single business enterprise and further that
there are substantial intercorporate business
transactions among such included companies.
(3) Upon the filing of a combined return
under [subsections (1) and (2)] SUBSECTION (a) OR
(b) of this section, combined returns shall be
filed for all succeeding income years or periods
for those corporations reporting therein, provided
IN THE CASE OF CORPORATIONS FILING UNDER
SUBSECTION (a) OF THIS SECTION, such corporations
are included in a federal consolidated corporation
income tax return filed for the succeeding income
years and, in the case of a corporation filing
under subsection [(2)] (b) OF THIS SECTION, the
aforesaid ownership or control continues in full
force and effect and is not extended to other
corporations, and further, provided no substantial
change is made in the nature or locations of the
operations of such corporations.
[(4)] (d) Notwithstanding the provisions of
subsections [(1) and (3)] (a) AND (c) of this
section, any taxpayer which has elected to file a
combined return under this chapter as provided in
said subsection [(1)] (a), may subsequently elect
to file a separate corporation business tax return
under this chapter, although continuing to be
included in a federal consolidated corporation
income tax return with other companies subject to
tax under this chapter, provided notice of intent
to file such separate return is filed with the
Commissioner of Revenue Services prior to the
beginning of the income year with respect to which
such taxpayer elects to file such separate return
and all other companies included in such combined
return under this chapter also elect to file
separate returns, and provided further, such
notice of intent may not be revoked subsequent to
the beginning of such income year.
Sec. 22. Section 12-217j of the general
statutes is repealed and the following is
substituted in lieu thereof:
There shall be allowed as a credit against
the tax imposed on any corporation under this
chapter, (1) with respect to income years of such
corporation commencing on or after January 1,
1993, and prior to January 1, 1994, an amount
equal to ten per cent of the amount spent by such
corporation directly on research and experimental
expenditures, as defined in Section 174 of the
Internal Revenue Code of 1986, or any subsequent
corresponding internal revenue code of the United
States, as from time to time amended, which are
conducted in this state and which exceeds the
amount spent by such corporation during the
preceding taxable year of such corporation for
such expenditures and (2) with respect to any
taxable year of such corporation commencing on or
after January 1, 1994, an amount equal to twenty
per cent of the amount spent by such corporation
on such expenditures which exceeds the amount
spent by such corporation during the preceding
taxable year of such corporation for such
expenditures. A credit or any portion of a credit
that is allowed under this section, WITH RESPECT
TO ANY TAXABLE YEAR COMMENCING ON OR AFTER JANUARY
1, 2000, but is not used by a [biotechnology
company] TAXPAYER because the amount of the credit
exceeds the tax due and owing by the
[biotechnology company] TAXPAYER shall be carried
forward to each of the successive income years
until such credit, or applicable portion of the
credit, is fully taken. In no case shall a credit,
or any portion of a credit, that is not used [by a
biotechnology company] be carried forward for a
period of more than fifteen years. [For the
purposes of this section, "biotechnology company"
means a company engaged in the business of
applying technologies, such as recombinant DNA
techniques, biochemistry, molecular and cellular
biology, genetics and genetic engineering,
biological cell fusion techniques, and new
bioprocesses, using living organisms, or parts of
organisms, to produce or modify products, to
improve plants or animals, to develop
microorganisms for specific uses, to identify
targets for small molecule pharmaceutical
development, or to transform biological systems
into useful processes and products or to develop
microorganisms for specific uses.]
Sec. 23. Section 12-217n of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) There shall be allowed as a credit
against the tax imposed by this chapter the amount
determined under subsection (c) of this section in
respect of the research and development expenses
paid or incurred during any income year, subject
to the limitations of this section.
(b) For purposes of this section:
(1) "Research and development expenses" means
research or experimental expenditures deductible
under Section 174 of the Internal Revenue Code of
1986, as in effect on May 28, 1993, determined
without regard to Section 280C(c) thereof or any
elections made by a taxpayer to amortize such
expenses on its federal income tax return that
were otherwise deductible, and basic research
payments as defined under Section 41 of said
Internal Revenue Code to the extent not deducted
under said Section 174, provided: (A) Such
expenditures and payments are paid or incurred for
such research and experimentation and basic
research conducted in this state; and (B) such
expenditures and payments are not funded, within
the meaning of Section 41(d)(4)(H) of said
Internal Revenue Code, by any grant, contract, or
otherwise by a person or governmental entity other
than the taxpayer unless such other person is
included in a combined return with the person
paying or incurring such expenses;
(2) "Combined return" shall mean a combined
corporation business tax return under section
12-223a;
(3) "Commissioner" means the Commissioner of
Economic and Community Development;
(4) "QUALIFIED SMALL BUSINESS" MEANS A
COMPANY THAT (A) HAS GROSS INCOME FOR THE PREVIOUS
INCOME YEAR THAT DOES NOT EXCEED ONE HUNDRED
MILLION DOLLARS, AND (B) HAS NOT, IN THE
DETERMINATION OF THE COMMISSIONER, MET THE GROSS
INCOME TEST THROUGH TRANSACTIONS WITH A RELATED
PERSON, AS DEFINED IN SECTION 12-217m.
(c) (1) The amount allowed as a credit in any
income year shall be the tentative credit
calculated under subdivision (2) of this
subsection, modified as provided in subsection (e)
or (f) of this section, if applicable, EXCEPT THAT
IN THE CASE OF A QUALIFIED SMALL BUSINESS THE
TENTATIVE CREDIT ALLOWED FOR RESEARCH AND
DEVELOPMENT EXPENSES SHALL BE EQUAL TO SIX PER
CENT OF SUCH EXPENSES.
(2) Where the research and development
expenses paid or incurred in the income year
equal: (A) Fifty million dollars or less, the
tentative credit allowed shall be an amount equal
to one per cent of such expenses; (B) more than
fifty million dollars but not more than one
hundred million dollars, the tentative credit
allowed shall be equal to five hundred thousand
dollars plus two per cent of the excess of such
expenses over fifty million dollars; (C) more than
one hundred million dollars but not more than two
hundred million dollars, the tentative credit
allowed shall be equal to one million five hundred
thousand dollars plus four per cent of the excess
of such expenses over one hundred million dollars;
and (D) more than two hundred million dollars, the
tentative credit allowed shall be equal to five
million five hundred thousand dollars plus six per
cent of the excess of such expenses over two
hundred million dollars.
(d) (1) The credit provided for by this
section shall be allowed for any income year
commencing on or after January 1, 1993, provided
any credits allowed for income years commencing on
or after January 1, 1993, and prior to January 1,
1995, may not be taken until income years
commencing on or after January 1, 1995, and, for
the purposes of subdivision (2) of this
subsection, shall be treated as if the credit for
each such income year first became allowable in
the first income year commencing on or after
January 1, 1995.
(2) No more than one-third of the amount of
the credit allowable for any income year may be
included in the calculation of the amount of the
credit that may be taken in that income year.
(3) The total amount of the credit under
subdivision (1) of this subsection that may be
taken for any income year may not exceed the
greater of (A) fifty per cent of the taxpayer's
tax liability or in the case of a combined return,
fifty per cent of the combined tax liability, for
such income year, determined without regard to any
credits allowed under this section, and (B) the
lesser of (i) two hundred per cent of the credit
otherwise allowed under subsection (c) of this
section for such income year, and (ii) ninety per
cent of the taxpayer's tax liability or in the
case of a combined return, ninety per cent of the
combined liability for such income year,
determined without regard to any credits allowed
under this section.
(4) Credits that are allowed under this
section but that exceed the amount permitted to be
taken in an income year by reason of subdivision
(1), (2) or (3) of this subsection, shall be
carried forward to each of the successive income
years until such credits, or applicable portion
thereof, are fully taken. No credit permitted
under this section shall be taken in any income
year until the full amount of all allowable
credits carried forward to such year from any
prior income year, commencing with the earliest
such prior year, that otherwise may be taken under
subdivision (2) of this subsection in that income
year, have been fully taken.
(e) In addition to the wage base test set
forth in subsection (f) of this section, any
aerospace company or in the case of a combined
return, any combined group including an aerospace
company, shall be subject to this subsection for
any income year commencing on or after January 1,
1993, and prior to January 1, 1996. For purposes
of this subsection, an aerospace company is any
taxpayer, whether or not included in a combined
return, engaged principally in the aerospace
industry whose research and development expenses
during each of the income years beginning on or
after January 1, 1990, 1991 and 1992,
respectively, exceeded two hundred million
dollars. No aerospace company, or in the case of a
combined return, a combined group including an
aerospace company, shall be allowed any credit
under this section for any income year to which
this subsection applies in which the aggregate
transfers by an aerospace company, if any, of
historical economic base functions outside of this
state, other than to a location outside the United
States, since January 1, 1993, through the end of
such income year, have materially reduced the
historical economic base functions in this state.
For purposes of this subsection, the historical
economic base functions shall be those economic
base functions conducted by an aerospace company,
which need not be all economic base functions of
the aerospace company, in this state on January 1,
1993, whose continuance in this state, as
determined by the commissioner in his discretion,
will further the policies set forth in section
32-221. Such historical economic base functions
shall be set forth in a binding memorandum of
understanding between the commissioner and an
aerospace company that may be entered into at any
time prior to the expiration of the first income
year to which this subsection applies, with
sufficient specificity to allow the commissioner
and the aerospace company to determine in all
income years subject to this subsection whether
there has been such a reduction in said historical
economic base functions. As a prerequisite to the
allowance of any credit otherwise allowable under
this section for any income year to which this
subsection applies, each aerospace company shall
obtain a certificate of eligibility issued by the
commissioner to the aerospace company for such
income year. The aerospace company shall within
sixty days of the close of each income year to
which this subsection applies certify to the
commissioner that there has been no such aggregate
material reduction in the historical economic base
functions in this state for the income year just
completed that otherwise has not been offset as
provided below. Within sixty days thereafter, the
commissioner shall review the certification and,
if the commissioner determines that there has been
no such net aggregate material reduction in the
historical economic base functions in this state,
the commissioner shall issue a certificate of
eligibility for said income year. The following
shall not constitute a material reduction in the
historical economic base functions in this state:
(1) A reduction of not more than two per cent of
the historical economic base functions; (2)
transfer of an historical economic base function
to a person in this state; (3) transfer of a
historical economic base function outside of the
United States; or (4) reductions in historical
economic base functions attributable to reductions
in volume, productivity improvements or the
discontinuance of operations due to obsolescence
or the like. Any transfers that may otherwise be
counted in determining if a material reduction
occurred may be offset to the extent economic base
functions listed in, or comparable to those listed
in, the memorandum of understanding are increased
in this state, transferred into this state, or
established in this state. Any such increase,
transfer or establishment made during an income
year, or subsequent to such income year but prior
to the filing of the return for such income year,
shall be effective for such income year and all
income years thereafter. The commissioner may
issue or reissue a certificate of eligibility for
the applicable income year following any such
offset. The aerospace company, or in the case of a
combined return including an aerospace company,
the combined group, shall include its certificate
of eligibility and memorandum of understanding
with its corporation business tax return for any
applicable income year. Information provided under
this subsection and subsection (f) of this section
shall be treated as provided in subsection (k) of
section 32-11a.
(f) The tentative credit allowable to the
taxpayer, or in the case of a combined return, the
combined group, that pays or incurs research and
development expenses in excess of two hundred
million dollars for the income year shall be
reduced for any income year in which the workforce
reductions, if any, exceed the percentages set
forth below. For purposes of this subsection,
workforce reductions shall be reductions of the
historical Connecticut wage base of the taxpayer,
or in the case of a combined return, the combined
group, as a result of the transfer outside of this
state, other than to a location outside the United
States, of work done by employees of the taxpayer,
or in the case of a combined return, the combined
group. Such reduction in the tentative credit
shall be as follows: (1) If the historical
Connecticut wage base for the income year is so
reduced by not more than two per cent, the
tentative credit allowable for the income year
shall not be reduced; (2) if the historical
Connecticut wage base for the income year is so
reduced by more than two per cent but not more
than three per cent, the tentative credit
allowable for the income year shall be reduced by
ten per cent; (3) if the historical Connecticut
wage base for the income year is so reduced by
more than three per cent but not more than four
per cent, the tentative credit allowable for the
income year shall be reduced by twenty per cent;
(4) if the historical Connecticut wage base for
the income year is so reduced by more than four
per cent but not more than five per cent, the
tentative credit allowable for the income year
shall be reduced by forty per cent; (5) if the
historical Connecticut wage base for the income
year is so reduced by more than five per cent but
not more than six per cent, the tentative credit
allowable for the income year shall be reduced by
seventy per cent; and (6) if the historical
Connecticut wage base for the income year is so
reduced by more than six per cent, no credit for
the income year shall be allowed. The Connecticut
wage base for any income year shall be the total
wages assigned to Connecticut for such income year
under section 12-218, AS AMENDED BY THIS ACT,
excluding wages paid to the ten most
highly-compensated executives of the taxpayer, or
in the case of a combined return, the combined
group, and any compensation that does not subject
the recipient thereof to federal income tax
thereon in said income year. The historical
Connecticut wage base shall be the Connecticut
wage base for the third full income year
immediately preceding the current income year;
provided the historical Connecticut wage base for
the first three income years commencing on or
after January 1, 1993, shall be the Connecticut
wage base for May 1993, converted to an annual
basis. The following shall not constitute a
workforce reduction for any income year: (A) A
reduction of wages attributable to the transfer of
work done by a taxpayer, or in the case of a
combined return, by the combined group, in this
state to a party in this state; (B) a reduction of
wages attributable to the transfer of work done by
a taxpayer, or in the case of a combined return,
by the combined group, outside the United States;
or (C) a reduction in wages attributable to
reductions in volume, productivity improvements or
the discontinuance of operations due to
obsolescence or the like. Solely for purposes of
determining whether the allowable credit is to be
reduced under this subsection for any income year,
the Connecticut wages attributable to any new jobs
or jobs moved into this state by the taxpayer, or
in the case of a combined return, the combined
group, during such income year or subsequent to
such income year but prior to the filing of the
return for such income year shall be an offset to
any workforce reduction of a taxpayer, or in the
case of a combined return, the combined group, for
said income year. A new job shall be a job that
did not exist in the business of a taxpayer, or in
the case of a combined return, a member of the
combined group, in this state at the end of the
income year just completed. Notwithstanding
subsection (g) of this section, a taxpayer may
elect for any income year to separately compute
its allowable tentative credit under this
subsection for any one or more business units that
had gross revenues for such income year in excess
of one hundred million dollars. Any taxpayer
subject to this subsection shall within sixty days
of the close of each income year certify to the
commissioner whether or not there has been any
workforce reduction for the income year just
completed, the amount thereof, and any offsets
thereto as provided above. Within sixty days
thereafter, the commissioner shall review the
certification and, if the commissioner determines
that there has been no more than a six per cent
workforce reduction, net of any such offsets, the
commissioner shall issue a certificate of
eligibility stating the amount of net workforce
reduction so determined for said income year, if
any. The commissioner shall not issue a
certificate of eligibility for any income year in
which the commissioner determines that there has
been more than a six per cent net workforce
reduction. The taxpayer, or in the case of a
combined return, the combined group, shall file
such a certificate of eligibility with any return
on which a credit subject to this subsection is
claimed.
(g) Where one or more taxpayers properly
included in a combined return pays or incurs
research and development expenses, all allowances
and limitations under this section shall be made
on an aggregate basis for all taxpayers included
in such combined return, PROVIDED, THE CREDIT
ATTRIBUTABLE TO A QUALIFIED SMALL BUSINESS MAY BE
TAKEN ONLY AGAINST THE COMBINED TAX LIABILITY
ATTRIBUTABLE TO SUCH QUALIFIED SMALL BUSINESS. THE
AMOUNT OF THE COMBINED TAX FOR ALL CORPORATIONS
PROPERLY INCLUDED IN A COMBINED CORPORATION
BUSINESS TAX RETURN THAT IS ATTRIBUTABLE TO A
QUALIFIED SMALL BUSINESS SHALL BE IN THE SAME
RATIO TO SUCH COMBINED TAX THAT THE NET INCOME
APPORTIONED TO THIS STATE OF THE QUALIFIED SMALL
BUSINESS BEARS TO THE NET INCOME, IN THE AGGREGATE
OF ALL CORPORATIONS INCLUDED IN SUCH COMBINED
RETURN. SOLELY FOR THE PURPOSES OF COMPUTING SUCH
RATIO, ANY NET LOSS APPORTIONED TO THIS STATE BY A
CORPORATION INCLUDED IN SUCH COMBINED RETURN SHALL
BE DISREGARDED.
(h) Any taxpayer, or in the case of a
combined return, any combined group of taxpayers,
that claims a credit under section 12-217j, AS
AMENDED BY THIS ACT, for any income year shall
reduce the amount of research and development
expenses that otherwise may be taken into account
in computing the allowable credit under subsection
(c) of this section for such income year by the
amount of excess research and experimental
expenditures, as computed under said section
12-217j, AS AMENDED BY THIS ACT, for which the
credit thereunder is given. Any taxpayer, or in
the case of a combined return, any combined group
of taxpayers, that claims a credit under section
12-217l for any income year shall reduce the
amount of research and development expenses that
otherwise may be taken into account in computing
the allowable credit under subsection (c) of this
section for such income year by the amount of
excess grants to institutions of higher education
in Connecticut, as computed under said section
12-217l, for which the credit thereunder is given.
(i) THE COMMISSIONER MAY ADOPT REGULATIONS,
IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER 54,
TO CARRY OUT THE PURPOSES OF THIS SECTION.
Sec. 24. The Department of Economic and
Community Development, in consultation with the
Department of Revenue Services, shall conduct a
cost benefit analysis of the various business
incentives for the economic clusters identified by
the Department of Economic and Community
Development and shall report its findings to the
joint standing committee of the General Assembly
having cognizance of matters relating to finance,
revenue and bonding in accordance with the
provisions of section 11-4a of the general
statutes no later than January 15, 1999.
Sec. 25. Section 12-202a of the general
statutes, as amended by section 57 of public act
97-11 of the June 18 special session, is repealed
and the following is substituted in lieu thereof:
(a) Each health care center, as defined in
section 38a-175, shall pay a tax to the
Commissioner of Revenue Services for the calendar
year commencing on January 1, 1995, and annually
thereafter, at the rate of one and three-quarters
per cent of the total net direct subscriber
charges received on any new or renewal contract or
policy by such health care center during each such
calendar year, which shall be in addition to any
other payment required under section 38a-48. [,
except that the]
(b) NOTWITHSTANDING THE PROVISIONS OF
SUBSECTION (a) OF THIS SECTION, THE tax shall not
apply to: [any] (1) ANY new or renewal contract or
policy entered into with the state on or after
July 1, 1997, to provide health care coverage to
state employees, retirees and their dependents; [.
The tax shall also not apply to] (2) ANY
subscriber charges received from the federal
government to provide coverage for Medicare
patients; (3) ANY SUBSCRIBER CHARGES RECEIVED
UNDER A CONTRACT OR POLICY ENTERED INTO WITH THE
STATE TO PROVIDE HEALTH CARE COVERAGE TO MEDICAID
RECIPIENTS UNDER THE MEDICAID MANAGED CARE PROGRAM
ESTABLISHED PURSUANT TO SECTION 17b-28, AS
AMENDED, WHICH CHARGES ARE ATTRIBUTABLE TO A
PERIOD ON OR AFTER JANUARY 1, 1998; (4) ANY NEW OR
RENEWAL CONTRACT OR POLICY ENTERED INTO WITH THE
STATE ON OR AFTER APRIL 1, 1998, TO PROVIDE HEALTH
CARE COVERAGE TO ELIGIBLE BENEFICIARIES UNDER THE
HUSKY PLAN, PART A, PART B, OR THE HUSKY PLUS
PROGRAMS, EACH AS DEFINED IN SECTION 2 OF PUBLIC
ACT 97-1 OF THE OCTOBER 29 SPECIAL SESSION; OR (5)
ANY NEW OR RENEWAL CONTRACT OR POLICY ENTERED INTO
WITH THE STATE ON OR AFTER APRIL 1, 1998, TO
PROVIDE HEALTH CARE COVERAGE TO RECIPIENTS OF
STATE ADMINISTERED GENERAL ASSISTANCE PURSUANT TO
SECTION 17b-257, AS AMENDED.
(c) The provisions of this chapter pertaining
to the filing of returns, declarations, instalment
payments, assessments and collection of taxes,
penalties, administrative hearings and appeals
imposed on domestic insurance companies shall
apply with respect to the charge imposed under
this section.
Sec. 26. Section 12-412d of the general
statutes, as amended by section 55 of public act
97-243, is repealed.
Sec. 27. This act shall take effect from its
passage, except that (1) sections 1 and 4 shall be
applicable to taxable years commencing on or after
January 1, 1998, (2) sections 5 and 8 shall be
applicable to sales occurring on or after July 1,
1998, (3) sections 6, 7, 9, 10 and 26 shall be
applicable to sales occurring on or after January
1, 1999, (4) sections 11 to 13, inclusive, 16 and
19 to 21, inclusive, shall be applicable to income
years commencing on or after January 1, 1999, (5)
section 14 shall be applicable to income years
commencing on or after January 1, 1999, and prior
to January 1, 2001, (6) section 15 shall be
applicable to income years commencing on or after
January 1, 2001, (7) section 17 shall be
applicable to income years commencing on or after
January 1, 1999, and prior to January 1, 2002, (8)
section 18 shall be applicable to income years
commencing on or after January 1, 2002, and (9)
sections 22 and 23 shall be applicable to income
years commencing on or after January 1, 2000.
Approved May 19, 1998