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Connecticut: How Will the New Budget Affect Taxpayers?



On June 20, 2013, the state of Connecticut passed its budget for 2014 and 2015. As a Connecticut taxpayer, there are a number of provisions in the budget that could affect your tax position.
Tax Amnesty Program:

From September 16 through November 15, 2013, the Department of Revenue Services will hold a tax amnesty program effective for any taxable period ending on or before November 30, 2012. Taxpayers who apply to the amnesty program and are accepted must pay all taxes and interest due on or before November 15, 2013. If the taxpayer pays by the due date, the Department will reduce the interest due to 25 percent of the amount of interest accrued as of the date of the taxpayer’s application. The Department will also waive civil penalties and refrain from criminal prosecution for participants in the program.
Click here for more details regarding the tax amnesty program.
Corporate Surcharge:

The 20 percent corporate income tax surcharge has been extended to the 2014 and 2015 tax years. If a corporation has either $100 million in annual gross income or files a combined or unitary tax return, and the corporation’s tax liability exceeds $250, that corporation must pay the surcharge. The surcharge is calculated using the corporation’s tax liability before any credits are applied.
Tax Credits:
The new budget changes several state tax credit programs.

  • The earned income tax credit has been reduced from 30 percent of the taxpayer’s federal credit amount to 25 percent in tax year 2013 and 27.5 percent in tax year 2014.
  • There will be a two-year moratorium, effective July 1, 2013, on the film production tax credit. This applies to fiscal years 2014 and 2015.
  • The Economic and Community Development Commissioner now has the authority to offer payments to taxpayers holding certificates of eligibility. This will replace the urban and industrial sites reinvestment tax credit.
  • The temporary cap on the use of certain credits to offset insurance premium tax liability has been extended through the end of 2014. The cap that applies to each insurer varies based on the types and combinations of credits claimed.

Other Tax Provisions:

  • The temporary tax on electric generation facilities has been extended through October 1, 2013.
  • Boats purchased in Connecticut that are docked in the state for 60 days or less during the year are exempt from sales and use tax beginning July 1, 2013.
  • Boats purchased in Connecticut that cost more than $100,000 will be subject to the standard sales and use tax rate instead of the luxury sales and use tax rate.
  • Sales and use tax exemptions for clothing and shoes costing less than $50 will be reinstated on June 1, 2015.

What Does CohnReznick Think?
Given the considerable revenue pressures facing Connecticut, the revenue raisers in the budget were fairly modest. Because Connecticut will be under significant revenue pressure during the next few years, we expect to see additional tax revenue increases in the near term.

For more information, please contact Patrick Duffany, Partner and State and Local Tax Practice Leader, at 860-368-3607.
To learn more about CohnReznick’s state and local tax services, please visit our webpage.

Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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