Governor M. Jodi Rell announced last week that she will neither sign nor veto the state budget given final approval by legislative Democrats last Tuesday morning, allowing the bill to become law without her signature according to the state Constitution. However, Governor Rell said she will exercise her line-item veto power to remove new earmarks and new “pork-barrel” spending items added to the bill. See the News Release for more details. The Budget Bill (H.B. 6802) was passed by the Connecticut General Assembly on August 31, 2009 and contains the following key tax provisions/changes. Personal and Pass-Through Entity Tax Changes: Beginning with the 2009 tax year,
- taxes are increased for joint filers with taxable incomes over $1 million, heads of households with taxable incomes over $800,000, and single filers and married individuals filing separately with taxable incomes over $500,000;
- the flat income tax rate for trusts and estates is increased from 5.0% to 6.5%;
- scheduled tax reductions are delayed for single filers for three years;
- CT law is decoupled from the federal domestic production activities deduction (Sec. 199);
- An "economic nexus" standard is established for determining whether an out-of-state S corporation or partnership is subject to tax (for income years beginning on or after January 1, 2010); and
- use tax tables are required to be included on tax forms.
Corporation Tax Changes
- A 10% corporate tax surcharge is imposed for income years beginning in 2009, 2010 and 2011.
- An "economic nexus" standard is established for determining whether an out-of-state C corporation is subject to the corporation business tax (for income years beginning on or after January 1, 2010).
- CT law is decoupled from the federal domestic production activities deduction (Sec. 199).
- The maximum preference tax is increased for groups of companies filing combined corporation business tax returns from $250,000 to $500,000.
- The period for which a company can carry forward unused credits for the donation of open space land is extended from 15 to 25 years (for income years beginning on or after January 1, 2009).
- Rates and eligibility requirements are adjusted for the film production, film production infrastructure, and digital animation production credits (for income years beginning on or after January 1, 2010).
Sale Tax Changes
- Lowers the sales and use tax rate from 6% to 5.5% effective January 1, 2010. The rate decrease is contingent on the state meeting certain revenue goals.
- The fee for a seller's permit will be increased from $50 to $100 per permit effective October 1, 2009.
- Department of Revenue Services is required to establish a "tax settlement initiative program" from October 1, 2009 to December 31, 2009.
In addition to the above, other changes were also made to Cigarette and Tobacco taxes, and Estate and Gift Taxes which I will not go into here.
For access to the entire bill, click on the following link: Emergency Certified Bill 6802, An Act Concerning Expenditures and Revenue for the Biennium Ending June 30, 2011. If you have any questions, please contact me at [email protected].