Despite facing a projected $200 million deficit for the current fiscal year, Governor Malloy stood by his promise not to raise taxes further on Connecticut taxpayers after last year’s historic tax increases. The projected deficit, however, curtailed any attempt to provide tax relief to Connecticut businesses or individuals, or to enact new tax incentives to promote job growth in the state. The result was a very quiet legislative session as it related to taxes, a welcome relief to many taxpayers after a series of tumultuous years.
The lack of legislative action during the regular and June special sessions did not diminish the public interest in evaluating Connecticut’s business tax policy. State Comptroller Kevin Lembo initiated the discussion by seeking to reconvene the Business Tax Credit and Tax Policy Review Committee. Governor Malloy immediately issued Executive Order No. 17 establishing a Governor’s Business Tax Policy Review Taskforce to: (i) identify specific business tax areas and other issues, including business tax credits or other targeted business tax relief, that should be the focus of future legislation and/or state economic policy; and (ii) evaluate the cost, benefit, efficiency, effectiveness and measurable performance of the current business tax credit structure with respect to economic development, business retention and growth, and employment retention and growth. The Taskforce, whose membership is comprised principally of representatives of the Executive Branch of the state government, has held public hearings and solicited testimony, including from Alan E. Lieberman, the chair of our State and Local Tax Practice Group. The findings and recommendations of the Taskforce are to be submitted to the Governor no later than October 1, 2012. Given the state’s budgetary issues, and the decision of the Taskforce to seek only suggestions that “could improve tax policy and economic development policy without destabilizing state finances,” it seems unlikely that the Taskforce’s final report will recommend the enactment of significant tax relief. Nevertheless, a number of good suggestions have been made, and we are hopeful that the Malloy administration will heed the call for stability and predictability in state tax policy.
This Alert summarizes Connecticut tax legislation enacted (or that became effective), court decisions rendered and administrative guidance published during the first half of 2012. To view the complete summary of 2012 Connecticut tax developments, click here