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Connecticut General Assembly Approves Budget for the Biennium

May 6, 2011

Authors: Alan E. Lieberman, Louis B. Schatz, Raymond J. Casella

The Connecticut General Assembly has adopted, and Governor Malloy has signed, Senate Bill No. 1239, “An Act Concerning the Budget for the Biennium Ending June 30, 2013” (the “Act” or “Budget”).

The Act is projected to increase state tax revenues by approximately $1.5 billion, principally through increases in the income tax, corporation business tax, sales and use tax and other miscellaneous taxes and fees. The tax increases are likely to impact every taxpayer and will require most businesses to implement quickly new sales tax rates, revised withholding tax tables and other new tax-related requirements.

In this Alert, we summarize the principal tax provisions in the Budget so that our clients can begin immediately to address the new compliance requirements. Hopefully, administrative guidance will be published promptly as many of the tax law changes are retroactive to January 1, 2011, or are scheduled to be effective as early as July 1, 2011. Please note, however, that the Budget contemplates significant concessions from state employees, totaling approximately $2 billion over two years. If an agreement with the state employees achieves less than $2 billion in savings, the Governor is to submit to the General Assembly recommendations for budget adjustments to achieve the difference. Although such adjustments are intended to be in the form of reduced expenses, there is nothing to prevent the legislature from adopting additional tax increases. In addition, the Connecticut General Assembly is still in session until June 8, 2011, and additional tax legislation may be enacted. As in prior years, we will publish our legislative review once the legislative session has concluded. To view the complete summary, please click here.

Please contact a member of our State and Local Tax Practice Group if you have any questions regarding the Governor’s tax proposals or how they will affect you or your business.

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