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Legislative Sessions End with More Taxes and More Questions

Updated through October 31, 2011

July 15, 2011

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

The 2011 regular and special June 30th sessions of the Connecticut General Assembly witnessed the enactment of a dizzying array of increased tax rates and new taxes. With some provisions effective as early as January 1, 2011, these changes afford both taxpayers and the Connecticut Department of Revenue Services little time, if any, to understand fully the consequences of such changes and to implement compliance measures. To its credit, the Department continues at a furious pace to publish administrative guidance and to post on its website the answers to frequently asked questions, but because of the retroactive effective date of many of the changes, it is an almost impossible task to educate all taxpayers in a timely manner. We hope this Alert helps in the education effort, as we review the principal tax laws adopted, administrative guidance issued and court decisions rendered during the first six months of this year.

Every Connecticut taxpayer is likely to be impacted by the new tax law changes. Increases in the personal income tax, the sales and use tax, the corporation business tax surcharge, the alcoholic beverages tax, the cigarette and tobacco products tax, the tax on diesel fuel and the real estate conveyance tax are intended to help plug approximately one half of the projected budget deficit for the next two years. Unresolved as of the date of this Alert’s publication is how the remaining projected deficit will be addressed given the recent rejection by the state employee unions of a labor savings and concession deal. Governor Malloy has published the details of a budget-cutting plan that will reduce a wide variety of state programs and result in the layoff of a considerable number of state employees. The Connecticut General Assembly has the right to review the plan, and state employee unions are considering whether to pursue a new deal with the Governor to mitigate the layoffs. In the interim, individuals and businesses will need to plan for the uncertain future based upon the new tax laws and their best estimates as to how the budget cuts will affect the local economy.

To view the Alert in its entirety, please click here.

Please contact a member of our State and Local Tax Practice Group if you have any questions regarding the new tax law changes or how they affect you or your business.

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