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Connecticut Tax Developments 2012

Full Year Legislative, Case Law and Administrative Review

October 1, 2012

Despite facing a significant projected deficit for the current fiscal year, Governor Malloy generally 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 and December 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 Task Force 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. After a series of hearings and meetings, the Task Force issued a report detailing its findings and recommendations. As part of this process, the State Comptroller also published a set of recommendations. Both the Task Force report and the State Comptroller’s recommendations are reviewed in our Alert entitled “Business Tax Policy Change Is In The Air (Again)?” Given the aggregate projected state budget deficit for the next two fiscal years, it remains to be seen what, if any, of the recommendations made will be promoted by the Administration.

This Alert summarizes Connecticut tax legislation enacted (or that became effective), court decisions rendered and administrative guidance published during 2012. Please contact any 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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