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Updated 2013 Connecticut Tax Developments

October 31, 2013

Download:  CT Tax Developments October 2013.pdf

Although the 2013 legislative session of the Connecticut General Assembly was dominated by a series of non-financial issues, such as gun control, it ended with the enactment of a number of finance and tax-related bills, including the passage of a biennial budget for the 2014 and 2015 fiscal years, that will leave many taxpayers scratching their heads. 

Mixed messages were the order of the day. Despite a United States Bureau of Economic Analysis report that showed Connecticut to be dead last in economic growth in 2012, the General Assembly extended the corporation business tax surcharge and limited the use of tax credits by businesses investing in Connecticut. The Governor repeatedly vowed the state would not impose any new taxes, but his budget ensures that many Connecticut businesses will pay more taxes during the 2014 and 2015 fiscal years. Legislators bemoaned the state’s high per capita debt and high electricity rates, but authorized increased state spending and borrowing, and extended the electric generation tax. Perhaps most emblematic of the oddly constructed budget is the fact that it reduces the state earned income tax credit for the poor for the next two years, and simultaneously lowers the sales tax on luxury yachts costing more than $100,000.

On a more positive note, the biennial budget provides for a two-month amnesty period from September 16, 2013 through November 15, 2013, during which eligible taxpayers can correct errors made in the reporting and/or payment of Connecticut tax for any taxable period ending on or before November 30, 2012, with a reduction in interest charges and relief from criminal and civil penalties. (Taxpayers should be forewarned, however, that the failure to use the amnesty program to address a delinquent Connecticut tax obligation could result in an additional, non-waivable 25% penalty if a tax assessment is later imposed for a taxable period for which no return was filed.) In addition, Commissioner of Revenue Services Kevin Sullivan recently announced two initiatives to solicit input from the tax practitioner and taxpayer communities. The first is the creation of a Department of Revenue Services (“DRS”) Advisory Group to provide the DRS with an “outside in” perspective on state tax issues. Alan Lieberman will be representing the Connecticut Bar Association as a member of the DRS Advisory Group. The second initiative is the formation of a DRS External Editorial Review Board which will seek the input of tax practitioners and taxpayers on selected forms, publications and notices to be published by the DRS. Ryan Leichsenring has been selected to serve on the DRS External Editorial Review Board. 

This Alert summarizes Connecticut tax legislation enacted, court decisions rendered and administrative guidance published during the first ten months of 2013. 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 and your business.






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