2016 Legislative Summary
- Motor Vehicle Parking Services: Charges for the provision of space in a seasonal parking lot provided by the federal government, state of Connecticut or its political subdivisions and charges for the provision of space in municipally owned parking lots are excluded from the scope of motor vehicle parking services and no longer taxable as of May 27, 2016.
- Seller’s Permits: Beginning January 1, 2017, DRS will not issue or renew a seller’s permit if a taxpayer has any outstanding unfiled returns.
- New exemptions: Effective July 1, 2018, feminine hygiene products and disposable or reusable diapers are exempt.
CORPORATION BUSINESS TAX
- Unitary Combined Reporting: Companies are required to calculate their Corporation Business Tax on a combined unitary basis for income years beginning on or after January 1, 2016. See Special Notice 2016(1), Combined Unitary Legislation – Corporation Business Tax for more information.
- Single Sales Factor Apportionment: For income years beginning on or after January 1, 2016, multi-state corporations are required to apportion their income on a single sales factor apportionment basis. See Special Notice 2015(11), Legislation Passed in the 2015 December Special Session for more information.
- Market Based Sourcing: For apportionment purposes, multi-state corporations are required to source receipts from the sales of services and intangible property on a market basis for income years beginning on or after January 1, 2016.
- Tax Credit Limitations: Generally, corporations may only use tax credits up to 50.01% of their liability. However, for the 2016 income year, corporations with any remaining R&D, R&E or Urban and Industrial Site Reinvestment credits may use these credits up to 55% of their liability. See Special Notice 2015(11), Legislation Passed in the 2015 December Special Session for more information.
- Knowledge Center Enterprise Zones: DECD is authorized to establish up to ten “knowledge center enterprise zones.” Such zones will surround an institute of higher learning. Businesses located in a knowledge center enterprise zone will be afforded the same benefits given to businesses located in enterprise zones.
- Property Tax Credit: For tax year 2016, the maximum income tax credit for taxes paid to a Connecticut municipality decreases from $300 to $200. In addition, the $200 credit amount is subject to phase out depending on income levels and filing status. See Special Notice 2015(7.1), 2015 Legislative Changes Affecting Income Tax Withholding and the Income Tax for more information.
- Teacher Pensions: The income modification for teacher pensions has been increased to 25% (up from 10%) for the 2016 tax year.
- Personal Tax Exemption for Single Filers: The personal exemption for single filers is increased to $15,000 beginning with the 2016 tax year.
- Angel Investor Credit: The sunset for new investments under the Angel Investor Credit has been extended to June 30, 2019. In addition, the credit may now be sold, assigned or transferred.
- Pass-through Entities: Beginning with the 2017 tax year, pass-through entities and other filers subject to the income tax will use single sales factor apportionment with market based sourcing to compute their liability.
CIGARETTE AND TOBACCO PRODUCTS TAXES
- Cigarette Floor Tax: The Cigarette Tax rate increases to one hundred ninety-five mills per cigarette or $3.90 per pack of twenty cigarettes on July 1, 2016. A floor tax of $0.25 per pack is imposed on the inventory held at the close of business on June 30, 2016.
- Cigarette or Tobacco Products Licenses: Beginning January 1, 2017, DRS will not issue or renew cigarette or tobacco products licenses if a taxpayer has any outstanding unfiled returns.
REAL ESTATE CONVEYANCE TAX
- New Exemption: Deeds made pursuant to a judgment of loss mitigation, which is a new judgment that can be entered by the court as of October 1, 2016.
GIFT AND ESTATE TAX
- Gift or Estate Tax Cap: The maximum amount of gift or estate tax that a donor or decedent will be required to pay is $20M. This cap is in effect for gifts made on or after January 1, 2016 and for estates of decedents dying on or after January 1, 2016.
- Estate Tax Reduction for Making Certain Investments: The estate tax may be reduced by an amount equal to half of the amount invested by a decedent in certain private investment fund or funds through Connecticut Innovations, for ten years or more. Such reduction cannot exceed $5M. The aggregate amount that can be reduced under this provision is capped at $30M. Applicable to estates of decedents dying on or after January 1, 2021.
- New Exemptions: Events at the Dunkin’ Donuts Park in Hartford are exempt as of June 2, 2016. Also, effective July 1, 2017, admission to any athletic event presented by a member team of the Atlantic League of Professional Baseball at New Britain Stadium is exempt.