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2018 Legislative Summary

State tax legislation passed during the 2018 Regular Session included the following provisions.
  • Pass-through entity tax. Pass-through entities are now subject to an entity-level tax. The new tax is intended to be revenue-neutral and there are two elections available to address issues raised by the business community. This bill was signed on May 31, 2018, and DRS is working with practitioners on the implementation of this tax. Visit link for additional guidance.  See the full text of the bill.
  • Marketplace fairness. For sales occurring on or after December 1, 2018, large marketplace facilitators will be required to collect and remit sales tax on sales made through their marketplace. Out-of-state sellers with at least $250,000 in sales into Connecticut and more than 200 transactions are also required to collect and remit sales tax.
  • Bonus depreciation. Connecticut’s income tax is decoupled from the federal bonus depreciation in the recently passed Tax Cuts and Jobs Act of 2017. The change is effective for the 2017 taxable year, so amended returns may be required for those affected taxpayers who have already filed returns.
  • Boat sales. The sales tax rate on boats, boat engines, and boat trailers is reduced to 2.99% beginning on July 1, 2018. Dyed diesel sold to marine fuel docks for marine purposes will no longer be subject to the motor vehicle fuels tax but will become subject to sales tax.
  • Corporation business tax dividends received deduction. Beginning with income year 2017, the dividends received deduction for all foreign dividends arising from mandatory federal repatriation rules will effectively be limited to 95%.
  • Connecticut grants to corporations. Connecticut corporation business tax decoupled from the new federal inclusion of grants provided by the state of Connecticut or its municipalities.
  • Interest expenses. Connecticut corporation business tax decoupled from the new federal limitation on interest expenses.
  • Municipal charitable option. Authorizes municipalities to provide property tax credits for donations made to certain charitable organizations.
  • Gift and estate tax changes. Beginning in 2020, Connecticut will increase its gift and estate tax threshold annually through 2023 when it will match the federal threshold.
  • Machinery rental surcharge increased. Effective July 1, 2018, the machinery rental surcharge will increase from 1.5% to 2.75%.
  • Income tax credit for taxes paid. Beginning with taxable year 2019, Connecticut residents who work in New York can receive a credit for taxes paid based on the New York Voluntary Employer Compensation Expense Tax.
  • Income tax sourcing rules. Residents of states with a “convenience of the employer” test will be subject to similar rules for work done for a Connecticut employer.

NOTE: This communication is for general information purposes and is not to be considered complete or authoritative.