Upcoming CT DRS webinar: Select to register for the upcoming Withholding Tax Overview Webinar on Wednesday, July 24, 2024, at 10:00 a.m.

2024 Connecticut State Tax Developments

The following is intended to provide an overview of certain legislation enacted during the 2024 regular session of the Connecticut General Assembly.  The information below is not intended to be a complete analysis of each and every aspect of recently enacted legislation but is intended to inform and alert taxpayers and practitioners of the enactment of such legislation.  The Department will issue additional and more detailed guidance regarding certain aspects of the legislation and will post such information to its website as it becomes available.

 

Corporation Business Tax:

  • Extension of period of time to claim net operating losses: Legislation extends the period of time in which a corporation can claim net operating losses. With regard to net operating losses incurred in income years starting on or after January 1, 2025, the carryforward period for such losses has been extended from twenty (20) years to (30) thirty years. The legislation is effective upon passage.
  • Modification to the net deferred tax liability deduction: Legislation modifies the net deferred tax liability deduction that was enacted as part of the state’s shift from separate entity filing for purposes of the corporation business tax to mandatory combined unitary reporting for purposes of said tax. Under this new legislation, certain eligible corporations are essentially allowed a second opportunity to determine the amount of the net deferred tax liability deduction allowed pursuant to Conn. Gen. Stat. § 12-218g.In order to do so, such corporations must file a statement with the Commissioner on or before July 1, 2025, specifying the total amount of the deduction. The allowable deduction may be claimed over a thirty (30) year period starting with the “first income year that begins in 2026.” The legislation is effective January 1, 2025. 

Business Tax Credit Provisions:

  • Amendment to tax credit for employers making student loan payments: Under current law, the credit allowed under Conn. Gen. Stat. § 12-217qq was limited to payments made towards education loans made by the Connecticut Higher Education Supplemental Loan Authority (CHESLA). Under the new legislation, a credit can be earned by a qualified employer for making payments to certain "student loan servicers" on behalf of a qualified employee. In addition, the legislation now requires employers to submit a list to the Commissioner of qualified employees for whom the employer will be making a payment on behalf of and further requires the Commissioner to issue said employer a voucher listing the amount of credit said employer is eligible to claim as a result of said payments. The legislation also caps the total amount of credits allowable under this section in any one calendar year to ten million dollars. This legislation is effective January 1, 2025, and applicable to calendar and income years commencing on or after January 1, 2025.
  • Amendment to the Historic Homes Rehabilitation Tax Credit: Legislation sets forth the various taxes for which such persons holding a tax credit voucher issued on or after January 1, 2024, may apply. The legislation also makes changes to the carryforward provisions relative to said credit. The legislation is effective July 1, 2024, and applicable to taxable and income years commencing on or after January 1, 2024.
  • Amendment to “Jobs CT” Tax Rebate Program: Legislation amends the “Jobs CT” Tax Rebate Program so as to incentivize the hiring of persons who reside in a concentrated poverty census tract. The legislation is effective from passage.

Income Tax:

  • Amendment to withholding provisions relative to pension and annuity distributions: New legislation modified the withholding requirements in connection with distributions of certain payments. Under the new law, mandatory withholding is no longer required, except in limited circumstances. That said, a recipient may still request that Connecticut income tax be withheld from such distributions. Said requests must be made in accordance with applicable regulations. With regard to lump sum distributions of certain payments, payers remain obligated to withhold from qualified distributions if the distribution is in excess of $5,000 or is more than 50% of the balance of the account from which such distribution is being made from. The legislation is effective January 1, 2025, and applicable to taxable years commencing on or after January 1, 2025. 
  • New subtraction modification for payments received from the Fallen Officer Fund: Legislation provides for a subtraction modification for payments received from the Fallen Officer Fund. The legislation is effective from passage and applicable to taxable years commencing on or after January 1, 2024.

Sales and Use Taxes: 

  • Expansion of exemption for Capital Region Development Authority: New legislation exempts from sales and use taxes any purchase or lease necessary for the operations of the XL Center while said Center is owned, leased or operated by the Capital Region Development Authority (CRDA). Said legislation further extends said exemption to any “contractor” of the CRDA, which includes any entity, including any affiliate thereof, selected and approved by the board of directors of the CRDA to manage and operate the XL Center. This legislation is effective July 1, 2024.

Insurance:

  • Expansion of the Department’s ability to conduct audits of the taxes imposed under Chapter 207: Legislation authorizes the Commissioner to audit and reaudit (for purposes of Chapter 207) as said Commissioner deems necessary within applicable statute of limitations. The legislation is effective from passage.

Cigarette Taxes:

  • New Administrative requirements in connection with the issuance and renewal of cigarette dealer’s licenses: Legislation imposes new requirements associated with the initial application for and renewal of cigarette dealer's licenses. The legislation is effective October 1, 2024.

Various Administrative Provisions:

  • General Assembly establishes a working group to review state tax expenditures: Legislation establishes a working group to examine expenditures in the state for the purpose of simplifying the state tax code and to identify expenditures that are redundant, obsolete, duplicative or inconsistent in language or policy. The Commissioner is identified as a member of the working group.