Q&A talks about new tax laws and policies affecting Connecticut with Kevin B. Sullivan, commissioner of the state Department on Revenue Services.
Q: New tax laws have been enacted as of July 1. What are some of the major changes that will help businesses in Connecticut?
A: Helpful legislation includes:
• Cutting taxes on incomes of tax single filers, estates, retail sales of clothing and footwear as well as eliminating taxes on non-prescription drugs.
• Reinvesting stranded research and development tax credits in Connecticut’s key aerospace industry — including new capital growth, more jobs and more work for businesses in a huge supply chain all across the state.
• Expanded eligibility for apprenticeship training tax credits.
• Parity in the tax sourcing of tangible property sales for non-C corporations.
Q: One of the business tax changes was the Manufacturing Reinvestment Account. The tax exemption increased from 50 percent to 100 percent for amounts used for eligible purposes, effective July 1, for both income and corporation business tax. What are some of the eligible purposes and what is the projected benefit to the state vs. lost revenue?
A: The Manufacturing Reinvestment Account (MRA) program supports manufacturing business investment in machinery or equipment for use in Connecticut and workforce training, development or expansion in the state — up to $500,000 over five years. The tax exemption is available to up to 100 manufacturers with 50 or fewer employees. The state revenue loss is estimated to be less than $50,000 for fiscal year 2015.
Q: What is the implication of the financial institutions data match law that authorizes banks and the Department of Revenue Services to share information to streamline the tax warrant process? Does this apply only to state chartered banks and why couldn’t this information be shared in the past? Will the changes lead to improved collection from delinquents?
A: The new law applies to all financial institutions doing business in the state. Previously, financial institutions and DRS were limited in sharing this information unless there was a collection warrant. This resulted in unnecessary expense for the state and the financial institutions as well as a legal burden on taxpayers just to find out that there actually were no assets for collection. Instead, financial institutions and DRS will enter into memoranda of understanding to permit front-end screening (with no less protection for the taxpayer) so that warrants may be issued only for accounts with assets subject to collection.
Q: The General Assembly passed a law called “An Act Concerning a Comprehensive Study of the State Tax Structure.” It requires consideration of all state taxes and analysis of whether each tax “encourages economic growth, is efficient, stable, simple and predictable, and fair and equitable.” What changes to the state code would you like to see after lawmakers finish the comprehensive study of state taxes?
A: The new review will need to happen quickly and the recommendations of the 2013 Business Tax Task Force would be a good place to begin:
• Better align overall state tax policy with long-term economic competitiveness, job growth and business investment in Connecticut.
• Phase out Connecticut’s corporate minimum tax and business entity tax.
• Continue to roll back sales taxes for consumers.
• Phase out taxation of business-to-business services.
• Reduce estate taxes that discourage investors from state residence.
Q: The sales tax filing deadline has been moved to the 20th of the month. What was the previous deadline and why was the change implemented?
A: The current deadline is the last day of the month following the monthly, quarterly or annual filing period. Based on best practices in other states and in consultation with Connecticut retailers, moving the sales tax deadline to the 20th of the month will reduce serious delinquencies. In fairness to businesses that pay their taxes, the new legislation will also put delinquent businesses on a discipline of weekly filing.
Q: What’s the impact of the extension of the angel investors income tax credit through June 30, 2016?
A: The angel investor tax credit extension will help interested investors that could not be accommodated within the current limits. Individuals can participate if they are an accredited investor, or a network of accredited investors. An investment of $25,000 to $1 million qualifies for a 25 percent credit on your state income tax.
Connecticut businesses qualify for the tax credit if they are engaged in bioscience, advanced materials, photonics, clean tech or information technology. They must also have:
• Gross revenues under $1 million in the most recent income year.
• Fewer than 25 employees, including shareholders, members or active partners, 75 percent of whom are Connecticut residents.
• Operated in Connecticut for less than seven consecutive years.
• Received less than $2 million in eligible investments from angel investors.
