🔒Taxes, health care, workforce issues top business agenda as CT lawmakers convene

State lawmakers return to Hartford on Wednesday to open the 2026 legislative session and several issues that directly affect businesses are expected to be on the agenda. Each year ahead of the session, the state Office of Legislative Research (OLR) identifies important issues the General Assembly may face during the coming session. This year is a short session, lasting just 13 weeks before adjourning on May 6. The OLR identifies potential issues based on interim studies; research requests; and non-confidential discussions with legislators, other legislative participants and executive branch agencies; as well as on OLR’s “general subject matter knowledge,” the report states, adding that it does not represent staff recommendations. OLR staff also consult with the Office of Fiscal Analysis and the Legislative Commissioners’ Office when selecting issues, the report states. Short sessions are intended primarily for budget revisions to address any issues related to the second year of the state’s two-year budget. Unlike the longer sessions held in odd years, individual legislators can propose bills that are only budget related. Bills addressing policy must be raised by one of the legislature’s committees.

Pass-through tax credit

One policy issue projected to be on the agenda of the Commerce Committee is expanding the research and development tax credit for pass-through entities. During the 2025 session, the legislature considered House Bill 7008, which would have allowed the owners of pass-through entities — including S corporations, partnerships, and limited liability companies — to claim a tax credit for R&D expenses. Currently, only C corporations can claim the credit, despite the fact that many small and midsize businesses — particularly in technology, manufacturing and life sciences — are structured as pass-through entities. A similar bill failed to pass in 2024. The pass-through entity tax credit is among the key requests of the legislature this year by the Connecticut Business & Industry Association, which released its set of 10 “policy solutions” for the legislative session last week. Chris Davis, vice president of public policy for CBIA, said the tax credit is part of a larger effort by his organization to focus on making Connecticut more affordable, particularly for small businesses. He said increasing the tax credit would provide direct relief to about 140,000 pass-through entities in the state and put “close to $70 million back into the hands of these small business owners to be able to make investments right here in Connecticut.” During his remarks at CBIA’s annual economic summit last week, Lamont announced that, following “conversations” with CBIA and its president and CEO, Chris DiPentima, his administration will support expanding the R&D tax credit to pass-through entities in the state.

Affordability

Health care costs also are a growing concern for employers, especially for small businesses struggling with rising premiums. The Insurance and Real Estate Committee is expected to renew discussions around association health plans, which would allow smaller employers to form groups to purchase coverage and potentially reduce costs. The issue has been debated in past sessions but could gain traction as affordability pressures grow. A bipartisan group of lawmakers recently came out in favor of association health plans and Lamont has also expressed support for the concept. Energy costs and regulation are also expected to be a focus of the session. The legislature is expected to consider Lamont’s four nominees for the Public Utilities Regulatory Authority (PURA), which oversees electric, gas and water utilities. The changes come amid ongoing concerns from businesses about energy affordability, reliability and the pace of infrastructure development. Lawmakers may also consider new safety and regulatory standards for solar facilities following a fire at a utility-scale project last year. Workforce availability is another major issue on the agenda as Connecticut’s workforce continues to age. Lawmakers are expected to consider expanded apprenticeship programs, career pipelines and work-based learning initiatives aimed at filling shortages in skilled trades, manufacturing, health care and technology. Proposals to improve college affordability and expand training incentives could also influence employers’ ability to recruit and retain talent. Emerging regulatory areas may also affect business operations. Lawmakers are considering proposals related to artificial intelligence that could require disclosures when consumers interact with AI systems or limit certain uses of AI-generated content. Financial services providers, meanwhile, could face expanded disclosure requirements for merchant cash advances, a popular alternative financing option for small businesses. Other business-related issues expected to be raised include potential new labor protections for warehouse workers, a renewed debate over unemployment benefits for striking workers, and expanded environmental producer responsibility programs that could increase compliance costs for manufacturers and retailers.

Budget

As for the budget, state Comptroller Sean Scanlon released an update on Monday projecting a fiscal year 2026 General Fund surplus of $85.9 million and a Special Transportation Fund surplus of $46.5 million. Both figures are in general agreement with the state Office of Policy and Management’s projections, he said. Scanlon noted that this month’s surplus is $50.4 million lower than last month and $223.1 million less than budgeted. The Budget Reserve Fund, also known as the Rainy Day Fund, remains at its statutory cap of 18% of net General Fund appropriations, he said, while $303.4 million remains available in a fund the legislature set aside for response to federal funding cuts. One of the other significant issues for employers this session is the state’s response to federal tax changes enacted last year under the “One Big Beautiful Bill Act.” The sweeping federal law extends and modifies business provisions such as bonus depreciation, full expensing of research and experimental costs, and limits on business interest deductions. Because Connecticut’s tax code is closely tied to federal law, lawmakers are expected to consider whether to decouple from certain provisions to protect state revenues. Any move to decouple could increase state tax liabilities for businesses, OLR noted, while maintaining conformity could reduce revenue available for other priorities. Lawmakers are also expected to debate whether surplus funds should be used for targeted tax relief, including enhanced property tax credits, a move that could benefit business owners who pay taxes both personally and through commercial property.