Source: https://www.cga.ct.gov/2015/SUM/2015SUM00244-R02HB-07061-SUM.htm
Timestamp: 2018-02-25 11:46:17
Document Index: 589559900

Matched Legal Cases: ['§ 19', '§ 33', '§ 35', '§ 65', '§ 66', '§ 71', '§ 72', '§ 74', '§ 83', '§ 85', '§ 138', '§ 172', '§ 176', '§ 81', '§ 82', '§ 93', '§ 103', '§ 108', '§ 112', '§ 164', '§ 1', '§ 155', '§ 10', '§ 2', '§ 155', '§ 12', '§ 13', '§ 14', '§ 15', '§ 16', '§ 18', '§ 402', '§ 45', '§ 89', '§ 90', '§ 19', '§ 20', '§ 22', '§ 23', '§ 25', '§ 259', '§ 26', '§ 343', '§ 28', '§ 32', '§ 33', '§ 207', '§ 34', '§ 35', '§ 2', '§ 18', '§ 39', '§ 40', '§ 41', '§ 44', '§ 45', '§ 46', '§ 47', '§ 48', '§ 49', '§ 50', '§ 52', '§ 55', '§ 56', '§ 496', '§ 65', '§ 66', '§ 66', '§ 67', '§ 69', '§ 70', '§ 72', '§ 132', '§ 74', '§ 74', '§132', '§ 74', '§ 132', '§ 133', '§ 516', '§ 71', '§ 136', '§ 136', '§ 78', '§ 81', '§ 82', '§ 83', '§ 138', '§ 139', '§ 87', '§ 88', '§ 86', '§ 56', '§ 91', '§ 91', '§ 92', '§ 94', '§ 99', '§ 138', '§ 112', '§ 137', '§ 475', '§ 478', '§ 474', '§ 137', '§ 139', '§ 138', '§ 140', '§ 144', '§ 144', '§ 144', '§ 139', '§ 139', '§ 139', '§ 139', '§ 149', '§ 148', '§ 139', '§ 87', '§ 142', '§ 139', '§ 139', '§ 139', '§ 139', '§ 139', '§ 139', '§ 143', '§ 141', '§ 145', '§ 145', '§ 156', '§ 149', '§ 162', '§ 152', '§ 142', '§ 150', '§ 147', '§ 139', '§ 164', '§ 481', '§ 170', '§ 130', '§ 130', '§ 133', '§ 494', '§ 110', '§ 494', '§ 494', '§ 494', '§ 211', '§ 11', '§ 405', '§ 20', '§ 20', '§ 20', '§ 20', '§ 20', '§ 2', '§ 2']

AN ACT CONCERNING THE STATE BUDGET FOR THE BIENNIUM ENDING JUNE 30, 2017, AND MAKING APPROPRIATIONS THEREFOR, AND OTHER PROVISIONS RELATED TO REVENUE, DEFICIENCY APPROPRIATIONS AND TAX FAIRNESS AND ECONOMIC DEVELOPMENT
PA 15-244—HB 7061
SUMMARY: This act appropriates funds for state agencies and programs and estimates state revenue for FYs 16 and 17. It carries forward unspent balances from prior years' appropriations and directs funds to be spent for specific programs and purposes, adjusts FY 15 appropriations to cover deficiencies, and transfers revenue from various sources to the General Fund for FYs 15 through 17. Among other things, the act:
1. freezes funding for the state's share of retired teachers' health insurance costs and requires the retired teachers' health insurance account to pay any remaining costs (§ 19);
2. establishes municipalities' education cost sharing (ECS) grants (§ 33); and
3. modifies the methodology for calculating the state's spending cap for FYs 15 through 17 (§ 35).
Among its major state tax provisions, the act:
1. fully exempts federally taxable military retirement pay from the state income tax (§ 65);
2. increases marginal income tax rates for certain higher income filers (§ 66);
3. eliminates certain sales and use tax exemptions and extends the tax to new taxable goods and services (§§ 71, 74-77 & 219);
4. increases, from 7% to 7. 75%, the sales and use tax rate on specified luxury items (§§ 72 & 73);
5. directs a portion of sales tax revenue to the Municipal Revenue Sharing Account (MRSA) and Special Transportation Fund (STF) (§ 74);
6. extends the 20% corporation income tax surcharge that was set to expire after the 2015 income year for two additional years (the 2016 and 2017 income years) and imposes an additional temporary 10% surcharge for the 2018 income year (§§ 83 & 84);
7. limits the extent to which corporations, insurance companies, and hospitals may use tax credits to reduce the amount of taxes they owe (§§ 85-89);
8. imposes a new mandatory combined reporting requirement for groups of related corporations meeting certain criteria (§§ 138-163);
9. establishes a new 6% gross receipts tax on ambulatory surgical centers (§ 172); and
10. increases the cigarette tax in two steps, from (a) $3. 40 to $3. 65 per pack on October 1, 2015 and (b) $3. 65 to $3. 90 per pack on July 1, 2016 (§§ 176-180).
The act authorizes several initiatives to strengthen municipalities' fiscal capacity and minimize disparities resulting from the property tax on motor vehicles. Specifically, it:
1. beginning in FY 17, restructures the state's payment in lieu of taxes (PILOT) program by establishing minimum annual reimbursement rates and a method for disbursing PILOT grants when appropriations are not enough to fund the full grant amounts;
2. requires the Office of Policy and Management (OPM) to distribute MRSA funds for municipal grant programs, including newly established motor vehicle property tax grants, municipal revenue sharing grants, and regional services grants for councils of government (COG);
3. authorizes a regional property tax base revenue sharing program for municipalities within a planning region to share up to 20% of the property tax revenue generated on specified commercial and industrial property; and
4. caps the mill rate municipalities and special taxing districts may impose on motor vehicles at (a) 32 mills for the 2015 assessment year and (b) 29. 36 mills for the 2016 assessment year and thereafter.
Among its other major provisions, the act:
1. increases the number of package store or druggist liquor permits in which a person may have an interest from (a) three to four, on July 1, 2015, and (b) four to five, on July 1, 2016 (§ 81);
2. extends by one hour each day the allowable hours for alcohol sales for off-premises consumption by certain alcohol permittees (§ 82);
3. transfers funds from various accounts to the General Fund (§§ 93-95, 99-102, 181-182 & 221);
4. allows the Connecticut Lottery Corporation to offer keno as a lottery game under certain conditions (§§ 103-106);
5. establishes a framework for regulating the manufacture and sale of electronic nicotine delivery systems and vapor products (§§ 108-111);
6. increases license renewal fees for various Department of Public Health (DPH) licensed professionals and directs the revenue generated to fund the professional assistance program for DPH-regulated professionals (§§ 112-137); and
7. establishes a mechanism for diverting projected surpluses in certain tax revenues to the Budget Reserve (i. e. , “Rainy Day”) Fund (BRF) (§§ 164-169).
EFFECTIVE DATE: July 1, 2015, unless otherwise noted below.
§§ 1 - 9 — FY 16 AND FY 17 APPROPRIATIONS
The act appropriates money from the state's nine appropriated funds for state agency operations and programs in FYs 16 and 17. Table 1 shows the net annual appropriations for each year from each fund.
Table 1: FY 16 and FY 17 Net Appropriations by Fund
$ 18,175,553,801
$ 18,738,158,675
*PA 15-5, June Special Session (§§ 155 & 156) reduces net General Fund appropriations by $14 million in FY 16 and $ 27 million in FY 17.
§§ 10, 11 & 38 —GENERAL FUND AND PERSONAL SERVICES SAVINGS
For FYs 16 and 17, the act requires OPM to recommend spending reductions in each branch of government to reduce General Fund and personal services expenditures. Table 2 lists the annual spending reductions for each branch. The provision concerning personal services reductions does not apply to the higher education constituent units.
Table 2: FY 16 and FY 17 Spending Reductions
$ 9,678,316
$ 30,920,000
The act also requires the OPM secretary to recommend savings to reduce General Fund expenditures by $7,110,616 in FY 16 and $12,816,745 in FY 17. It requires him to apply the reductions only to state employees and in an appropriate and proportionate manner among branches and agencies. In doing so it overrides the statutory requirement that the budget act specify the amount of any statewide unallocated budget reductions to be achieved in each branch of government (CGS § 2-35 (c)).
(PA 15-5, June Special Session (JSS) (§§ 155 & 156) adds $12. 5 million in targeted General Fund annual savings for FY 16 and FY 17. It also permits the OPM secretary to reduce specified allotments to achieve the savings. )
§ 12 — MUNICIPAL AID REDUCTIONS
The act requires the OPM secretary to recommend municipal aid spending reductions for FY 16 and FY 17 to reduce General Fund expenditures by $20,000,000 in each year.
§ 13 — APPROPRIATIONS FOR NONFUNCTIONAL – CHANGE TO ACCRUALS
The act bars the OPM secretary from allotting funds from the Nonfunctional – Change to Accruals line item accounts in each of the state's nine appropriated funds, regardless of the law requiring the governor, through OPM, to allot appropriations before they can be spent. These line items represent the change to accruals in agency budgets due to the conversion to generally accepted accounting principles (GAAP)-based budgeting.
§ 14 — FEDERAL REIMBURSEMENT FOR DEPARTMENT OF SOCIAL SERVICES (DSS) PROJECTS
For FY 16 and FY 17, the act authorizes DSS, with OPM's approval, to establish receivables for the anticipated reimbursement from approved projects. It must do so in compliance with any advanced planning documents approved by the federal Department of Health and Human Services.
§ 15 — NEWBORN SCREENING ACCOUNT
For FYs 16 and 17, the act allocates $3,109,177 annually, rather than the statutorily required $500,000 per fiscal year, to the General Fund's newborn screening account. The funding comes from fees the Department of Public Health (DPH) charges institutions for comprehensive newborn testing, parent counseling, and treatment. DPH must use $1. 91 million of the allocated amount for upgraded screening technology and testing expenses. Of the remaining allocation, the act (1) credits $600,000 to DPH's personal services account to offset the screening program's personnel costs and (2) makes $599,177 available to DPH for grants to newborn screening regional and sickle cell disease treatment centers.
§ 16 — DEPARTMENT OF CHILDREN AND FAMILIES (DCF)-LICENSED PRIVATE RESIDENTIAL TREAMENT FACILITIES
The act suspends per diem and other rate adjustments for FY 16 and FY 17 for private residential treatment facilities licensed by DCF.
1. personal services appropriations in any appropriated fund from agencies to the Reserve for Salary Adjustments account to more accurately reflect collective bargaining and related costs and
2. General Fund appropriations for Reserve for Salary Adjustments to any agency in any appropriated fund to implement salary increases; other employee benefits; agency costs related to staff reductions, including accrual payments; or any other authorized personal service adjustment.
§§ 18, 27, 29, 30, 36, 37, 42, 43 & 45 — FUNDS CARRIED FORWARD
The act carries forward various unspent balances from prior years' appropriations and requires them to be used for the same purpose in FY 16 or FY 17, rather than lapsing at the end of the fiscal year (see Table 3).
Table 3: Funds Carried Forward for the Same Purpose*
Collective bargaining agreements and related costs for FY 14 & FY 15
Collective bargaining agreements and related costs in General and Special Transportation Funds for FY 16
Upgrading registration and driver's license data processing systems
Up to $297,000
Disparity study by the Connecticut Academy of Science and Engineering (CASE)
Up to $299,400
CASE family violence study
*PA 15-5, JSS (§§ 402 & 464) adds items to this list.
The act carries forward prior years' appropriations to FY 16 or FY 17 and requires them to be used for other purposes in the same agency, as shown in Table 4.
National Center for Higher Education Management Systems contract
Charter Oak Group consulting services for Appropriations Committee Accountability Initiative
Multi-year, comprehensive analysis of African American, Latino, and poor children in Connecticut, including a grant for data and analysis on the achievement gap (see § 45 below)
* PA 15-5, JSS (§§ 89, 91 & 336) adds items to this list.
Up to $412,150
Personal services ($221,102); other expenses ($10,000); equipment ($10,800); and fringe benefits ($170,248), to hire four additional staff
Up to $420,920
Personal services ($232,157); other expenses ($10,000); and fringe benefits ($178,763)
Up to $152,000
Other expenses—purchase of pheasants
* PA 15-5, JSS (§§ 90, 92, & 509) adds items to this list.
§ 19—STATE PAYMENTS FOR RETIRED TEACHERS' HEALTH INSURANCE
For FYs 16 and 17, the act freezes funding at the FY 15 appropriated level for the state's share of retired teachers' health insurance costs and requires the retired teachers' health insurance premium account to pay any remaining associated costs. In doing so, it overrides the statute specifying the state's share of (1) Teacher's Retirement Board (TRB)-sponsored retiree health plans and (2) the subsidy for retirees in local board of education health plans.
Under that statute, annual premiums for the basic TRB plan are split equally among (1) the General Fund; (2) the retired teacher; and (3) the retired teachers' health insurance premium account, which is funded by active teachers who contribute 1. 25% of their salaries to it. For retired teachers covered under local board health plans, the law requires the TRB to provide a monthly subsidy to the local boards to offset retired teachers' local plan premiums. Retirees are responsible for paying the difference between the subsidy and the premium cost. By law, the state General Fund pays one-third of the subsidy, and the retired teachers' health insurance account pays two-thirds.
§§ 20 & 21 — TRANSFERS AND FUNDING ADJUSTMENTS TO MAXIMIZE FEDERAL MATCHING FUNDS
The act allows the governor, with the Finance Advisory Committee's (FAC) approval, to transfer all or part of an agency's General Fund appropriation at its request to another agency to take advantage of federal matching funds, as long as both agencies certify that the receiving agency will spend the money for the original purpose. Federal funds generated from transfers can be used to reimburse General Fund spending, expand services, or both, as the governor, with FAC approval, determines.
§§ 22 & 24 — TRANSFERS TO MEDICAID ACCOUNT
The act allows the OPM secretary to transfer all or part of any FY 16 or FY 17 General Fund appropriation for the UConn Health Center or the Department of Veterans' Affairs to DSS's Medicaid account in order to maximize federal reimbursement.
§ 23 — DSS PAYMENTS TO DEPARTMENT OF MENTAL HEALTH AND ADDICTION SERVICES (DMHAS) HOSPITALS
The act requires DSS to spend money appropriated to it for FY 16 and FY 17 for DMHAS – Disproportionate Share payments when and in the amounts OPM specifies. DSS must make payments to DMHAS hospitals for operating expenses and related fringe benefits. Hospitals must reimburse the comptroller for the fringe benefit payments and deposit the other funds into “grants – other federal accounts. ” Unspent disproportionate share funds in the “grants” account must lapse at the end of each fiscal year.
§ 25 — BIRTH-TO-THREE PROGRAM
For FYs 16 and 17, the act requires SDE to annually transfer $1 million of the federal special education funds it receives to the Department of Developmental Services (DDS) for the Birth-To-Three Program to carry out special education-related responsibilities consistent with federal special education law. (PA 15-5, JSS (§§ 259-261) shifts responsibility for the Birth-to-Three Program from DDS to the Office of Early Childhood. )
§§ 26 & 31 — RESERVED AMOUNTS FROM LINE ITEM APPROPRIATIONS
The act reserves certain amounts from line items in agency budgets for various purposes, as shown in Table 6.
Table 6: Reserved Amounts from FY 16 and FY 17 Line Item Appropriations*
Pretrial Education Program
Regional Action Councils ($353,025) and Governor's Prevention Partnership ($475,950)
Up to $828,975 annually
Maintenance of National Iwo Jima Memorial and Park in Newington
*PA 15-5, JSS (§§ 343 & 507) adds items to this list.
§ 28 — DDS AND DMHAS COST SETTLEMENTS WITH PRIVATE AND NONPROFIT PROVIDERS
During FYs 16 and 17, the act requires private and nonprofit organizations providing services under contract with DDS or DMHAS to reimburse these agencies at 100%, or an alternate amount identified by the DDS or DMHAS commissioners and approved by the OPM secretary, of the difference between the actual expenses incurred and the amount the organization received from these agencies under the contract.
§ 32 — PRIVATE OCCUPATIONAL SCHOOL STUDENT PROTECTION ACCOUNT
The act overrides statutory restrictions to allow the Office of Higher Education (OHE) to spend up to $525,000 in FY 16 and up to $575,000 in FY 17 from the private occupational school student protection account.
§ 33 — EDUCATION COST SHARING (ECS) GRANTS
The act establishes each municipality's ECS grant for FYs 16 and 17. The act also transfers $10 million in FY 16 and again in FY 17 from MRSA for ECS grants (see § 207).
§ 34 — CITIZEN'S ELECTION FUND (CEF) TRANSFERS
For FYs 16 and 17, the act transfers funds from the CEF to SOTS for other expenses in the amounts and for the purposes specified in Table 7. It does so regardless of a law requiring CEF funds to be used for the Citizen Elections Program.
Table 7: FY 16 and FY 17 Transfers from CEF to SOTS
Annual Dues to the Electronic Registration Information Center and, in FY 17, mailings to likely eligible but unregistered voters
Registrar and Deputy Registrar of Voters training
Grants to Regional Councils of Government for elections preparation and post-election activities costs
Election monitoring in Hartford
§ 35 — SPENDING CAP CALCULATION
The state's statutory and constitutional spending cap bars the legislature from authorizing an increase in general budget expenditures for any fiscal year that exceeds the greater of the percentage “increase in personal income” or “increase in inflation,” unless (1) the governor declares an emergency or the existence of extraordinary circumstances and (2) at least three-fifths of each house of the legislature approves the extra expenditure for those purposes (CGS § 2-33a & Conn. Const. , art. III, § 18(b)). By law, the “increase in personal income” is the state's average annual increase in personal income for the preceding five years, based on United States Bureau of Economic Analysis data. Under prior practice, OPM and the Office of Fiscal Analysis calculated this average annual increase on a fiscal year basis. For FY 15 through FY 17, the act instead requires them to do so on a calendar year basis.
The act also expands the types of expenditures excluded from the spending cap to include certain appropriations for unfunded pension liabilities. By law, the payment of principal and interest on state bonds, notes, or other “evidences of indebtedness” is excluded from the cap. For FY 15 through FY 17, the act provides that “evidences of indebtedness” includes expenditures for the state employees' and teachers' retirement systems that are used to reduce the systems' unfunded liabilities. In doing so, it excludes such spending from the cap.
As under existing law, the following expenditures are also excluded from the cap:
1. statutorily required transfers of unappropriated General Fund surpluses (a) to the BRF (“Rainy Day Fund”) and (b) once the fund reaches the maximum, to fund the State Employees Retirement Fund's unfunded liability and other outstanding state debt;
2. statutory grants to distressed municipalities, if the grants were in effect on July 1, 1991; and
3. payments to implement federal mandates or court orders for the first fiscal year in which the spending is authorized.
§ 39 — TOBACCO AND HEALTH TRUST FUND ALLOCATIONS
The act transfers funds from the Tobacco and Health Trust Fund for the programs and purposes shown in Table 8.
Table 8: Tobacco and Health Trust Fund Allocations
Connecticut Coalition for Environmental Justice: Asthma Outreach and Education Program
Implementing recommendations from a study of support services for individuals with autism and their families
§ 40 — BETHLEHEM ANIMAL CONTROL
For FY 16, the act authorizes a one-time grant of up to $50,000 from the Department of Agriculture's (DoAg) animal population control account to Bethlehem to fund its FY 16 animal control expenses.
§ 41 — OVERTIME REDUCTIONS
The act requires the OPM secretary to recommend $10. 5 million in overtime spending reductions each year for FY 16 and FY 17.
§§ 44 & 51 — SMART START COMPETITIVE GRANT ACCOUNT TRANSFERS
The act transfers money disbursed from the Tobacco Settlement Fund to the smart start competitive grant account to other agencies for specified purposes.
In FY 16, the act transfers $150,000 of such funds to the state comptroller for a grant to UConn to conduct an Early Childhood Regression Discontinuity study in FY 16.
In FY 17, the act transfers up to $2,000,000 of such funds to SDE for grants to local and regional boards of education to reimburse costs they incurred in implementing, by July 1, 2017, a kindergarten entrance inventory to measure children's kindergarten preparedness.
§ 45 — ACHIEVEMENT GAP STUDY
The act requires $50,000 of SDE funds carried forward from FY 15 (see Table 4) to be made available for a grant to the Metropolitan Center for Research on Equity and the Transformation of Schools at New York University for data and analysis on the achievement gap of African American, Latino, and poor children in Connecticut.
The center must annually report on the analysis, including any related policy recommendations, to the (1) achievement gap task force, (2) Interagency Council for Ending the Achievement Gap, (3) SDE commissioner, and (4) Education and Appropriations committees.
§ 46—PROBATE COURT ADMINISTRATION FUND RECEIVABLES
For FY 16 and FY 17, the act allows the Judicial Department, in consultation with the OPM secretary, to establish receivables for anticipated revenue for the Probate Court Administration Fund.
§ 47 — CONNECTICUT INSTITUTE FOR CLINICAL AND TRANSLATION SCIENCE
The act transfers $1 million in FY 16 and FY 17 from the Biomedical Research Trust Fund to the UConn Health Center to support the Connecticut Institute for Clinical and Translational Science. The institute must use $250,000 of the $1 million to conduct breast cancer research.
§ 48 — JOHN DEMPSEY HOSPITAL FRINGE BENEFIT DIFFERENTIAL
For FY 16 and FY 17, the act requires the state comptroller to pay the difference, up to $13. 5 million per fiscal year, between the state fringe benefit rate for John Dempsey Hospital employees and the average rate for private Connecticut hospitals from the appropriations for State Comptroller—Fringe benefits.
§ 49 — BOARD OF REGENTS FOR HIGHER EDUCATION (BOR) AND UCONN ADMINISTRATIVE COSTS CAPS
For FY 16 and FY 17, the act caps the amount BOR and UConn may spend on administrative costs at 7. 25% and 3. 35%, respectively, of their annual General Fund appropriations and operating fund expenditures, excluding capital bond and fringe benefits funds.
Under the act, the cap applies to expenditures for system office, executive management, fiscal operations, and general administration, and excludes expenditures for logistical services and administrative computing and development.
§ 50 — MUNICIPAL HEALTH DEPARTMENTS AND HEALTH DISTRICTS
For FY 16, the act requires the public health commissioner to proportionately reduce payments to full-time municipal health departments and health districts by a total of $234,000.
§§ 52 - 54 — FY 15 DEFICIENCY APPROPRIATIONS AND REDUCTIONS
The act (1) appropriates a total of $121,651,000 from the General Fund to cover deficiencies in various state agencies and programs for FY 15, as shown in Table 9, and (2) reduces appropriations to various state agencies and programs for FY 15 by the same amount, as shown in Table 10.
Table 9: FY 15 General Fund Appropriations
Table 10: FY 15 General Fund Reductions
($7,548,000)
(4,391,000)
The act appropriates a total of $20. 4 million from the STF to cover deficiencies in various state agencies and programs for FY 15, as shown in Table 11.
Table 11: FY 15 STF Appropriations
§ 55 — TRANSFERS TO THE GENERAL FUND
The act transfers a total of $8. 5 million from various sources to the General Fund for FY 15, as shown in Table 12.
Table 12: FY 15 Transfers to the General Fund
Judicial Data Processing Revolving Fund
§§ 56 - 64 — REVENUE ESTIMATES
The act adopts revenue estimates for FY 16 and FY 17 for appropriated state funds as shown in Table 13.
Table 13: Revenue Estimates for FY 16 and FY 17
$18,177,957,470
$18,739,126,722
*PA 15-5, JSS (§§ 496-497) changes the net revenue estimates for the General Fund and the STF.
§ 65 — Military Retirement Income
The act fully exempts federally taxable military retirement pay from the state income tax. Prior law exempted 50% of this retirement pay. The exemption applies to federal retirement pay for retired members of the U. S. Army, Navy, Air Force, Marine Corps, Coast Guard, and Army and Air National Guard.
EFFECTIVE DATE: July 1, 2015 and applicable to tax years beginning on or after January 1, 2015.
§ 66 — Marginal Rate Increases
The act increases marginal income tax rates for those with taxable incomes over (1) $500,000 for joint filers, (2) $250,000 for single filers and married people filing separately, and (3) $400,000 for heads of household. It does so by (1) increasing the 6. 7% marginal tax rate to 6. 9% and (2) adding a seventh, higher-income tax bracket subject to a 6. 99% marginal tax rate. It also increases the flat income tax rate for trusts and estates from 6. 7% to 6. 99%.
Table 14 shows the marginal tax rates and income brackets under prior law and the act.
Table 14: Tax Brackets and Rates under Prior Law and PA 15-244 by Filing Status
400,000-500-000
§ 66 — Benefit Recapture
By law, taxpayers whose annual Connecticut adjusted gross income (CT AGI) exceeds specified thresholds are subject to “benefit recapture,” a requirement that eliminates the benefit they receive from having a portion of their taxable income taxed at lower marginal rates. Recapture is triggered by specific income thresholds. The thresholds, as well as the recapture amounts and recapture limits, vary by filing status.
The act revamps the benefit recapture schedule to reflect the new marginal rates and income tax brackets. Table 15 shows the schedule under prior law.
Table 15: Benefit Recapture Schedule under Prior Law by Filing Status
Income Threshold Triggering Benefit Recapture
Maximum Recapture Amount
$75 for each $5,000 of income by which CT AGI exceeds threshold
$120 for each $8,000 of income by which CT AGI exceeds threshold
$150 for each $10,000 of income by which CT AGI exceeds threshold
As Table 16 shows, the act adds a second income threshold for each filing status and establishes new recapture amounts.
Table 16: Recapture Schedule under PA 15-244 by Filing Status
$90 for each $5,000 of income by which CT AGI exceeds threshold
$50 for each $5,000 of income by which CT AGI exceeds threshold
$140 for each $8,000 of income by which CT AGI exceeds threshold
$80 for each $8,000 of income by which CT AGI exceeds threshold
$180 for each $10,000 of income by which CT AGI exceeds threshold
$100 for each $10,000 of income by which CT AGI exceeds threshold
§§ 67 & 68 — Delay in Scheduled Income Tax Reductions for Single Filers
The act delays scheduled income tax reductions for single filers by one year. It does so by delaying increases in (1) AGI exempt from the tax and (2) income thresholds for phasing out personal exemptions and credits.
Personal Exemption. Under prior law, the maximum personal exemption for single filers was set to increase from $14,500 to $15,000 on January 1, 2015. The act instead reverts to the $14,500 exemption for an additional year, through the 2015 tax year.
By law, the personal exemption amounts gradually phase out at higher income levels until they are completely eliminated. The act delays the scheduled increase in the personal exemption reduction threshold, from $29,000 to $30,000, to correspond to the delay. (The income tax personal exemption is reduced by $1,000 for each $1,000 of AGI over the specified threshold. )
Personal Credit. The act delays by one year scheduled increases in income ranges that allow single filers to qualify for personal credits against their income tax. Personal credits range from 1% to 75% of tax liability, depending on AGI. Filers with AGIs above specified thresholds do not qualify for a credit. Table 17 shows the qualifying personal credit income ranges for single filers under prior law and the act.
Table 17: Personal Credits for Single Filers
Income Ranges for Personal Credit Against the Income Tax
$14,500-$62,500
Through to 2015
15,000-64,500
§ 69 — Earned Income Tax Credit (EITC)
The act delays by two years the scheduled increase in the EITC. Under prior law, the EITC was scheduled to increase to 30% for the 2015 tax year. The act instead maintains it at 27. 5% for two more years, through the 2016 tax year.
§ 70 — Property Tax Credit Reduced
Beginning in the 2016 income year, the act reduces, from $300 to $200, the maximum property tax credit against the personal income tax. By law, the percent of paid property taxes taxpayers can take as a credit declines as income increases until it completely phases out. The income level at which the percent reduction begins varies by filing status. As Table 18 shows, the act begins phasing out the credit sooner by reducing the levels triggering the phase-out.
Table 18: Property Tax Credit Reduction Levels by Filing Status
Income Levels Triggering Credit Reduction
EFFECTIVE DATE: July 1, 2015 and applicable to income years commencing on or after January 1, 2015.
§§ 72 & 73 — Luxury Tax Rate Increase
The act increases, from 7% to 7. 75%, the sales and use tax rate on specified luxury items. By law, the rate applies to the full sales price of motor vehicles (with certain exceptions) costing over $50,000; real or imitation jewelry costing over $5,000; and clothing, footwear, handbags, luggage, umbrellas, wallets, and watches costing over $1,000.
EFFECTIVE DATE: July 1, 2015 and applicable to sales occurring on or after that date. (PA 15-5, JSS (§ 132) makes the sales tax rate change effective upon passage and applicable to sales occurring on or after October 1, 2015. )
§ 74 — Regional Planning Incentive Account
By law, the Department of Revenue Services (DRS) commissioner must deposit in the Regional Planning Incentive Account (1) 6. 7% of the revenue generated by the hotel tax and (2) 10. 7% of the revenue generated by the rental car tax. The act eliminates this requirement for calendar quarters ending July 1, 2016 and prior to July 1, 2017, thus redirecting these revenue flows to the General Fund in FY 17.
The hotel tax rate is 15% and the rental car tax rate is 9. 35%. By law, the OPM secretary uses the revenue from these taxes that is deposited in the account to fund (1) annual grants to regional councils of government and (2) grants awarded under the regional performance incentive program.
EFFECTIVE DATE: Upon passage and applicable to sales on or after October 1, 2015 and sales of services that are billed to customers for a period that includes October 1, 2015.
§ 74 — Sales Tax Revenue Diversion
The act requires the DRS commissioner to direct a portion of the 6. 35% sales tax revenue to MRSA and the STF, according to the schedule shown in Table 19. (PA 15-5, JSS (§132) delays the revenue diversion schedule. )
Table 19: Sales Tax Revenue Diverted to MRSA and STF
MRSA (% of 6. 35% sales tax revenue)
STF (% of 6. 35% sales tax revenue)
December 31, 2015 but prior to July 1, 2016
July 1, 2016 but prior to July 1, 2017
§§ 74-76 — Computer and Data Processing Services
The act increases the sales and use tax rate on computer and data processing services from (1) 1% to 2% on October 1, 2015 and (2) 2% to 3% on July 1, 2016. For such services sold on or after October 1, 2015, the act exempts services performed by an entity for one of its affiliates (i. e. , a person who directly or indirectly owns, controls, or is owned or controlled by, or is under common ownership or control with another person). PA 15-5, JSS (§§ 132 & 516) repeals these changes, thus maintaining the 1% sales and use tax on computer and data processing services.
The act extends the (1) sales and use tax to include the creation, development, hosting, and maintaining a website and (2) use tax to internet service access. PA 15-5, JSS (1) delays, from July 1, 2015 to October 1, 2015, the extension of the sales tax to the specified website tasks (§§ 133 & 134) and (2) restores the use tax exemption for internet service access (§ 516).
EFFECTIVE DATE: For the sales tax on computer and data process services, upon passage and applicable to sales occurring on our after October 1, 2015 and services billed to customers that include that date; for the use tax on such services, October 1, 2015 and applicable to sales occurring on or after October 1, 2015 and sales of services billed to customers for a period that includes October 1, 2015; and for the extension of the sales and use tax to website and internet access service, July 1, 2015 and applicable to sales occurring on or after July 1, 2015 and sales of services billed to customers for a period that includes July 1, 2015.
§§ 71, 75, 77 & 219 — Sales Tax Exemptions Eliminated and New Taxable Service
The act (1) limits the exemption for clothing and footwear during the “sales-tax-free-week” to items costing less than $100, rather than $300 and (2) eliminates the exemption for clothing and footwear costing less than $50 that was scheduled to take effect on July 1, 2015.
The act eliminates the exemption for goods or services purchased by a water company to maintain, operate, manage, or control a pond, lake, reservoir, stream, well, or distributing plant or system that supplies water to at least 50 customers.
It also eliminates the exemption for parking in certain non-metered parking lots with 30 or more spaces. Prior law exempted two types of entities from collecting the tax for parking in such lots. It exempted employers that operate lots they own or lease for less than 10 years exclusively for their employees' use. (PA 15-5, JSS (§ 136) restores the exemption for these employer-operated lots. ) Prior law also exempted from the tax lots operated by specific types of tax-exempt organizations that operate seasonal lots, specifically (1) the state and its political subdivisions; (2) federal tax-exempt nonprofit organizations; and (3) nonprofit charitable hospitals, nursing homes, rest homes, residential care homes, and certain acute-care hospitals.
Lastly, the act extends the sales and use tax to car washing services except those operated by coin. (PA 15-5, JSS (§ 136) eliminates this exemption. ) EFFECTIVE DATE: July 1, 2015 for (1) car wash and parking provisions which are applicable to sales occurring on or after July 1, 2015 and (2) sales of services billed to customers for a period that includes July 1, 2015.
§§ 78-80 — Beer Growlers
The act allows restaurant, café, and tavern alcohol permittees to sell, at retail, permittee-supplied and sealed containers of draught beer for off-premises consumption (i. e. , growlers). In the case of a restaurant permittee, the act (1) additionally requires that the containers be filled by the permittee and (2) prohibits manufacturer, out-of-state shipper, and wholesale permittees from supplying the restaurant permittee with the authorized containers or any draught system component other than tapping accessories.
§ 81 — Package Store and Druggist Permits
The act increases the number of package store or druggist liquor permits in which a person may have an interest from (1) three to four on July 1, 2015 and (2) four to five on July 1, 2016.
§ 82 — Expanding Days and Hours for Sales
The act extends, by one hour each day, the allowable hours for alcohol sales for off-premises consumption by (1) package, drug, and grocery stores; (2) beer and beer and brew pub manufacturers; and (3) retailers selling gift baskets containing wine. These expanded hours also apply to package stores' on-premises offerings, tastings, classes, and demonstrations.
The act generally allows the sale and dispensing of alcohol for off-premises consumption on Sundays from 10: 00 a. m. to 6: 00 p. m. , rather than 5: 00 p. m. , and any other day from 8: 00 a. m. to 10: 00 p. m. , rather than 9: 00 p. m. By law, permittees cannot sell or dispense alcohol for off-premises consumption on Thanksgiving Day, New Year's Day, or Christmas Day.
The act also extends, by one hour, from 9: 00 p. m. to 10: 00 p. m. , the last hours during which farm winery manufacturer, nonprofit golf tournament, and farmers' markets wine sales permittees may sell or dispense alcohol or allow it to be consumed.
§§ 83-84 — Surcharge
The act (1) extends the 20% corporation income tax surcharge that was set to expire after the 2015 income year for two additional years, to the 2016 and 2017 income years, and (2) imposes an additional, temporary 10% surcharge for the 2018 income year.
By law, the surcharge applies to corporations based on the amount of taxes they owe and the type of return they file. The act continues to exempt corporations that must pay the minimum $250 tax from the surcharge. (By law, corporations must calculate their taxes using two methods and pay the greater amount. If that amount is $250 or less, the corporation must pay $250. ) Prior law exempted corporations whose annual gross income was less than $100 million, if they (1) were not part of a group of related corporations (unitary group) or (2) did not file a combined return with other affiliated corporations (combined group). The act continues the exemption for separate corporations grossing less than $100 million but not for those that are taxable members of a combined group filing a combined, unitary return, a change that conforms to the act's other change requiring corporations to submit combined returns (see §§ 138-163).
EFFECTIVE DATE: Upon passage and applicable to income years starting on or after January 1, 2015. (PA 15-5, JSS (§ 139) pushes back the effective date to January 1, 2016, making the surcharge extension applicable to income years starting on or after that date. )
§ 87 — Net Operating Loss (NOL)
When the total value of a corporation's deductions exceeds its gross income for a tax year, the corporation incurs a NOL. The law allows a corporation to add these losses from previous years (i. e. , carryforwards) to the loss it incurs in the current year, thus further reducing the taxes it owes. Under prior law, the amount of NOL carryforwards a corporation could deduct in an income year following a loss year was the lesser of:
1. any net income for the income year following the loss year, or, for companies with taxable income in other states, any net income apportioned to Connecticut or
2. the excess of NOL over the total net income for any prior income year.
Starting with the 2015 income year, the act limits the amount of NOL carryforwards corporations may deduct. Specifically, it retains the requirement that a corporation may deduct the lesser of the two above options but reduces the income in the first option to (1) 50% of the net income for the income year following the loss year or (2) if the corporation has taxable income in other states, 50% of the net income apportioned to Connecticut. The act retains the law's methods for the calculating net income for these purposes.
§ 88 — Tax Credit Limit
The law limits the extent to which corporations can use credits to reduce the amount of taxes they owed. Prior law limited the value of the credits to 70% of the taxes owed in any income year. Beginning in the 2015 income year, the act reduces this limit to 50. 01%.
The act extends, to 2015 and 2016, the temporary cap on the maximum insurance premium tax liability that an insurer may offset through tax credits.
By law, (1) type one credits are film and digital media production, entertainment infrastructure, and digital animation tax credits; (2) type two credits are insurance reinvestment credits; and (3) type three credits are all other tax credits. Table 20 shows the order and reduction schedule under prior law and the act.
Table 20: Order and Reduction Schedule for Claiming Insurance Premium Tax Credits under Prior Law and the Act
Sum of both types = 55%
Sum of both types = 70%
§ 86—FILM AND DIGITAL MEDIA TAX CREDIT MORATORIUM
The act extends, to FY 16 and FY 17, the moratorium on issuing film and digital media production tax credits for certain motion pictures. Under prior law, the moratorium expired at the end of FY 15.
The moratorium bars the issuance of tax credit vouchers for motion pictures that were not designated as state-certified productions before July 1, 2013. It does not apply, however, to motion pictures that conduct at least 25% of their principal photography days at a Connecticut facility that (1) receives at least $25 million in private investment and (2) opens for business on or after July 1, 2013.
Other types of qualified productions continue to be eligible for tax credits during FY 16 and FY 17, including documentaries; long-form, specials, mini-series, series, sound recordings, music videos, or interstitial television programming; relocated television productions; interactive television or games; videogames; commercials or infomercials; and any digital media format created primarily for public viewing or distribution.
Hospitals pay taxes each calendar quarter based on their net patient revenue and may use the Urban Reinvestment Act tax credits they acquired to reduce the amount of taxes they owe (i. e. , tax liability). Prior law placed no limit on the amount of credits hospitals could use to reduce their tax liability. For calendar quarters beginning on or after July 1, 2015, the act limits the amount by which hospitals can use credits for this purpose to 50. 01% of that liability.
For FY 16 and FY 17, the act eliminates the $12 million disbursement from the Tobacco Settlement Fund to the Tobacco and Health Trust Fund. Beginning in FY 18, it reduces the disbursement to $6 million per year, thus making permanent the temporary reduction to the disbursement made for FY 14 and FY 15.
The act also reduces, from $10 million to $5 million, the FY 16 and FY 17 disbursements from the Tobacco Settlement Fund to the Smart Start competitive grant account and transfers the funds to the General Fund.
Under the act, the canceled disbursements ($17 million in both FY 16 and FY 17) are included in the amount transferred from the Tobacco Settlement Fund to the General Fund in FY 16 and FY 17 (§ 56).
§§ 91 & 92 — STF
§ 91- Petroleum Products Gross Earnings Tax Revenue Transferred to STF
Prior law required the comptroller to transfer quarterly, to the STF, specified amounts from the Petroleum Products Gross Earnings Tax. The act instead requires, for calendar quarters ending on or after September 30, 2015, the comptroller to deposit in the STF all such tax revenue.
It correspondingly eliminates laws:
1. specifying the annual amounts of the required transfers;
2. requiring the comptroller to transfer money from the General Fund to the STF to compensate for specified shortfalls in tax revenue and other legally required transfers to the STF; and
3. requiring the revenue services commissioner to (a) biennially calculate the amount of tax paid on gasoline sold in the prior fiscal year as a percentage of total tax revenue and (b) use this calculation to determine the amount of tax revenue to be transferred to the STF.
§ 92 – General Fund Transfers to the STF
The act eliminates statutorily required transfers from the General Fund to the STF scheduled for FYs 16 and 17 and annually afterwards. Specifically, it eliminates the transfer of $152,800,000 in FY 16 and $162,800,000 in FY 17 and subsequent years.
From January 1, 2016 to June 30, 2017, the act diverts to the General Fund, on a quarterly basis, 50% of the funds deposited in the CIA. It requires any funds remaining in the account to be distributed according to existing law.
§§ 94-98 & 181-182 — TRANSFERS TO THE GENERAL FUND
The act transfers funds from various sources to the General Fund, as shown in Table 21.
Table 21: Transfers to the General Fund
$3. 5
16 & thereafter
§§ 99-102 & 221 — MEDICAL MARIJUANA FEES
Prior law credited all fees the Department of Consumer Protection (DCP) collected under its regulation of medical marijuana to the palliative marijuana administration account. The act eliminates the account and requires the fees to be credited to the General Fund.
The act allows the Connecticut Lottery Corporation (CLC) to offer keno games, generally subject to the same requirements as other state lottery games, including those concerning lottery sales agents, advertisements, and prizes.
It allows the Office of Policy and Management (OPM) secretary, on behalf of the state, to enter separate agreements with the Mashantucket Pequot and Mohegan tribes concerning CLC's operation of keno. CLC may not introduce keno until such agreements are effective. (PA 15-5, JSS (§ 138) limits the total amount of gross keno revenue the state may give to a tribe under an agreement to 12. 5% of that revenue after subtracting prize payments. )
The act defines “keno” as a lottery game where a subset of numbers are drawn from a larger field of numbers by a central computer system using an approved number generator, wheel system device, or other drawing device. Keno does not include games operated on a video facsimile machine (e. g. , slot machine).
The act also specifies that CLC has the exclusive right to operate and manage the sale of all lottery games in Connecticut, except on the Mashantucket Pequot and Mohegan reservations.
By law, the state imposes a surcharge on certain car, truck, and machinery rentals (3% for car and truck rentals and 1. 5% for machinery rentals) and requires rental companies to remit the surcharge collected during the calendar year that exceeds the Connecticut property taxes and Department of Motor Vehicles (DMV) licensing and titling fees they paid on the vehicles and equipment.
The act limits the rental companies subject to the surcharge to people or businesses generating at least 51% of their total annual revenue from rentals, excluding retail or wholesale rental equipment sales. As under existing law, the surcharge applies to companies that (1) are in the business of renting cars, trucks, or machinery and (2) have a fleet of at least five cars, trucks, or pieces of machinery in Connecticut.
Under prior law, the 1. 5% surcharge applied to rentals for 30 days or less of heavy construction, mining, and forestry equipment without an operator. The act expands it to cover (1) all equipment a rental company owns and (2) rentals for less than 365 days or an undefined period under an open-ended contract. It eliminates a provision specifying that the rental period for the equipment runs from the date the machinery is rented to the date it is returned to the rental company. As under existing law, the 3% surcharge continues to apply to car and truck rentals for 30 days or less.
By law, rental companies must annually report to DRS on (1) the aggregate amounts of personal property taxes paid to towns and registration and titling fees paid to DMV and (2) the aggregate amount of rental surcharges collected in the previous year on the rental machinery, along with any other information DRS requires. The act requires them to report such information in a consolidated report.
Existing law bans (1) people from selling, giving, or delivering electronic nicotine delivery systems or products to minors and (2) minors from buying or possessing them in public. The act extends these prohibitions to cover electronic cigarette liquid. It does so by including these liquids within the definition of an electronic nicotine delivery system.
By law, an “electronic nicotine delivery system” is an electronic device used to simulate smoking while delivering nicotine or another substance to a person who inhales from it. Under existing law, delivery systems include electronic (1) cigarettes; (2) cigars; (3) cigarillos; (4) pipes; (5) hookahs; and (6) related devices, cartridges, or other components. The act expands this list to include electronic cigarette liquid used in such a delivery system or vapor product, which produces a vapor that may or may not contain nicotine and is inhaled by the system or product user.
Beginning March 1, 2016, the act requires electronic nicotine delivery system or vapor product dealers and manufacturers to register with DCP and annually renew their registration in order to sell or manufacture an electronic nicotine delivery system or vapor product. Under the act, a manufacturer is anyone who mixes, compounds, repackages, or resizes any nicotine-containing electronic nicotine delivery system or vapor product.
Application. Beginning January 1, 2016, anyone seeking a dealer or manufacturer registration or registration renewal must apply to DCP using a DCP-furnished form. The application must include (1) the applicant's name and address; (2) the business location; (3) a financial statement detailing any business transactions connected to the application; (4) the applicant's criminal convictions; and (5) proof that the business location will meet state and local building, fire, and zoning requirements. The act authorizes DCP to conduct an investigation to determine whether to issue an applicant's registration.
The DCP commissioner must issue the registration within 30 days after the application date unless he finds that the applicant (1) willfully made a materially false statement in the registration application or any other DCP-application, (2) owes state taxes, (3) was convicted of violating any state or federal cigarette or tobacco products tax laws, or (4) is not suitable because of his or her criminal record. The act prohibits the commissioner from denying a registration due to a prior conviction of a crime except as permitted by law.
Fees. The act requires applicants to pay a nonrefundable $75 application fee and registered dealers and manufacturers to pay a $400 annual fee. There is no application fee to renew a registration.
Dealer Posting Requirement. The act requires dealers to post their registrations in a prominent location next to the electronic nicotine delivery system products or vapor products they sell.
Transferability and Attachment. A registration is not transferable under the act, except it can transfer through a registrant's estate when he or she dies.
The act provides that a dealer or manufacturer registration is not property or subject to attachment and execution.
Partnerships. Under the act, if the registration is issued to a partnership and the partnership adds one or more new partners, it must submit a new application and pay new application and annual fees. If one or more of the partners dies or retires, the remaining partners do not need to file a new application or pay an additional fee for the registration's unexpired portion. But they must notify DCP of the change, and DCP must endorse the registration to reflect the correct ownership.
Late Renewals. DCP may renew an expired registration if the applicant pays both the annual fee and the standard late renewal penalty the commissioner may impose. By law, the penalty must equal 10% of the renewal fee and be at least $10 and no more than $100.
Fines and Penalties for Violations. The act makes it illegal to manufacture, sell, offer for sale, or possess with intent to sell an electronic nicotine delivery system or vapor product without a manufacturer or dealer registration. The penalty for each knowing violation is a fine of up to $50 per day. The commissioner may waive all or part of the fine if he is satisfied that the failure to obtain or renew the registration was due to reasonable cause.
Under the act, the penalty is an infraction with a $90 fine, payable by mail without court appearance, for a manufacturer or dealer who operates up to 90 days after his or her license expires.
Prior to imposing a penalty, the act requires the DCP commissioner to notify the dealer or manufacturer of the violation and give 60 days to comply. He must send the notice, within available appropriations, with a certificate of mailing or a similar U. S. Postal Service form that verifies the date on which it was sent. (A certificate of mailing is a receipt that provides evidence of the date that mail was presented to the U. S. Postal Service for mailing. )
The act requires the Public Health Committee to hold a public hearing within 30 days of any federal rule change subjecting tobacco products subject to the federal Food, Drug, and Cosmetic Act. The committee must determine if Connecticut law governing these products should be changed.
§§ 112-136 — DPH LICENSE RENEWAL FEES
The act (1) increases by $5 license renewal fees for various DPH-licensed professionals, as shown in Table 22, and (2) directs the revenue generated to fund the professional assistance program for DPH-regulated professionals (currently, the Health Assistance InterVention Education Network (HAVEN)). By law, the program is an alternative, voluntary, and confidential rehabilitation program that provides support services to health professionals with a chemical dependency, emotional or behavioral disorder, or physical or mental illness.
The DPH commissioner must (1) certify the amount of revenue received as a result of the fee increase each January, April, July, and October; (2) transfer it to the professional assistance program account, which the act establishes (see § 137); and (3) provide the funds to the professional assistance program.
Table 22: DPH License Renewals Subject to Fee Increase
112 & 120
(PA 15-5, JSS (§ 475) also increases, from $565 to $570, license renewal fees for podiatrists, chiropractors, and naturopathic physicians. Additionally, § 478 eliminates the five dollar fee increase for renewing a funeral home inspection certificate. )
EFFECTIVE DATE: July 1, 2015 (PA 15-5, JSS (§§ 474 & 479) changes the effective date from July 1, 2015 to October 1, 2015 and makes the above fee increases applicable to registration periods on or after that date. )
§ 137 — PROFESSIONAL ASSISTANCE PROGRAM ACCOUNT
The act establishes a professional assistance program account as a separate, nonlapsing General Fund account. It requires the DPH commissioner to use the account funds for the professional assistance program for DPH-regulated professionals.
Combined reporting refers to the way related companies must calculate and report their corporate income tax liability. Beginning with the 2015 income year, the act requires a company that is (1) a member of a corporate group of related companies meeting certain criteria (i. e. , combined group) and (2) subject to the Connecticut corporation tax (i. e. , taxable member) to file a corporation income tax return based on the combined income or capital base of the group as a whole (i. e. , combined reporting), rather than as a separate entity as generally required under prior law (i. e. , separate entity reporting). Under the act, a company that is part of a combined group must compute its tax liability in this manner if the group is engaged in a “unitary business,” as defined in the act (see below). As such, the company must treat all of its affiliates as if they are one single company and combine all of their taxable income and capital base in a single pool, which is then apportioned to Connecticut for tax purposes. Prior law generally required companies to file as separate entities even if they were part of a broader group of corporations operating in other states, although it allowed or permitted a combined or unitary return under certain circumstances.
(PA 15-5, JSS (§ 139) instead requires corporations to implement combined reporting beginning with the 2016 income year. )
§ 138 — Combined Group and Unitary Business
The act specifies criteria for determining whether a company is part of a combined group and thus required to file a combined unitary tax return. Under the act, a combined group is a group of companies that (1) have common ownership, (2) are engaged in a unitary business (see below), and (3) have at least one member that is subject to the Connecticut corporation tax. Companies are considered to be under common ownership if the same entity or entities directly or indirectly own more than 50% of voting control over each of them. These entities' owners do not have to be members themselves of the combined group. Indirect control must be determined according to the federal tax law. Combined group members include taxable members (i. e. , companies subject to Connecticut corporation tax) and nontaxable members (i. e. , companies not subject to Connecticut corporation tax, excluding those statutorily exempt from the tax).
The act defines a “unitary business” as a single economic enterprise that is interdependent, integrated, or interrelated enough through its activities to provide mutual benefit and produce significant sharing or exchanges of value among its entities or a significant flow of value among its separate parts. A unitary business can be either separate parts of a single entity or a group of separate entities under common ownership. The act establishes criteria for determining whether a unitary business relationship exists when a company conducts business through a partnership or S corporation (i. e. , pass-through entities).
§ 140 — Group Reporting Requirements
Companies that are part of a combined group must generally determine their tax liability based on their share of the group's income and losses. The act requires combined groups to determine their membership on a water's edge basis (i. e. , generally limited to members within the United States) unless they elect a (1) worldwide (i. e. , including foreign members) or (2) “affiliated group” basis.
Water's Edge. Under the act, a water's edge basis means that a group must include the net income, capital base, and apportionment factors of its taxable and nontaxable members only if:
1. they are incorporated in, or formed under the laws of, the United States, any state, the District of Columbia, or a U. S. territory or possession, excluding members that have at least 80% of their property and payroll during the income year located outside such jurisdictions;
2. 20% or more of their property and payroll during the income year is located in the United States, any state, the District of Columbia, or a U. S. territory or possession; or
3. they are incorporated in a jurisdiction determined to be a "tax haven," as described below, unless the DRS commissioner is satisfied that the member is incorporated there for a legitimate business purpose.
(PA 15-5, JSS (§ 144) additionally requires such groups to include any member that earns more than 20% of its gross income, directly or indirectly, from intangible property or service-related activities, the costs of which generally are deductible for federal income tax purposes against the income of other group members (whether currently or over a period of time). Groups must include such members only to the extent of such gross income and its related apportionment factors. )
Under the act, a combined group must include in its combined unitary tax return members that are incorporated in a tax haven. A tax haven is a jurisdiction that:
1. has laws or practices preventing the effective exchange of information for tax purposes with other governments about taxpayers benefiting from the tax regime;
The act requires the DRS commissioner, by September 30, 2015, to publish a list of jurisdictions that he determines to be tax havens. The list applies to income years beginning on or after January 1, 2015 and remains in effect until the commissioner publishes a revised list. (PA 15-5, JSS (§ 144) delays this requirement by one year. )
Worldwide or Affiliated Group Election. Instead of determining the group's membership on a water's edge basis, the act allows the group's “designated taxable member” to do so on a worldwide or affiliated group basis. Under the act, the designated taxable member is (1) the group's common parent corporation, if it has one that is a taxable member or (2) a taxable member selected by the group or DRS commissioner. To make a worldwide or affiliated group election, the group's designated taxable member must do so on an original, timely filed tax return for an income year. The election is binding for the income year in which it is made and the following 10 years.
The DRS commissioner may select the designated taxable member at his discretion or, if the group does not select one according to the act's process for doing so, as described below.
If the designated taxable member chooses to determine the group's membership on an affiliated group basis, it must include all those members that are part of its affiliated group for federal tax purposes, plus:
2. any member of the combined group, determined on a worldwide basis, incorporated in a tax haven, as described above. (PA 15-5, JSS (§ 144) specifies that such a member may be excluded from the affiliated group if the DRS commissioner is satisfied that the member is there for a legitimate business purpose. )
A group making an affiliated group election must include the net income or loss and apportionment factors of all its members subject to tax or that would be if they were conducting business in the state, regardless of whether they are engaged in a unitary business.
§§ 139 (i) & 142 — Calculating Corporation Tax Liability
By law, corporations must calculate their Connecticut corporation tax liability on the basis of both their net income and capital base and pay the higher of the two amounts. The act requires taxable members of combined groups to do the same based on the tax calculated on their apportioned net income and capital bases, as described below. Under the act, as under existing law, taxable members must pay a minimum tax of $250 regardless of tax credits.
§§ 139 (a)–(e) & 149 —Net Income Basis
The act specifies how combined groups must determine and apportion to Connecticut their taxable income and adjust it for net operating losses.
§ 139 (a) — Determining the Group's Total Income or Loss. When determining the total income or loss subject to apportionment for Connecticut corporation tax purposes, the combined group must include and aggregate the following for each of its taxable and nontaxable members derived from a unitary business:
1. For each group member incorporated in the United States, included in a consolidated federal corporate return, and filing a federal corporate income tax return, its gross income minus Connecticut corporation tax deductions as if it were not consolidated for federal tax purposes.
3. For each member incorporated outside the United States, not included in a federal consolidated return and not required to file its own federal return, the income determined from regularly maintained profit and loss statements for each foreign office or branch adjusted on any reasonable basis to conform to U. S. accounting standards and expressed in U. S. dollars. Reasonable alternative procedures may be applied if the DRS commissioner determines that the reported income reasonably approximates the income determined under the Connecticut corporation tax law.
The act establishes requirements for treating the following income and deductions in a unitary filing:
2. Business income from an intercompany transaction with another group member must be deferred as required under federal tax rules unless the (a) object of the transaction is sold or otherwise removed from the unitary business under specified conditions or (b) buyer and seller cease to be members of the same combined group.
3. Charitable expenses incurred by a group member may be deducted from the combined group's net income, subject to federal income limits applicable to the entire group's business income. If part of the deduction is carried over to a later year, it must be treated in that year as incurred by the same group member.
4. Capital gains and losses must be removed from each member's net income and included in the combined group's net income by (a) combining each class of gains or losses (e. g. short- or long-term capital gains or losses), without netting among such classes; (b) apportioning each class to members; and (c) applying the apportioned gains or losses to the income or loss of the Connecticut taxable members. If the capital loss is limited under federal law and a loss carryover is required, the loss must be treated in the year for which the carryover applies as incurred by the same member.
§ 139 (b) & (c) — Income Apportionment Factors. The act requires the taxable members of a combined group to apportion their net income and losses to Connecticut similar to the way multistate companies must apportion such income and losses under existing law.
By law, multistate companies subject to the Connecticut corporation tax must apportion their net income or loss using statutory apportionment formulas. Most companies must use a formula that combines the ratios of their property, payroll, and sales (receipts) in Connecticut to all their property, payroll, and sales. However, some types of businesses, including manufacturers, broadcasters, and financial institutions, are allowed to use a single-factor apportionment formula based entirely on the ratio of their sales in Connecticut to all their sales.
In apportioning income or loss for the Connecticut corporation tax, the act requires each taxable member of a combined group to use the otherwise applicable Connecticut statutory apportionment percentage. It specifies how taxable members of the combined group must incorporate the property, payroll, and sales of nontaxable group members in the apportionment factors they use to apportion the group's income for purposes of the taxable members' Connecticut corporation tax liability. Under the act, each taxable member may apportion its net income according to these provisions as long as one group member is taxable in another state.
Under the act, though each taxable member's apportionment is based on the Connecticut apportionment formula that applies to that member, the taxable member must add a share of the nontaxable members' sales, property, and payroll factors as follows:
1. Each taxable member must add to its sales factor numerator a share of the aggregate sales of the groups' nontaxable members assignable to Connecticut. This share is the ratio of the taxable member's Connecticut sales to the Connecticut sales of all the group's taxable members.
2. The property and payroll factor denominators are the aggregate property and payrolls for the entire group, including taxable and nontaxable members, even if some group members are subject to single-factor apportionment (i. e. , based on sales only).
§ 149 — Investments in Connecticut Partnerships. By law, multistate corporations that invest in Connecticut partnerships or limited liability companies are subject to special apportionment provisions. Under these provisions, companies that are limited partners in Connecticut partnerships (other than investment partnerships) but are not otherwise doing business in Connecticut pay tax only on their distributive shares of the Connecticut-based partnership income. But if the DRS commissioner determines that the corporate limited partner and the partnership are parts of a unitary business engaged in a single business enterprise, the corporation is generally taxed according to standard apportionment rules. The act extends this requirement to corporate limited partners that are members of a combined group filing a combined unitary tax return, thus requiring them to also apportion their income under such rules. (PA 15-5, JSS (§ 148) makes similar changes in how such corporate limited partners must apportion their capital base for corporation tax purposes. )
§ 139 (d) — Net Operating Loss (NOL). After each taxable member calculates its share of net income or loss apportioned to Connecticut, the act allows it to deduct its share of the group's NOL from that income.
It allows the following NOL carryovers:
1. For income years starting on or after January 1, 2015, if the combined group's net income computation results in a net operating loss, the taxable members can carry forward the share apportioned to Connecticut consistent with NOL carryover limits (see § 87). If the taxable member has more than one NOL carryover, it must apply them in the order they were incurred, deducting the older one first. The act allows a taxable member who has an NOL carryover derived from the combined group in an income year beginning on or after January 1, 2015 to share it with other taxable group members if they were part of the group when the loss was incurred. Any such sharing reduces the taxable member's original NOL carryover.
2. A taxable member can deduct an NOL carryover derived from either pre-January 1, 2015 losses or losses incurred before the taxable member joined the combined group and can share it with other members that were part of the same (a) combined group in the year the loss was incurred or (b) unitary group under the state's prior combined reporting law. (PA 15-5, JSS (§ 142) makes these provisions applicable for income years starting on or after January 1, 2016. )
§ 139 (e) — Calculating Net Income Tax Liability. After each member determines its net income, it must calculate its net income tax liability by multiplying its Connecticut apportioned net income or loss by the statutory corporation net income tax rate of 7. 5%.
§ 139 (f) – (h) —Capital Stock Basis
As explained above, a combined group's taxable members pay taxes on their share of the group's net income or capital base, whichever is greater.
§ 139 (f) — Determining the Group's Capital Base. The act requires combined groups to determine their capital bases by combining their separate bases, including those of their nontaxable members, generally as determined under existing law for nonfinancial companies (i. e. , those that are not financial service companies). Under existing law, a nonfinancial company's capital base is the sum of the:
1. average value of issued and outstanding capital stock, including treasury stock at par or face value;
2. fractional shares, scrip certificates, and payments on subscriptions to capital stock;
3. surplus and undivided profit; and
4. surplus reserves.
The sum is reduced by the average value of (1) deficits and (2) private company stockholdings, including treasury stock.
Under the act, the combined group (1) must exclude intercorporate stockholdings from its capital base and (2) may not take the deduction for private company stockholdings. In calculating the combined capital base, a combined group must include a share of its nontaxable members' capital bases according to the ratio of the taxable members' Connecticut capital base to the combined Connecticut capital bases of all the group's taxable members.
Group members that are financial services companies must (1) calculate their capital base tax liability as required by existing law for such companies (i. e. , $250 per year) and (2) not be included in calculating the combined group's alternative capital base, as described above.
§ 139 (g) — Capital Base Apportionment. Existing law requires multistate companies subject to the Connecticut corporation tax to apportion their capital base to Connecticut based on a two-factor formula consisting of tangible property and intangible assets. The act requires combined groups to do the same for each of the taxable members included in the group's combined capital base calculation. Under the act, the taxable member must apportion its capital base to Connecticut according to the ratio of its Connecticut tangible property and intangible assets to the combined group's Connecticut tangible property and intangible assets.
§ 139 (h) — Calculating Capital Base Tax Liability. Each taxable member included in the group's combined capital base calculation must calculate its capital base tax liability by multiplying the (1) combined group's capital base, (2) member's apportionment ratio, and (3) statutory corporation capital base tax rate of 3. 1 mills (per dollar of capital holdings). As under existing law, the maximum aggregate tax calculated under the capital base method is $1 million. Under the act, if the aggregate amount of tax calculated on each taxable member's capital base exceeds $1 million, each member must prorate its tax, in proportion to the group's tax calculated regardless of the $1 million cap, such that the group's aggregate additional tax equals $1 million.
Under the act, as under existing law, financial service companies have a capital base tax liability of $250 and may not use tax credits to reduce their tax liability.
§ 139 (j) — Tax Credits.
The act requires each taxable member to separately apply its tax credits, but allows it to share tax credits and credit carryover with other taxable members under certain conditions. In determining the amount of credits it has available, each taxable member must separately apply (1) the statutory tax credit limit and (2) any refunded research and development (R&D) tax credits under the existing credit refund program for eligible small businesses.
The act allows a taxable member to share tax credits it earns beginning on or after the 2015 income year with other taxable members in the combined group. Any credit amount used by another taxable member reduces the amount of credit carryover available to the taxable member that originally earned it. If the taxable member has a credit carryover derived from an income year beginning on or after 2015, it may share the carryover credit with the group's taxable members as long as they were taxable members in the income year in which the credit was earned.
A taxable member with a credit carryover derived from an income year prior to 2015 or during which it was not a member of the combined group may (1) continue to use the carryover and (2) share it with other group members that were part of its combined or unitary group under prior law. Taxable members eligible to claim more than one corporation business tax credit in an income year must claim the credits according to the law that establishes the order for claiming corporation business tax credits. (PA 15-5, JSS (§ 143) makes these provisions applicable for income years starting on or after January 1, 2016. )
§ 141 — Deduction for Certain Publicly-Traded Companies (FAS 109 Deduction)
Beginning in the 2018 income year, the act allows certain publicly-traded companies to claim a deduction over a seven-year period if combined reporting triggers an increase in their net deferred tax liabilities or decrease in their net deferred tax assets. (PA 15-5, JSS (§ 145) additionally allows them to do so if combined reporting results in an aggregate change from a net deferred tax asset to a net deferred tax liability. ) This deduction is referred to as a “FAS 109” deduction, based on a financial accounting and reporting standard for income taxes (Financial Accounting Standards No. 109, “Accounting for Income Taxes”). Under FAS 109, a company that is required to issue financial statements must create a liability or asset for estimated taxes payable or refundable for the current year.
The act defines “net deferred tax liability” as deferred tax liabilities that exceed the combined group's deferred tax assets. It defines “net deferred tax assets” as deferred tax assets that exceed the group's deferred tax liabilities. Both must be determined according to generally accepted accounting principles (GAAP).
The deduction applies only to publicly-traded companies, including affiliated corporations participating in a publicly-traded company's financial statements, prepared according to GAAP, as of June 30, 2015. From the 2018 to 2024 income years, such groups may deduct from their net income an amount equal to one-seventh of the amount necessary to offset the (1) increase in net deferred tax liability, (2) decrease in net deferred tax asset resulting from combined reporting, or (3) aggregate change thereof if the group's net income changes from a net deferred tax asset to a net deferred tax liability. They must calculate the deduction (1) based on the impact of combined reporting regardless of the deduction, (2) regardless of its impact on federal taxes, and (3) without altering the tax basis of any asset. Any events that occur after the deduction is calculated, including the disposition or abandonment of assets, must not reduce it. They may carry forward any excess deduction to future income years until it is fully utilized.
Combined groups intending to claim this deduction must, by July 1, 2016, file a statement with the commissioner specifying the total amount of the deduction claimed. (PA 15-5, JSS (§ 145) delays this requirement to July 1, 2017. ) The statement must (1) be made on a form and in a manner the commissioner prescribes and (2) contain any information or calculation the commissioner specifies. No deduction is allowed for any income year unless it is claimed by July 1, 2016.
The act specifies that its provisions do not limit the commissioner's authority to review or redetermine the proper amount of any deduction claimed, whether claimed on the statement described above or on a tax return for any income year.
§ 156 — Annual Return
The act requires the combined group's designated taxable member to file the unitary return and pay the tax on behalf of all its taxable members. To this end, the designated member may, on the taxable and nontaxable members' behalf, (1) sign a unitary return, (2) apply for filing extensions, (3) agree to an examination or assessment of the return, (4) make offers of compromise and closing agreements regarding tax liability, and (5) receive refunds and credits for tax overpayments.
A combined group member whose income year is different from that of the rest of the group must report amounts from its return for its income year that ends during the “group income year. ” Under the act, the “group income year” is (1) the designated taxable member's income year or (2) if two or more members in the group file in the same federal consolidated tax return, the income year used on the federal return. No such reporting is required until the beginning of the member's first income year starting on or after January 1, 2015. (PA 15-5, JSS (§ 149) delays this requirement to income years starting on or after January 1, 2016. )
The act allows the designated taxable member to recover the payments from the other taxable members and prohibits those members from holding the designated taxable member liable for the payments. However, each taxable member of the combined group is jointly and severally liable for the taxes plus any interest, penalties, or additions due from any other taxable member.
A combined group eligible to select a designated member must give the DRS commissioner written notice of the selection by the date the tax is due. The commissioner must approve any change in the designated member.
The act gives the commissioner the sole discretion to (1) send notices, make deficiency assessments, and provide tax refunds and credits to the designated member or any other group member and (2) require a unitary return to be filed electronically and any tax payment to be made by electronic funds transfer.
§ 162 — Estimated Tax and Safe Harbor
The act applies estimated tax requirements to taxable members of combined groups required to file unitary returns. It makes the designated taxable member responsible for paying the estimated tax installments.
By law, corporations must pay the following percentages of their annual taxes by the following dates: 30% by March 15, 40% by June 15, 10% by October 15, and 20% by December 15. The act extends the due dates for the first estimated tax payment for combined groups whose 2015 group income years start in (1) January or February to July 15, 2015 or (2) March to August 15, 2015. Such groups must pay 70% (i. e. , a combination of the first and second payment) of the required annual payment on those dates.
Under the act, taxable members of combined groups required to file unitary returns are not subject to interest and penalties for underpaying estimated tax in 2015 if:
2. the 2014 income year was a 12-month year, the taxable members of the combined group pay estimated taxes of 100% of the tax liability, before credits, shown on either their individual separate 2014 returns or their optional 2014 combined return, as applicable. (PA 15-5, JSS (§ 152) eliminates these estimated tax filing deadlines and safe harbor provisions. )
§§ 142-155, 157-161 & 163 — Previous Unitary and Combined Return Provisions and Conforming Sections
Prior law gave certain corporations the option of filing a unitary or combined tax return under certain circumstances. The unitary return was a single return for all members of a unitary group with substantial intercorporate business transactions among the group's corporations. The combined return was a single return for a group of affiliated corporations subject to Connecticut corporation income tax that filed a federal consolidated return. The DRS commissioner could require or permit groups that did not file consolidated federal returns to file a combined return if he determined that such a filing was necessary, because of intercompany transactions or some agreement or arrangement, to properly determine the group's corporation business tax liability.
The act eliminates these combined and unitary return provisions for income years starting on or after January 1, 2015. (PA 15-5, JSS (§ 150) delays this repeal by one year, to income years starting on or after January 1, 2016. )
It makes additional statutory changes to conform to the mandatory combined reporting requirements and the elimination of current combined and unitary return provisions. (PA 15-5, JSS (§§ 147, 150, 151, & 153) make additional changes to conform to the delayed implementation and repeal. )
EFFECTIVE DATE: Upon passage and applicable to income years starting on or after January 1, 2015 (PA 15-5, JSS (§ 139) delays the effective date to January 1, 2016, and applicable to income years beginning on or after that date. )
§ 164-169 — BUDGET RESERVE FUND (BRF) DEPOSITS
The act establishes a mechanism for diverting projected surpluses in certain tax revenues to the BRF. It applies to revenue (referred to as “combined revenue”) from the (1) corporation income tax and (2) personal income tax's estimated and final payments (i. e. , income tax revenue generated from taxpayers who make estimated income tax payments on a quarterly basis).
The act establishes a formula for calculating a threshold level, based on the average revenue from these two sources over 10 years, that forms the basis for the revenue diversions. It requires the state (1) comptroller to begin certifying the threshold in FY 20 and (2) treasurer to begin diverting the revenue in FY 21.
Beginning in FY 20, the act requires the state comptroller to annually certify the threshold level for BRF deposits using a formula based on (1) a 10-year average of the state's combined revenue and (2) the rate of growth in combined revenue. Under the act, a “10-year average” is the average amount of combined revenue in the 10 fiscal years preceding a given fiscal year.
3. take the average of these 10 differentials and add one to this average.
Certifying and Reporting the Threshold Level. Beginning in FY 20, the act requires the comptroller to include a statement certifying the threshold level for the current fiscal year in the annual report he submits to the governor on the state's financial condition. By law, he must submit this report by September 30 and make a published copy available to the public by December 31.
The act requires the OPM secretary and OFA director to annually report the comptroller's certified threshold level by November 10, after adjusting for enacted laws projected to impact the estimated and final portion of the income tax or corporation income tax revenue by more than 1%. Presumably, the threshold is adjusted upward by the amount of a projected revenue increase and downward by the amount of a projected revenue decrease.
The OPM secretary and OFA director may (1) recalculate their threshold level adjustments to reflect any consensus revenue revisions in January and April impacting these revenue sources (see BACKGROUND) and (2) continue making the adjustments (a) for up to 10 fiscal years following the implementation of the law that created the revenue impact or (b) until there is no longer a revenue impact of more than 1%, whichever comes first. They must report any such revisions in their January and April consensus revenue estimates and include information on how they (1) determined the revenue impact and (2) used that information to adjust the threshold level.
The act also requires the OPM secretary and OFA director to each report the estimated threshold level, using the act's formula, for the three fiscal years following the current fiscal year.
State Budget Act and OFA Fiscal Notes. Beginning in FY 20, the act requires (1) consensus revenue estimates and the revenue statement included in the state budget act to itemize the withholding, estimated, and final payment components of personal income tax revenue and (2) the fiscal note on any bill impacting the personal or corporation income tax to clearly identify any impact to BRF deposits.
Required Transfers from the General Fund to the RGF and BRF
Beginning in FY 21, the act diverts, to the Restricted Grants Fund (RGF), projected surpluses in combined revenue based on January and April consensus revenue estimates (see below). The act requires the state treasurer to transfer the surpluses from the RGF to the BRF after the close of General Fund accounts each fiscal year. As with the BRF under existing law, the act authorizes the treasurer to invest all or part of the RGF in certain statutorily prescribed investments and directs her to credit all investment interest to the General Fund.
January. The act requires the state treasurer to transfer funds from the General Fund to the RGF if the January 15 consensus revenue estimate projects combined revenue for the current fiscal year that exceeds the threshold level. The treasurer must annually transfer the amount projected to exceed this level by January 31.
Under the act, there is no transfer if (1) combined revenue is projected to be less than or equal to the threshold level or (2) the consensus revenue estimate for the current fiscal year projects a year-end General Fund deficit.
April. The act requires the treasurer to adjust the amount diverted to the RGF in January based on the April 30 revised consensus estimate for combined revenue. It does so by requiring the state treasurer to transfer (1) additional funds from the General Fund to the RGF or (2) funds from the RGF back into the General Fund. In certain cases, it requires a transfer to the RGF after the April 30 estimate even if no transfer was made in January.
As Table 23 shows, the transfer depends on whether the (1) January estimate was more or less than the threshold level and (2) April estimate (a) increases or decreases the January estimate or (b) is more or less than the threshold level. The treasurer must transfer the required amounts to or from the RGF annually by May 15. As with the January estimate, there is no transfer if the April 30 estimate for the current fiscal year projects a year-end General Fund deficit.
Table 23: Transfers Required Following April 30 Consensus Revenue Estimate
Transfer Required Under the Act
Difference between January and April combined revenue projection must be transferred from the General Fund to RGF
Difference between April combined revenue projection and threshold level must be transferred from the General Fund to RGF
Deficit Mitigation Plan. The act authorizes the governor to direct the treasurer to transfer money in the RGF to the General Fund as part of a required deficit mitigation plan. By law, the governor must submit a deficit mitigation plan to the Appropriations and Finance, Revenue and Bonding committees when the comptroller's cumulative monthly financial statement projects a current year deficit of more than 1% of General Fund appropriations. (PA 15-5, JSS (§ 481) makes a technical change to this provision. )
Reducing or Eliminating Transfers to RGF or BRF. The act requires at least three-fifths of the members of the Appropriations and Finance, Revenue and Bonding committees to approve any act that, if passed, would reduce or eliminate the amount of any deposit to the BRF or RGF. It is unclear whether this provision is enforceable against future legislatures (see BACKGROUND).
Purpose. The act expressly provides that the BRF is to be maintained and invested to reduce revenue volatility in the General Fund and reduce the need for tax increases and state aid cuts due to changes in the economy.
Maximum Balance. The act increases the BRF's maximum balance from 10% to 15% of net General Fund appropriations for the current fiscal year but appears to allow the balance to exceed 15% under certain circumstances. Specifically, if a required transfer to the BRF would cause the balance to exceed 15%, the act appears to allow such a transfer to be made in whole, thus causing the balance to exceed 15%. As under existing law, once the BRF reaches the maximum, the treasurer may not transfer additional funds to it. Any remaining funds must go towards (1) the State Employee Retirement Fund's unfunded liability and (2) paying off outstanding state debt.
Authorized Use of Funds in the BRF. Beginning in FY 21, the act provides statutory authority for the legislature to transfer funds from the BRF to the General Fund in the three fiscal years following a fiscal year in which the April 30 consensus revenue estimate projects a 2% drop in General Fund tax revenue from the current fiscal year to the next fiscal year.
Directing BRF Transfers to Pay Unfunded Pension Liability. By law, any unappropriated surplus that remains after the BRF reaches its maximum balance must be used for paying the State Employee Retirement Fund's unfunded liability. Beginning in FY 17, the act additionally earmarks for that purpose a percentage of any amount transferred to the BRF. The percentage depends on the BRF's balance, as shown in Table 24.
Table 24: BRF Transfer Directed to Unfunded Pension Liabilities
Beginning by December 15, 2024, and every five years thereafter, the act requires the OPM secretary, OFA director, and state comptroller to each report to the Finance, Revenue and Bonding Committee and the governor on the act's BRF deposit formula and include any recommended changes to the formula or BRF cap that are consistent with the BRF's purpose, as described above.
§ 170 — RESIDENT STATE TROOPER PROGRAM
Under prior law, a town participating in the resident state trooper program paid 70% of the regular cost of compensation, maintenance, and other expenses of troopers assigned to it. The act increases this percentage to 85% for the first two troopers assigned to the town and 100% for any additional troopers. In addition, by law, unchanged by the act, the town must pay 100% of the overtime costs and the portion of fringe benefits directly associated with such costs.
The act increases the aggregate cap on Insurance Reinvestment Act tax credits by $150 million, from $200 million to $350 million. It does not change the program's $40 million annual cap. The credits apply to the insurance premium tax, and insurers qualify for them by investing in eligible businesses through state-certified business investment funds, which prior law called “Insurance Investment Funds. ” The act renames these funds “Invest CT Funds. ”
By law, companies managing funds must apply to the Department of Economic and Community Development (DECD) commissioner for certification as an Invest CT fund. In doing so, a fund must, among other things, commit to investing a portion of the funds' capital in newly forming businesses (pre-seed) and green technology.
For funds seeking certification or credit allocations on or after September 1, 2015, the act increases, from 3% to 7%, the amount of capital the funds must invest in pre-seed businesses, but requires funds to meet this goal within four years after they received their credit allocation, rather than three years, as prior law required. The act continues to require funds to invest at least 25% of their capital in green technology businesses, but also creates two additional investment targets:
1. at least 25% of the funds' capital must be invested in businesses located in municipalities with more than 80,000 people (targeted area businesses) and
2. at least 3% of the funds' capital must be invested in cybersecurity businesses.
Under the act, cybersecurity businesses are those that primarily provide information technology products, goods, or services aimed at detecting, preventing, or responding to attacks on information technology systems or the information stored in or transiting such systems. The attacks include attempting to obtain unauthorized access to, exfiltration or manipulation of, or impairment to, the system's integrity, confidentiality, or availability.
The act makes changes to the requirements for claiming credits and distributing returns conforming to these new investment targets.
By law, funds must obtain investments from other sources besides insurers (leveraged capital) before the DECD commissioner can certify a fund and allocate credits to it on behalf of its insurance company investors. For funds seeking certification on or after September 1, 2015, the act increases the share of such capital from 5% to 10% of the insurers' total investment.
By law, the tax credit equals 100% of an insurer's investment, but insurers must claim them over 10 years according to a statutory schedule. The act changes the schedule for claiming credits earned for investments made on or after September 1, 2015.
For credits earned on investments made on or before June 30, 2015, the insurer may begin claiming credits in the fourth year, claiming up to 10% per year in years four through seven and 20% per year in the last three years. For investments made on or after September 1, 2015, the insurer may begin claiming 20% of the credit starting in the sixth year and may continue claiming them at that annual rate until the 10th year. By law, the insurer may carry forward unused credits, but cannot transfer them to other taxpayers.
By law, insurance investors' ability to claim credits depends on whether the fund meets its annual investment goals. The act resets the investment goals for funds awarded credit allocations after September 1, 2015. The changes align with the investment commitments funds must make when they apply for certification.
Under the act, a fund must have invested (1) at least 60% of its credit-eligible capital in eligible businesses within six years, instead of four, after the commissioner allocates the credit, and (2) at least 7% of its credit-eligible capital in pre-seed businesses within four years, instead of three years after the commissioner allocates the credit. The fund must also have invested at least 25% in targeted area businesses and 3% in cybersecurity businesses, but the act does not specify a date by which they must do so.
The act requires companies managing Invest CT funds to include information on these investments in their annual report to the commissioner.
In addition to tax credits, insurance company investors receive a return on their investments (distributions). The act adds conditions a fund must meet before it can make a distribution.
The conditions for funds certified on or after September 1, 2015 align with the investment goals the act sets for them. Specifically, the fund must have invested at least 25% of its capital in target area businesses, 7% in pre-seed businesses, and at least 3% in cybersecurity businesses. As under prior law, it must also have invested (1) all of the credit-eligible capital in eligible businesses and (2) at least 25% of the capital in green technology businesses.
The act also requires, as a condition for distributions from funds certified on or before June 30, 2015, at least 3% of the funds' eligible capital to be invested in pre-seed businesses.
The act allows funds to distribute returns before they meet these investment targets under the same conditions that apply under current law.
The act extends the period during which the DECD commissioner may decertify a fund and cause it to forfeit future unclaimed credits. By law, the commissioner may decertify a fund if it fails to submit required reports, meet its investment targets, or comply with the distribution rules.
As under prior law, for funds receiving credit allocations on or before June 30, 2015, the act requires the fund to forfeit unclaimed credits if the commissioner decertifies it within four years after she allocated its credits and the fund failed to invest at least 60% of its capital. For funds receiving credit allocations on or after September 1, 2015, the act requires the fund to forfeit the credit if the commissioner decertifies it within the first six years of the credit allocation and the fund failed to meet the 60% investment goal.
The act imposes a 6% gross receipts tax on DPH-licensed and Medicare-certified ambulatory surgical centers, facilities where surgery and related services take less than a day without subsequently requiring patients to be admitted to a hospital. (PA 15-5, JSS (§ 130) excludes from this tax (1) the first $1 million of a center's gross receipts or (2) any portion of a center's gross receipts that constitute net patient revenue of a hospital subject to the hospital tax. )
The centers must remit the tax quarterly, beginning with the last quarter of 2015. This payment is due January 31, 2016 and each subsequent payment is due on the last day of the month preceding the quarter. Centers must file the return electronically and remit the tax by electronic funds transfer. Each return must identify the center's name and location, indicate the total gross receipts the center generated during the quarter, and provide any other information the DRS commissioner requires. (PA 15-5, JSS (§ 130) allows the centers to seek remuneration for the act's 6% tax. )
Centers that fail to remit the tax face a penalty equal to 10% of the taxes owed or $50, whichever is greater, plus interest at 1% per month. The act gives the commissioner the same statutory enforcement powers he has to enforce admission and dues taxes.
Beginning in FY 16, the act authorizes the comptroller to record the revenue the tax generates each fiscal year no later than five business days after the end to the fiscal year.
The act allows the comptroller to designate up to $25 million of General Fund revenue for FY 16 as General Fund revenue in FY 17.
The act puts a $20 million cap on the maximum amount of (1) estate tax imposed on the estates of residents and nonresidents who die on or after January 1, 2016 and (2) gift tax imposed on taxable gifts donors make on or after January 1, 2016. (However, the effective date for the gift tax cap specifies that it takes effect one year sooner, on January 1, 2015. ) The estate tax cap must be reduced by the amount of any gift taxes the decedent, the decedent's estate, or the decedent's spouse paid on taxable gifts made on or after January 1, 2016, but the reduction cannot exceed the tax due. By law, the estate and gift taxes apply to taxable estates and gifts that total more than $2 million.
EFFECTIVE DATE: Upon passage and applicable to estates of decedents who die on or after January 1, 2016 and gifts made on or after January 1, 2015 (see above).
The act increases the cigarette tax in two steps, from (1) $3. 40 to $3. 65 per pack on October 1, 2015 and (2) $3. 65 to $3. 90 per pack on July 1, 2016.
It imposes a 25-cent “floor tax” on each pack of cigarettes that dealers and distributors have in their inventories at the earlier of the close of business or 11: 59 p. m. on (1) September 30, 2015 and (2) June 30, 2016.
By November 15, 2015 and August 15, 2016, each dealer and distributor must report to DRS the number of cigarettes in its inventory as of September 30, 2015 and June 30, 2016, respectively, and pay the floor tax. If a dealer or distributor does not report by the due date, the DRS commissioner must estimate the number of cigarettes in the dealer's or distributor's inventory using any information the commissioner has or obtains. If this occurs, the dealer or distributor is subject to a penalty of 10% of the tax due or $50, whichever is greater, plus interest of 1% per month.
Failure to file the report by the due date is grounds for DRS to revoke or not renew a cigarette dealer's or distributor's license and any other DRS-issued license or permit the person or entity holds. A dealer or distributor who willfully fails to file is subject to a fine of up to $1,000, one year in prison, or both. A dealer or distributor who willfully files a false report can be fined up to $5,000, sentenced to one to five years in prison, or both. Late filers are subject to the same interest and penalties that apply to other late cigarette tax payments, 10% of the tax due or $50, whichever is greater, plus interest of 1% per month.
By law, the state makes annual PILOT payments to municipalities to reimburse them for a part of the revenue loss from tax-exempt (1) state-owned property, Indian reservation and trust land, and municipally owned airports (“state, municipal, or tribal property”) and (2) private nonprofit college and hospital property (“college and hospital property”). The PILOTs are based on (1) a specified percentage of taxes that each municipality would otherwise collect on the property and (2) the amount the state appropriates for the payments.
Beginning in FY 17, the act ends the existing PILOT programs for such properties and requires the PILOTs to be paid under a new consolidated program. The new program reimburses municipalities for the same types of property, at the same reimbursement rates, using the same application and payment process as the existing programs. As under existing law, the rate is (1) 45% for state-owned property; (2) 77% for college and hospital property; and (3) between 45% and 100% for other specified properties, as shown in Table 25.
Table 25: PILOT Rates for Specified Property Types under Existing Law and the Act
State, Municipal, or Tribal Property
U. S. Department of Veterans Affairs Connecticut Healthcare Systems campuses
The act also retains the following PILOTs for municipalities that host specified properties or institutions:
2. $1 million to New London for the U. S. Coast Guard Academy, and
Under prior law, only towns and boroughs were eligible for state, municipal, and tribal property PILOTs. The act conforms the law to current practice by extending such PILOTs to cities, consolidated towns and cities, and consolidated towns and boroughs.
As under existing law, the act provides college and hospital property PILOTs to towns, boroughs, cities, consolidated towns and cities, and consolidated towns and boroughs, and village, fire, sewer, or combination fire and sewer districts, and other municipal organizations authorized to levy and collect taxes.
FY 17. Under prior law, the PILOTs were proportionately reduced if the amount appropriated was not enough to fund the full amount to every municipality or district. For FY 17, the act maintains this requirement, but adds two mitigating features. It (1) requires municipalities and districts to receive PILOTs that equal or exceed the reimbursement rates they received in FY 15 for such property and (2) establishes an additional PILOT grant, funded from the select PILOT account described below, for specified municipalities and districts. It enumerates the additional grant amount that these municipalities and districts must receive.
FY 18 and Thereafter. Beginning in FY 18, the act maintains the requirement that the PILOTs be proportionately reduced, but establishes a new method for doing so. It establishes minimum reimbursement rates for specific types of PILOT-eligible property, based on a municipality's mill rate, as described below. In addition, it requires that PILOTs for all other eligible properties (i. e. , “qualified state, municipal, and tribal property” and “qualified college and hospital property”) be proportionately reduced, but no lower than the reimbursement rate the municipality or district received in FY 15 for such property.
The act establishes minimum reimbursement rates for PILOTs on (1) “select state property” (i. e. , the category of state-owned property reimbursed at 45%); and (2) “select college and hospital property” (i. e. , private, nonprofit colleges and universities, nonprofit general and chronic disease hospitals, and certain urgent care facilities).
Under the act, OPM must rank each municipality based on (1) its mill rate and (2) the percentage of tax-exempt property on its 2012 grand list, excluding correctional and juvenile detention facilities. OPM must give boroughs and districts the same ranking as the municipalities in which they are located.
The act divides municipalities into three tiers based on this ranking and sets a minimum reimbursement rate for each tier, as shown in Table 26. It requires that the portion of the grants made to tiers one and two that exceeds the minimum reimbursement rate for tier three (i. e. , 32% for college and hospital PILOTs and 24% for state property PILOTs) be paid from the select PILOT account.
Table 26: Minimum PILOT Reimbursement Rates
Select College and Hospital Property
Select State Property
The act also specifies a procedure for reducing PILOTs beyond the minimum reimbursement rates in Table 26 if the amount appropriated for the grants and available in the select PILOT account (described below) is not enough to fund them. Under this procedure, OPM must proportionately reduce the select college and hospital property PILOTs so that the tier one and tier two grants are 10 percentage points and five percentage points greater than the tier three grants, respectively. Similarly, OPM must proportionately reduce the select state property PILOTs such that the tier one and tier two grants are eight percentage points and four percentage points greater than the tier three grants, respectively. It must pay the grants to tiers one and two that exceed the grants paid to tier three from the select PILOT account.
The act requires OPM to fund certain PILOT grants from the select PILOT account, which the act establishes as a separate, nonlapsing General Fund account. It capitalizes the fund with sales tax revenue transferred from the municipal revenue sharing account, as specified below.
The act requires OPM to use the account to fund (1) the additional PILOT grants in FY 17 and (2) beginning in FY 18, the portion of PILOT grants paid to tiers one and two exceeding the reimbursement rates paid to tier three.
The act requires the account to contain any money legally required to be deposited into it.
The act requires OPM, beginning by July 1, 2017, to annually report for four years to the Finance, Revenue and Bonding Committee on the PILOTs and include its recommendations for changes.
Prior law annually allocated a portion of the Mashantucket Pequot and Mohegan Fund to municipalities according to two statutory formulas linked to the state's PILOT distributions. It allocated:
1. $20 million of the fund to municipalities so that each one received one-third of the difference between what it was eligible to receive as a state-owned property PILOT in the appropriate fiscal year and what it would have received if that PILOT grant program had been funded at $85,205,085, subject to a minimum grant amount of $1,667, and
2. $20. 1 million of the fund to municipalities according to the distribution formula for college and hospital PILOTs.
The act instead sets each municipality's distribution of the two pools of funds equal to the amount they received in total Pequot and Mohegan Fund distributions in FY 15. (However, the total amount of these distributions exceeds the $40. 1 million in the two pools. )
Under prior law, the Pequot and Mohegan Fund grants from these two formulas, when added to the grants municipalities received from the respective PILOT programs, could not exceed 100% of the property taxes the municipalities would have received from such property based on the grand lists for the fiscal year preceding the year in which the grants were payable. The act instead provides that the grants, when added to the newly consolidated PILOT grant, may not exceed such thresholds. Although it makes this change, and other conforming changes to the Pequot and Mohegan Fund grants to reflect the act's PILOT provisions, effective July 1, 2015, the new PILOT provisions do not take effect until July 1, 2016.
Beginning with the October 1, 2015 assessment year, the act allows municipalities and special taxing districts to tax motor vehicles at a different rate than other taxable property, but caps the motor vehicle rate at (1) 32 mills for the 2015 assessment year and (2) 29. 36 mills for the 2016 assessment year and thereafter. The act (1) applies to any town, city, borough, consolidated town and city, consolidated town and borough, and village, fire, sewer, or combination fire and sewer districts, and other municipal organizations authorized to levy and collect taxes and (2) supersedes any special act, municipal charter, or home rule ordinance.
The act further limits the motor vehicle mill rate special taxing districts and boroughs may impose by barring them from setting a rate that, if combined with the municipality's motor vehicle mill rate, would exceed the capped rate. Presumably, a district or borough would set its motor vehicle mill rate after the municipality in which it is located does so.
It also makes a conforming change to a provision allowing municipalities with more than one taxing district to set a uniform citywide mill rate for taxing motor vehicles. Thus, a uniform citywide mill rate cannot exceed the capped rate.
Beginning in FY 16, the act requires the DRS commissioner to begin directing a portion of sales tax revenue to MRSA (see § 133 above). It requires OPM to distribute MRSA funds for municipal grant programs, including newly established motor vehicle property tax grants, municipal revenue sharing grants, and regional services grants for councils of government (COG).
Schedule for Disbursing MRSA funds
Under the act, OPM must transfer or disburse MRSA funds beginning in FY 16 in the amounts and order shown in Table 27.
Table 27: MRSA Distribution Schedule
MRSA Distributions
$10 million for education cost sharing (ECS) grants
$10 million for ECS grants
Amount sufficient to make grants payable from the select PILOT account
Amount sufficient to make motor vehicle property tax grants to municipalities
Amount sufficient to pay municipal revenue sharing grants as specified below
$3 million for regional services grants to COGs
18 and each year thereafter
$7 million for regional services grants to COGs
Any remaining amounts to provide municipal revenue sharing grants to municipalities according to a specified formula
The act eliminates the previous process for distributing MRSA funds, which required OPM to (1) provide manufacturing transition grants to municipalities and (2) distribute any remaining funds according to a specified municipal revenue sharing formula.
Beginning in FY 17, the act requires OPM to distribute motor vehicle property tax grants to municipalities to mitigate the revenue loss attributed to the motor vehicle mill rate cap described above. Under the act, the FY 17 grant is equal to the difference between the amount of property taxes a municipality levied on motor vehicles for the 2013 assessment year and the amount of the levy for that year at 32 mills. In FY 18 and thereafter, the grant is equal to this difference, based on the rate of 29. 36 mills.
PA 15-5, JSS (§ 494) (1) limits these grants to municipalities with mill rates, or combined municipal and district mill rates, greater than (a) 32 mills in FY 17 or (b) 29. 36 mills in FY 18 and annually thereafter, (2) increases the grant amounts to include the revenue loss attributed to districts that levied a property tax on motor vehicles for the 2013 assessment year, and (3) requires municipalities to disburse to districts the portion of the grant amount attributable to them.
Beginning in FY 17, the act requires OPM to distribute regional services grants to COGs on a per capita basis, based on the most recent DPH population estimate. (PA 15-5, JSS (§§ 110 & 111) instead requires OPM to distribute the grants based on a formula determined by the OPM secretary. ) Beginning in FY 18, the act requires each COG to get OPM approval of a spending plan for a grant in order to receive one grant.
The act requires COGs to use the grants (1) for planning purposes and (2) to achieve efficiencies in delivering municipal services on a regional basis, including regionally consolidating services. The act specifies that the efficiencies must not diminish the services' quality. A COG's council members must unanimously approve any grant expenditure.
The act also requires COGs, beginning by October 1, 2017, to biennially report to the Planning and Development and Finance, Revenue and Bonding committees (1) on how they have spent the grants and (2) with recommendations for expanding, reducing, or modifying them.
Beginning in FY 17, the act requires OPM to distribute municipal revenue sharing grants to municipalities. It explicitly authorizes municipalities to disburse any such grant funds to their special taxing districts.
Under the act, OPM must distribute the grants according to (1) specified amounts in FY 17 and (2) a newly established formula beginning in FY 18. (PA 15-5, JSS (§ 494) instead requires OPM to distribute the grants according to the (1) specified amounts in FY 17 and FY 18 and (2) formula beginning in FY 19. ) OPM must proportionately reduce each municipality's grant amount if the total amount of grants for all municipalities exceeds available MRSA funds.
The formula for calculating each municipality's grant amount depends on its motor vehicle mill rate. As explained below, it gives more weight to municipalities with relatively high motor vehicle mill rates by setting a 25-mill threshold and basing the distribution on whether a municipality's motor vehicle mill rate is above or below that threshold.
Formula for Municipalities Below the Threshold. OPM must calculate grant amounts for municipalities below the 25-mill threshold using the act's per capita and pro rata formulas. A municipality's grant is the lesser of the per capita and pro rata distributions.
OPM must calculate each municipality's per capita distribution by multiplying the municipality's share of the state's total population (based on the most recent DPH population estimate) by the total amount of funds available for the revenue sharing grants.
1. First, it must calculate a municipality's “weighted mill rate,” which is its motor vehicle mill rate for FY 15 divided by the average FY 15 motor vehicle mill rate for all municipalities.
2. Next, it must multiply the municipality's weighted mill rate by its per capita distribution. (The act refers to the outcome of this step as the “municipal weighted mill rate calculation. ”)
3. OPM must then (1) divide the municipal weighted mill rate calculation by the sum of all municipal weighted mill rate calculations and (2) multiply the result by the total amount of funds available for the revenue sharing grants, thus yielding the municipality's pro rata distribution.
Formula for Municipalities At or Above the 25-mill Threshold. The formula for municipalities at or above the 25-mill threshold also begins by calculating the per capita and pro rata distributions, but OPM must select the greater of the two amounts and increase it based on a specified percentage. OPM must determine that percentage by:
The act caps the grant amounts for specified municipalities. It caps Hartford's grant at 5. 2% of the total amount of revenue sharing grants distributed, Bridgeport's at 4. 5%, New Haven's at 2. 0%, and Stamford's at 2. 8%. OPM must redistribute any funds remaining after determining these caps to all other municipalities with motor vehicle mill rates at or above the 25-mill threshold according to the pro rata distribution formula used to determine their initial grant amounts.
Grant Schedule. The act requires OPM to distribute the funds deposited in MRSA for municipal revenue sharing grants. It must distribute the funds deposited between (1) October 1 and June 30 on the following October 1 and (2) July 1 and September 30 on the following January 31. But it allows municipalities to apply to OPM on or after July 1 for an early disbursement. OPM may approve a municipality's application if it finds that the early disbursement is required to meet the municipality's cash flow needs. It must issue such disbursements annually by September 30.
Spending Cap. Beginning in FY 18, OPM must reduce the grant amount for those municipalities whose spending, with certain exceptions, exceeds a specified spending cap. Under the act, the spending cap is the greater of 2. 5% or more or the inflation rate. Municipalities that increase their general budget expenditures over the previous fiscal year by a percentage over this cap receive a reduced revenue sharing grant. The reduction is generally equal to 50 cents for every dollar the municipality spends over the cap. However, for municipalities that taxed motor vehicles at more than 32 mills for the 2013 assessment year, the reduction may not exceed the difference between the amount of property taxes the municipality levied on motor vehicles for the 2013 assessment year and the amount the levy would have been had the motor vehicle mill rate been 32 mills. (PA 15-5, JSS (§ 494) eliminates the grant reduction limit for such municipalities. )
The act requires each municipality to annually certify to the OPM secretary, on an OPM-prescribed form, whether it has exceeded the spending cap and if so, the excess amount.
Under the act, municipal spending does not include expenditures:
3. for any municipal revenue sharing grant the municipality disburses to a special taxing district, up to the difference between the amount of property taxes the district levied on motor vehicles in the 2013 assessment year and the amount the levy would have been had the motor vehicle mill rate been 32 mills, for FY 17 disbursements, or 29. 63 mills, for disbursements in FY 18 and thereafter. (PA 15-5, JSS (§ 494) (1) also excludes from the cap expenditures for any motor vehicle property tax grants disbursed to districts and (2) expands the exclusion for municipal revenue sharing grants to include the entire amount of these disbursements. )
The act defines “municipal spending” as the percentage growth in spending in the prior fiscal year, but uses the term only in describing the types of expenditures excluded from the cap.
Property Tax Statements. The act requires municipal tax collectors to include, as part of property tax bills, a statement informing taxpayers of the act's spending cap penalty. The statement must be in the following form:
“The state will reduce grants to your town if local spending increases by more than 2. 5% from the previous fiscal year. ”
EFFECTIVE DATE: October 1, 2015, except the property tax statement provision is effective October 1, 2017 and applicable to assessment years beginning on or after October 1, 2017.
The act requires OPM, by January 1, 2016, to report to the Planning and Development and Finance, Revenue and Bonding committees on the act's PILOT and municipal revenue sharing grant provisions. OPM must include its recommendations for (1) enacting further legislation on these provisions, (2) making statutory changes that would help in implementing them, (3) adjusting grant amounts or formulas, and (4) improving and enhancing such provisions.
§§ 211-215 — OPTIONAL PROPERTY TAX BASE REVENUE SHARING PROGRAM
The act authorizes COGs to establish a property tax base revenue sharing program under which municipalities in their planning regions (1) tax commercial and industrial (C&I) property at a composite mill rate, based in part on the average mill rate in their regions, and (2) share up to 20% of the property tax revenue generated by the growth in their C&I property tax bases since 2013, which the act designates as the “base year. ” The revenue sharing must be administered by an auditor elected by COG members.
The act allows a COG to implement the program only if its member municipalities unanimously authorize it to do so. It appears that COGs must decide whether to participate by August 1, 2016 (the deadline by which they must elect an auditor to coordinate the program).
It allows COGs to establish the program beginning with the 2015 assessment year and, for those doing so, requires municipalities to begin, on or after January 1, 2017, annually remitting revenue sharing payments by February 1 for redistribution as described below.
Growth in C&I Property Tax Base. In regions implementing the revenue sharing program, municipalities with growing C&I property tax bases are taxed at a composite rate determined according to the following formula (and a portion of the revenue generated by the growth is shared with the region's other municipalities). Under the act, growth in a municipality's C&I property tax base is the difference between the total assessed value of its C&I property for the current year and the total assessed value of its C&I property for the base year (“increase from base year”).
The act defines C&I property as real property used for:
1. selling goods or services, including nonresidential living accommodations, dining establishments, motor vehicle services, warehouses, distribution facilities, retail services, banks, office buildings, multipurpose buildings, commercial condominiums for retail or wholesale use, recreation facilities, entertainment facilities, airports, hotels, and motels; or
It includes the lot or land on which a building is situated and any accessory improvements, including pavement and storage buildings, but excludes any real property in an enterprise zone.
Municipal Commercial Industrial Mill Rate. The act requires municipalities in participating COGs that have had an increase in their C&I tax base from the base year to tax C&I property at a “municipal commercial industrial mill rate,” rather than their local mill rates. Municipalities with C&I tax bases that have not increased since the base year must tax C&I property using their local mill rates.
The municipal commercial industrial mill rate is calculated according to a formula that incorporates the average mill rate in the municipality's planning region (“regional mill rate”) and the municipality's mill rate for the following fiscal year (i. e. , the mill rate effective July 1 of the current year). Although the act does not specify when the municipality must calculate this rate, presumably it would do so after finalizing its budget for the following year.
1. the revenue sharing percentage determined by the COG (i. e. , 0. 2 or less, as described below) multiplied by the (a) increase from the base year and (b) regional mill rate;
2. one, minus the revenue sharing percentage (i. e. , 0. 8 or more) multiplied by the (a) increase from the base year and (b) municipal mill rate for the following fiscal year; and
Municipal Contribution to the Area-Wide Tax Base. Starting January 1, 2017, each municipality in a participating COG must annually remit, by February 1, its property tax revenue sharing payment (i. e. , its “municipal contribution to the area-wide tax base”) to the administrative auditor (see below). The payment is a portion of the property taxes paid on the growth in the municipality's C&I tax base since 2013, based on the regional mill rate.
The municipality must calculate the payment amount by (1) multiplying its increase from the base year by the revenue sharing percentage, (2) dividing that number by 1,000, and (3) multiplying the result by the regional mill rate.
The auditor must distribute the revenue sharing payments in the same proportion as the municipality's municipal distribution index bears to the total of all municipal distribution indices in the region. In other words, if the municipality's fiscal capacity is the same as the regional average, its share of the funds will be the same as its share of the region's population. If its fiscal capacity is above the regional average, its share will be smaller. If its fiscal capacity is below the regional average, its share will be larger.
The act requires each COG implementing the program to elect, from among its members, an administrative auditor to coordinate the program's property tax revenue sharing payments. The COG must elect the auditor by August 1, 2016 and in succeeding even-numbered years. If a majority of the COG's members cannot agree on an auditor, the OPM secretary must appoint one from among the members.
The auditor serves for two years and until the COG elects his or her successor. If he or she ceases to serve as a COG member during his or her term, a successor must be chosen to serve for the unexpired term, in the same manner in which the original auditor was chosen (i. e. , by the COG or OPM secretary).
The auditor must use the planning region's staff and facilities. The COGs' member municipalities must reimburse it for the marginal expenses its staff incurs. Each municipality's share of the total expenses is prorated based on its share of the region's population. Annually, by February 1, the auditor must certify, to each municipality's treasurer or other fiscal officer, the amount of total expenses for the preceding calendar year and the municipality's share of the expenses. The treasurer or officer must pay such amount to the planning region's treasurer or fiscal officer by the following March 1.
EFFECTIVE DATE: October 1, 2015, and applicable to assessment years beginning on or after that date
From July 1, 2015 to June 30, 2017, the act exempts from the 10% admissions tax any athletic event presented by an Atlantic League of Professional Baseball member team at Bridgeport's Harbor Yard Ballpark. (PA 15-184 (§ 11) has the same exemption. )
The act creates a swimming pool license for people who install above-ground swimming pools. (PA 15-5, JSS (§§ 405 & 517) repeal the pool installer license and instead create a pool assembler license. )
By law, anyone who, for financial compensation, builds or installs permanent spas or in-ground or partially above-ground swimming pools more than 24 inches deep must be licensed as a swimming pool builder and registered as a home improvement contractor with DCP (CGS § 20-340d). The act creates a swimming pool installer license for people who, for financial compensation, install above-ground swimming pools more than 24 inches deep, and it subjects these licensees to license and registration requirements similar to those that apply to swimming pool builder licensees under existing law, including registering as a home improvement contractor. People building or installing pools on their own residential property are exempt from the requirements under the law as well as the act.
As is the case for the swimming pool builder licensee, the act prohibits the swimming pool installer licensee from performing electrical; plumbing and piping; or heating, piping, and cooling work without being properly licensed for this work by DCP.
As is the case for the swimming pool builder licensee, the initial fee for the swimming pool installer license is $150, and the annual renewal fee is $100. The annual fee to register as a home improvement contractor is $120, plus $100 annually for the Home Improvement Guaranty Fund.
The act does not contain specific penalties for swimming pool installer license violations. But by law, DCP may impose penalties, such as revoking or suspending DCP licenses for violations. Under the act, a swimming pool installer licensee who violates the home improvement contractor registration provisions is also subject to a range of penalties.
Implementing Regulations for Swimming Pool Installers
By April 1, 2016, the act requires the DCP commissioner to adopt implementing regulations establishing, among other things, the amount and type of experience, training, continuing education, and examination requirements for getting and renewing a pool installer license.
Once DCP adopts regulations, the act prohibits anyone from installing, for financial compensation, an above-ground swimming pool more than 24 inches deep, except on his or her own property, without first obtaining a DCP pool installer license and registering with DCP as a home improvement contractor.
Anyone who applies for a license before January 1, 2017 does not have to take a license examination, provided his or her experience and training are equivalent to that required to qualify for the examination under DCP regulations.
The act requires swimming pool installer licensees to comply with the registration requirements that apply to home improvement contractors under existing law.
Fees. By law, home improvement contractors must register with DCP and pay a $220 annual fee, including $100 for the Home Improvement Guaranty Fund. This fund reimburses consumers unable to recover losses suffered because the contractor failed to fulfill a contract valued over $200, up to $15,000 per claim (CGS §§ 20-421 & 432).
Violations and Penalties. DCP may investigate, refuse, suspend, or revoke a home improvement contractor's registration and impose fines. It may impose civil fines of up to $500 for a first offense, $750 for a second offense, and $1,500 for subsequent offenses for such violations as working without the required registration or willfully employing an unregistered individual (CGS § 20-427(d)).
In addition to other remedies in law, certain violations involving (1) fraud or misrepresentation are class B misdemeanors and (2) failure to refund money for home improvement work not done in a specified time are class A or B misdemeanors depending on the price of the work (see Table on Penalties) (CGS § 20-427(c)).
Finally, a violation of the home improvement contractor laws constitutes a violation under the Connecticut Unfair Trade Practices Act (CGS § 20-427(c)).
The act transfers $90,000 in each of FY 16 and FY 17 from the Community Investment Account to the Military Department for Personal Services. In each fiscal year, $45,000 must be distributed to each of the (1) First Company Governor's Horse Guard unit in Avon and (2) Second Company Governor's Horse Guard unit in Newtown.
By law, multistate companies subject to Connecticut's corporation business tax must apportion their net income or loss and alternate capital base according to statutory apportionment formulas. By February 1, 2016, the act requires the DRS commissioner to (1) review how alternative apportionment and income sourcing methods affect Connecticut businesses and (2) make any recommendations to the Finance, Revenue, and Bonding Committee.
The act repeals a requirement that the DRS commissioner deposit $12. 7 million of FY 15 sales and use tax payments into MRSA and distribute the funds to municipalities according to a specified municipal revenue sharing formula. By June 30, 2015, it allows the comptroller to designate up to $12. 7 million of FY 15 General Fund revenue as FY 16 General Fund revenue.
Legislative entrenchment refers to one legislature restricting a future legislature's ability to enact legislation. For example, CGS § 2-35 previously prohibited appropriations bills from containing general legislation. (This provision has since been repealed. ) In Patterson v. Dempsey, 152 Conn. 431 (1965), the Connecticut Supreme Court held that this provision of CGS § 2-35 was unenforceable, writing that, “to hold otherwise would be to hold that one General Assembly could effectively control the enactment of legislation by a subsequent General Assembly. This obviously is not true, except where vested rights, protected by the constitution, have accrued under the earlier act. ”
OLR Tracking: RP: MS: PF: bs