On June 23, 2021, Connecticut Governor Ned Lamont signed two budget laws covering the state budget for the financial year 2022-2023 (the “Budget Act”). HB 6689, SB 1202. The draft budget contained several notable tax provisions, including extending the corporate tax surcharge for an additional two years, delaying the expiry of corporate capital taxation and creating a tax amnesty program. These provisions are discussed below.
Extension of the trade tax surcharge
The draft budget extends the existing corporate tax surcharge of 10 percent, which should expire in 2020 to 2022. The Corporate Income Tax Surcharge applies a 10 percent tax surcharge to companies with more than $ 250 in Connecticut corporate tax liability and either taxable members of a combined group filing a combined unit return or gross annual income of $ 100 million or more.
Delay in the exit from corporate capital taxation
The draft budget also delays the planned four-year exit from capital taxation for corporations. The tax rate, which was currently $ 0.0031 per million for 2020, should be reduced to $ 0.0026 in 2021 and then gradually decreased annually until it is completely abolished in 2024. The draft budget keeps the rate of $ 0.0031 per million through 2023. and introduces a new slower exit plan that does not see the tax abolished entirely by 2028. Interest for underpayments of the estimated taxes due to the change in the rate for 2021 will be waived.
Creation of a tax amnesty program
The draft budget also requires that the Treasury Commissioner draw up a three-month tax amnesty program to run from November 1, 2021 to January 31, 2022. The amnesty program applies to virtually all Ministry-administered Revenue Services taxes, including corporate tax, income tax, and sales and use taxes. A person whose application is accepted as part of the amnesty program is generally entitled to a fine and a 75 percent reduction in interest on the tax amounts due. However, an application for amnesty will in no way result in a refund or credit of any taxes, credits or penalties already paid. Persons involved in final agreements with the Commissioner, who have made compromise offers that have been accepted by the Commissioner, or who are parties to managed audit agreements cannot apply for an amnesty. Amnesty requests can be made for all tax periods ending on or before December 30, 2020.