Finance Commission Withdraws Small Business Tax Cuts » CBIA


Congress’ Finance, Revenue, and Bonds Committee has responded to a number of tax bills ahead of the April 20 deadline, leaving two key small business measures to meet different fates.

The committee unanimously approved HB 6584. This will level the playing field for small businesses by extending the R&D tax credit to pass-through entities.

However, the commission removed a provision from Governor Ned Lamont’s state budget plan that would fully restore tax credits for pass-through entities to their original levels.

The proposal would return $60 million to over 123,000 Connecticut small businesses.

“These changes we are proposing will help Connecticut small businesses save money, which they will reinvest in their offices to support continued growth and new job development. It can be used for,” Lamont said at a conference in January announcing the initiative.

“By making this change, businesses can have confidence that they will be able to maximize the benefits of this tax credit.”

“Huge hit”

CBIA’s Eric Gjede called the commission’s exclusion of tax credits for pass-through entities “a big blow for small businesses, but not unexpected.”

“Many Republican and Democratic committee members explicitly emphasized this lack of credit restoration as the reason they opposed the committee’s revenue package.

CBIA’s Eric Gjede called the commission’s exclusion of tax credits for pass-through entities a “huge blow to small businesses.”

Revised budget SB 981 approved 31-20 with Democrats Jill Barry (D-Glastonbury), Steve Meskers (D-Greenwich) and Kelly Wood (D-Rocky Hill) all Republicans voted against.

Gjede said parliamentary leaders and senior government officials are negotiating many elements of the budget’s tax provisions, with additional amendments expected before the full parliament is enacted ahead of the June 7 recess. rice field.

tax cut

Commission members approved a $300 million tax cut plan. This is the first state income tax cut since the mid-1990s and curtailed the government’s original $500 million proposal.

The plan will reduce at least two marginal income tax rates, reducing the 3% rate (on the first $10,000 for singles and $20,000 for couples) to 2%.

The 5% The interest rate on the next $40,000 earned by singles ($80,000 for couples) will drop to 4.75%, with changes proposed for singles earning $200,000 or more (and couples with combined earnings of $400,000 or more). Is not …

Lamont’s proposal to extend the three-year 2023-2025 “temporary” corporate business tax surcharge through 2023-2025 was held by the Finance Committee.

Budget provision

SB 981 also includes the following measures:

  • Beginning with tax year 2023, we will increase the income tax deduction from 30.5% to 45% of the federal deduction.
  • Increased corporate business tax credit for investments in human capital from 5% to 10% (for most eligible investments) or 25% (for eligible childcare-related expenditures) and Make a donation or capital contribution to a non-profit organization for improvement. eligible for credit (from 2024);
  • Film and digital media tax credit increased from 78% to 92%, requiring production companies to report certain job creation data to the Department of Economic and Community Development (2024).
  • Increases the cash refund that eligible small business biotech companies can receive for unutilized R&D tax credits from 65% to 80%. The share of companies in other sectors remains at 65%.
  • Exempt all job-related or personnel training services from sales and use tax.
  • Increases the maximum tax credit allowed for each construction apprentice under the Apprentice Training Tax Credit Program from $4,000 to $7,500.

The commission has taken no action on a number of bills that would raise business taxes, including raising income tax rates, adding a capital gains tax, and adopting a statewide property tax.

Connecticut Solution Transformation

Gjede said extending the R&D tax credit to small businesses, restoring tax credits for pass-through entities, and lowering Connecticut’s high cost of living are among the CBIA’s 2023 Transform Connecticut policy solutions.

These policy recommendations, endorsed by a bipartisan group of parliamentarians representing nearly half of the General Assembly, also included additional proposals approved by the Finance Committee.

Committee approved HB6922It voted 48 to 3 to extend the period over which companies can carry forward the net operating loss credit for losses incurred after 2015 from 20 to 30 years.

HB6927was unanimously approved to allow certain corporations owning LLCs to claim the fixed capital investment tax credit on amounts invested by the LLC in qualifying fixed capital.

The Commission’s tax system exempts personal protective equipment, occupational and training services from state sales tax.

Committee unanimously approved HB6925It exempts children’s clothing and footwear, personal protective equipment, occupational and human resource development services from state sales and use taxes.

CBIA has proposed a provision exempting all workforce training services. This is because current law imposes a sales tax on training directly related to an individual’s job and not on training indirectly related to employment.

A law allowing companies that offer eligible employee share-share plans to claim a deduction per dollar for additional corporate tax charges also gained unanimous board approval.

SB1239the bill, which was introduced just a week before the commission’s deadline, was amended after supporters in the business community voiced concerns as it made the corporate tax surcharge permanent.

If the corporate surcharge is eliminated in the future, businesses can claim the same deduction for corporate tax or premium tax.

Please contact CBIA for more information. Eric Jede (860.480.1784) | @egjede.

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