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 Special Edition 2015

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Connecticut Governor Signs Combined Reporting Effective in 2016

Connecticut Governor Dannel Malloy has signed two bills, H.B. 7061 and S.B. 1502, containing controversial budget provisions including:

  • Requiring mandatory unitary, water’s-edge combined reporting beginning 2016, unless an election to file on a world-wide or affiliated group basis is made;
  • Extending the temporary 20% corporate surcharge for 2016 and 2017; and
  • Imposing a corporate tax surcharge of 10% beginning January 1, 2018. 
Effective for taxable years beginning on or after January 1, 2015, the law also:
  • Limits the use of net operating loss carryforwards to the lesser of 1) 50% of the apportioned net income or 2) the excess of such operating loss over the loss being carried forward from prior years;
  • Limits credits to 50.01% (previously 70%) of a taxpayer's tax liability;
  • Increases the 6.7% individual tax rate to 6.9%;
  • Adds a seventh individual tax bracket for income above $500,000 for individuals ($1 million for joint) with a rate of 6.99%; and
  • Increases the tax rate for estates and trusts to 6.99%. 

Several additional sales and use tax changes were imposed, including:

  • Effective October 1, 2015, services for website development, creation, and maintenance will be taxable;
  • Effective July 1, 2015, the “luxury goods” tax increases from 7% to 7.75%; and
  • The annual sales tax holiday will be limited to items of clothing or footwear that cost less than $100.
Additional guidance for complying with the changes is expected later this year.

Related Tax News

Connecticut Legislature Hikes Taxes on Businesses. Read more.

Tax Planning to Reduce Risk of Sales Tax Nexus Activity. Read more.

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