Tax News

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.



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