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General Assembly Substitute Bill No. 6174
January Session, 2019
AN ACT EXEMPTING SOC IAL SECURITY BENEFITS FROM STATE
INCOME TAX AND STUDY ING THE EFFECT OF THE EXEMPT ION ON
TAXPAYER MIGRATION O UT OF STATE.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Subparagraph (B) of subdivision (20) of subsection (a) of 1
section 12-701 of the general statutes is repealed and the following is 2
substituted in lieu thereof (Effective from passage and applicable to taxable 3
years commencing on or after January 1, 2019): 4
(B) There shall be subtracted therefrom: 5
(i) To the extent properly includable in gross income for federal 6
income tax purposes, any income with respect to which taxation by 7
any state is prohibited by federal law; 8
(ii) To the extent allowable under section 12-718, exempt dividends 9
paid by a regulated investment company; 10
(iii) To the extent properly includable in gross income for federal 11
income tax purposes, the amount of any refund or credit for 12
overpayment of income taxes imposed by this state, or any other state 13
of the United States or a political subdivision thereof, or the District of 14
Columbia; 15
(iv) To the extent properly includable in gross income for federal 16
income tax purposes and not otherwise subtracted from federal 17 Substitute Bill No. 6174
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adjusted gross income pursuant to clause (x) of this subparagraph in 18
computing Connecticut adjusted gross income, any tier 1 railroad 19
retirement benefits; 20
(v) To the extent any additional allowance for depreciation under 21
Section 168(k) of the Internal Revenue Code for property placed in 22
service after September 27, 2017, was added to federal adjusted gross 23
income pursuant to subparagraph (A)(ix) of this subdivision in 24
computing Connecticut adjusted gross income, twenty-five per cent of 25
such additional allowance for depreciation in each of the four 26
succeeding taxable years; 27
(vi) To the extent properly includable in gross income for federal 28
income tax purposes, any interest income from obligations issued by or 29
on behalf of the state of Connecticut, any political subdivision thereof, 30
or public instrumentality, state or local authority, district or similar 31
public entity created under the laws of the state of Connecticut; 32
(vii) To the extent properly includable in determining the net gain 33
or loss from the sale or other disposition of capital assets for federal 34
income tax purposes, any gain from the sale or exchange of obligations 35
issued by or on behalf of the state of Connecticut, any political 36
subdivision thereof, or public instrumentality, state or local authority, 37
district or similar public entity created under the laws of the state of 38
Connecticut, in the income year such gain was recognized; 39
(viii) Any interest on indebtedness incurred or continued to 40
purchase or carry obligations or securities the interest on which is 41
subject to tax under this chapter but exempt from federal income tax, 42
to the extent that such interest on indebtedness is not deductible in 43
determining federal adjusted gross income and is attributable to a 44
trade or business carried on by such individual; 45
(ix) Ordinary and necessary expenses paid or incurred during the 46
taxable year for the production or collection of income which is subject 47
to taxation under this chapter but exempt from federal income tax, or 48 Substitute Bill No. 6174
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the management, conservation or maintenance of property held for the 49
production of such income, and the amortizable bond premium for the 50
taxable year on any bond the interest on which is subject to tax under 51
this chapter but exempt from federal income tax, to the extent that 52
such expenses and premiums are not deductible in determining federal 53
adjusted gross income and are attributable to a trade or business 54
carried on by such individual; 55
(x) (I) For taxable years commencing prior to January 1, 2019, for a 56
person who files a return under the federal income tax as an 57
unmarried individual whose federal adjusted gross income for such 58
taxable year is less than fifty thousand dollars, or as a married 59
individual filing separately whose federal adjusted gross income for 60
such taxable year is less than fifty thousand dollars, or for a husband 61
and wife who file a return under the federal income tax as married 62
individuals filing jointly whose federal adjusted gross income for such 63
taxable year is less than sixty thousand dollars or a person who files a 64
return under the federal income tax as a head of household whose 65
federal adjusted gross income for such taxable year is less than sixty 66
thousand dollars, an amount equal to the Social Security benefits 67
includable for federal income tax purposes; 68
(II) For taxable years commencing prior to January 1, 2019, for a 69
person who files a return under the federal income tax as an 70
unmarried individual whose federal adjusted gross income for such 71
taxable year is fifty thousand dollars or more, or as a married 72
individual filing separately whose federal adjusted gross income for 73
such taxable year is fifty thousand dollars or more, or for a husband 74
and wife who file a return under the federal income tax as married 75
individuals filing jointly whose federal adjusted gross income from 76
such taxable year is sixty thousand dollars or more or for a person who 77
files a return under the federal income tax as a head of household 78
whose federal adjusted gross income for such taxable year is sixty 79
thousand dollars or more, an amount equal to the difference between 80
the amount of Social Security benefits includable for federal income tax 81 Substitute Bill No. 6174
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purposes and the lesser of twenty-five per cent of the Social Security 82
benefits received during the taxable year, or twenty-five per cent of the 83
excess described in Section 86(b)(1) of the Internal Revenue Code; 84
(III) For the taxable year commencing January 1, 2019, and each 85
taxable year thereafter, for a person who files a return under the 86
federal income tax as an unmarried individual whose federal adjusted 87
gross income for such taxable year is less than [seventy-five] one 88
hundred thousand dollars, or as a married individual filing separately 89
whose federal adjusted gross income for such taxable year is less than 90
[seventy-five] one hundred thousand dollars, or for a husband and 91
wife who file a return under the federal income tax as married 92
individuals filing jointly whose federal adjusted gross income for such 93
taxable year is less than one hundred twenty-five thousand dollars or a 94
person who files a return under the federal income tax as a head of 95
household whose federal adjusted gross income for such taxable year 96
is less than one hundred twenty-five thousand dollars, an amount 97
equal to the Social Security benefits includable for federal income tax 98
purposes; and 99
(IV) For the taxable year commencing January 1, 2019, and each 100
taxable year thereafter, for a person who files a return under the 101
federal income tax as an unmarried individual whose federal adjusted 102
gross income for such taxable year is [seventy-five] one hundred 103
thousand dollars or more, or as a married individual filing separately 104
whose federal adjusted gross income for such taxable year is [seventy-105
five] one hundred thousand dollars or more, or for a husband and wife 106
who file a return under the federal income tax as married individuals 107
filing jointly whose federal adjusted gross income from such taxable 108
year is one hundred twenty-five thousand dollars or more or for a 109
person who files a return under the federal income tax as a head of 110
household whose federal adjusted gross income for such taxable year 111
is one hundred twenty-five thousand dollars or more, an amount equal 112
to the difference between the amount of Social Security benefits 113
includable for federal income tax purposes and the lesser of twenty-114 Substitute Bill No. 6174
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five per cent of the Social Security benefits received during the taxable 115
year, or twenty-five per cent of the excess described in Section 86(b)(1) 116
of the Internal Revenue Code; 117
(xi) To the extent properly includable in gross income for federal 118
income tax purposes, any amount rebated to a taxpayer pursuant to 119
section 12-746; 120
(xii) To the extent properly includable in the gross income for 121
federal income tax purposes of a designated beneficiary, any 122
distribution to such beneficiary from any qualified state tuition 123
program, as defined in Section 529(b) of the Internal Revenue Code, 124
established and maintained by this state or any official, agency or 125
instrumentality of the state; 126
(xiii) To the extent allowable under section 12-701a, contributions to 127
accounts established pursuant to any qualified state tuition program, 128
as defined in Section 529(b) of the Internal Revenue Code, established 129
and maintained by this state or any official, agency or instrumentality 130
of the state; 131
(xiv) To the extent properly includable in gross income for federal 132
income tax purposes, the amount of any Holocaust victims' settlement 133
payment received in the taxable year by a Holocaust victim; 134
(xv) To the extent properly includable in gross income for federal 135
income tax purposes of an account holder, as defined in section 31-136
51ww, interest earned on funds deposited in the individual 137
development account, as defined in section 31-51ww, of such account 138
holder; 139
(xvi) To the extent properly includable in the gross income for 140
federal income tax purposes of a designated beneficiary, as defined in 141
section 3-123aa, interest, dividends or capital gains earned on 142
contributions to accounts established for the designated beneficiary 143
pursuant to the Connecticut Homecare Option Program for the Elderly 144
established by sections 3-123aa to 3-123ff, inclusive; 145 Substitute Bill No. 6174
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(xvii) To the extent properly includable in gross income for federal 146
income tax purposes, any income received from the United States 147
government as retirement pay for a retired member of (I) the Armed 148
Forces of the United States, as defined in Section 101 of Title 10 of the 149
United States Code, or (II) the National Guard, as defined in Section 150
101 of Title 10 of the United States Code; 151
(xviii) To the extent properly includable in gross income for federal 152
income tax purposes for the taxable year, any income from the 153
discharge of indebtedness in connection with any reacquisition, after 154
December 31, 2008, and before January 1, 2011, of an applicable debt 155
instrument or instruments, as those terms are defined in Section 108 of 156
the Internal Revenue Code, as amended by Section 1231 of the 157
American Recovery and Reinvestment Act of 2009, to the extent any 158
such income was added to federal adjusted gross income pursuant to 159
subparagraph (A)(xi) of this subdivision in computing Connecticut 160
adjusted gross income for a preceding taxable year; 161
(xix) To the extent not deductible in determining federal adjusted 162
gross income, the amount of any contribution to a manufacturing 163
reinvestment account established pursuant to section 32-9zz in the 164
taxable year that such contribution is made; 165
(xx) To the extent properly includable in gross income for federal 166
income tax purposes, (I) for the taxable year commencing January 1, 167
2015, ten per cent of the income received from the state teachers' 168
retirement system, (II) for the taxable years commencing January 1, 169
2016, January 1, 2017, and January 1, 2018, twenty-five per cent of the 170
income received from the state teachers' retirement system, and (III) 171
for the taxable year commencing January 1, 2019, and each taxable year 172
thereafter, fifty per cent of the income received from the state teachers' 173
retirement system or the percentage, if applicable, pursuant to clause 174
(xxi) of this subparagraph; 175
(xxi) To the extent properly includable in gross income for federal 176
income tax purposes, except for retirement benefits under clause (iv) of 177 Substitute Bill No. 6174
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this subparagraph and retirement pay under clause (xvii) of this 178
subparagraph, for a person who files a return under the federal income 179
tax as an unmarried individual whose federal adjusted gross income 180
for such taxable year is less than seventy-five thousand dollars, or as a 181
married individual filing separately whose federal adjusted gross 182
income for such taxable year is less than seventy-five thousand dollars, 183
or as a head of household whose federal adjusted gross income for 184
such taxable year is less than seventy-five thousand dollars, or for a 185
husband and wife who file a return under the federal income tax as 186
married individuals filing jointly whose federal adjusted gross income 187
for such taxable year is less than one hundred thousand dollars, (I) for 188
the taxable year commencing January 1, 2019, fourteen per cent of any 189
pension or annuity income, (II) for the taxable year commencing 190
January 1, 2020, twenty-eight per cent of any pension or annuity 191
income, (III) for the taxable year commencing January 1, 2021, forty-192
two per cent of any pension or annuity income, (IV) for the taxable 193
year commencing January 1, 2022, fifty-six per cent of any pension or 194
annuity income, (V) for the taxable year commencing January 1, 2023, 195
seventy per cent of any pension or annuity income, (VI) for the taxable 196
year commencing January 1, 2024, eighty-four per cent of any pension 197
or annuity income, and (VII) for the taxable year commencing January 198
1, 2025, and each taxable year thereafter, any pension or annuity 199
income; 200
(xxii) The amount of lost wages and medical, travel and housing 201
expenses, not to exceed ten thousand dollars in the aggregate, incurred 202
by a taxpayer during the taxable year in connection with the donation 203
to another person of an organ for organ transplantation occurring on 204
or after January 1, 2017; 205
(xxiii) To the extent properly includable in gross income for federal 206
income tax purposes, the amount of any financial assistance received 207
from the Crumbling Foundations Assistance Fund or paid to or on 208
behalf of the owner of a residential building pursuant to sections 8-442 209
and 8-443; [, and] 210 Substitute Bill No. 6174
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(xxiv) To the extent properly includable in gross income for federal 211
income tax purposes, the amount calculated pursuant to subsection (b) 212
of section 12-704g for income received by a general partner of a 213
venture capital fund, as defined in 17 CFR 275.203(l)-1, as amended 214
from time to time; and 215
(xxv) To the extent any portion of a deduction under Section 179 of 216
the Internal Revenue Code was added to federal adjusted gross income 217
pursuant to subparagraph (A)(xiv) of this subdivision in computing 218
Connecticut adjusted gross income, twenty-five per cent of such 219
disallowed portion of the deduction in each of the four succeeding 220
taxable years. 221
Sec. 2. (Effective from passage) The Commissioner of Revenue Services 222
shall study any change in migration out of the state of taxpayers sixty-223
two years of age and older after Social Security benefits are fully 224
exempted from income tax for certain income brackets pursuant to 225
section 12-701 of the general statutes, as amended by this act. Not later 226
than July 1, 2020, the commissioner shall file a report in accordance 227
with the provisions of section 11-4a of the general statutes with the 228
joint standing committee of the General Assembly having cognizance 229
of matters relating to finance, revenue and bonding. The report shall 230
include, but not be limited to: (1) Any change in migration of such 231
taxpayers out of state from the effective date of this section to the 232
taxable year commencing January 1, 2020, (2) any change in state tax 233
revenue related to any decrease in migration of such taxpayers, (3) any 234
projected impact on state revenues in fiscal years 2021 to 2025, 235
inclusive, of fully exempting Social Security benefits from state income 236
tax for residents in certain income brackets, and (4) projected impact 237
on state revenues in fiscal years 2021 to 2025, inclusive, of fully 238
exempting Social Security benefits from state income tax for residents 239
in all income brackets. 240
This act shall take effect as follows and shall amend the following
sections:
Substitute Bill No. 6174
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Section 1 from passage and
applicable to taxable years
commencing on or after
January 1, 2019
12-701(a)(20)(B)
Sec. 2 from passage New section
Statement of Legislative Commissioners:
In section 2, "(NEW)" was removed before the effective date for
accuracy.
AGE Joint Favorable Subst. -LCO