Researcher: RP Page 1 5/10/21
OLR Bill Analysis
sHB 6443
AN ACT CONCERNING REVENUE ITEMS TO IMPLEMENT THE
BIENNIAL BUDGET.
TABLE OF CONTENTS:
SUMMARY
§§ 1 & 2 — VOLUNTARY WAGE COMPE NSATION TAX PROGRAM
Establishes a new voluntary wage compensation tax program under which eligible
employees and vendors may elect to have employers pay a 5% tax on their respective
wages or compensation; allows (1) electing employees and vendors to claim a refundable
credit against their personal income tax equal to 95% of the taxes paid by the employer
and (2) electing employees to deduct Roth IRA contributions made during applicable tax
years; directs the revenue from the tax to the Connecticut Equitable Investment Fund
established under the bill (§ 13)
§ 3 — CONSUMPTION TAX
Establishes a new consumption tax on state residents with federal AGIs of $500,000 or
more, ranging from 0.7% to 1.5% of their federal AGI; directs the revenue from the tax to
the Connecticut Equitable Investment Fund
§ 4 — DIGITAL ADVERTISING SERVICES
Imposes a new tax on the gross revenue from digital advertising services in the state that
applies to companies with at least $100 million in global annual gross revenues; directs
the revenue from the tax to the Connecticut Equitable Investment Fund
§ 5 — EARNED INCOME TAX CR EDIT
Increases the EITC from 23% to 40% and requires it to be funded through the Connecticut
Equitable Investment Fund
§ 6 — ESTATE TAX REDUCTION FOR QUALIFYING INVESTMENTS
Expands the existing estate tax reduction for decedents that made qualifying investments
during their lifetimes and ties the reduction to investments made in the Connecticut
Equitable Investment Fund
§§ 7-12 — ONLINE LOTTERY
Requires CLC to establish an online lottery program and directs the program’s revenue to
the Connecticut Equitable Investment Fund
§ 13 — CONNECTICUT EQUITABL E INVESTMENT FUND
Establishes the Connecticut Equitable Investment Fund as a permanent investment fund to
receive, invest, and distribute specified tax revenue; establishes the Connecticut Equitable
Investment Council to oversee the fund
§§ 14-16 — CORPORATION BUSINESS TAX SURCHARGE
Makes permanent the 10% corporation business tax surcharge 2021HB-06443-R000638-BA.DOCX
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§ 17 — R&D TAX CREDITS
Increases the cap on the amount of R&D tax credits corporations may claim each year
from 50.01% to 70% of their annual tax liability
§ 18 — INVEST CT TAX CREDIT CAP
Increases the aggregate cap on Invest CT tax credits by $200 million
§ 19 — DIGITAL MEDIA TAX CREDIT
Allows film and digital media production tax credits to be claimed against the sales and
use tax under certain conditions
§§ 20-24 — ADMISSIONS TAX ELIMINATION
Eliminates the admissions tax beginning July 1, 2021
§ 25 — CHILD TAX CREDIT
Beginning with the 2022 tax year, establishes a child tax credit against the income tax for
resident taxpayers with qualifying incomes and allows such taxpayers to claim the credit
for up to three children
§ 26 — INCOME TAX EXEMPTION FOR RETIREMENT INCOM E
Phases out the income tax on certain taxpayers’ income from IRAs, other than Roth IRAs,
under the same conditions that apply to pension and annuity income
§ 27 — CAPITAL GAINS SURCHARGE
Imposes a 2% surcharge on capital gains for taxpayers with incomes in the top income tax
bracket
§ 28 — PROPERTY TAX CREDIT AGAINST THE INCOME TAX
Extends, to the 2021 and 2022 tax years, the limits on eligibility for the property tax credit
against the personal income tax
§ 29 — SALES AND USE TAX EXEMPTION FOR BREASTFEEDING
SUPPLIES
Exempts breast pumps and certain related parts, supplies, kits, and repair services from
the sales and use tax beginning July 1, 2021
§ 30 — REVENUE FROM MEALS A ND BEVERAGES TAX
Allows certain businesses to keep a portion of the sales tax they collect on sales of meals
and beverages for FY 22
§§ 31-35 — AMBULATORY SURGICAL CENTERS
Beginning July 1, 2021, terminates the 6% ASC gross receipts tax and instead subjects
ASC services to a 6.35% sales tax, subject to certain exclusions; authorizes a refundable
state credit against the sales tax for ASCs; allows ASCs to deduct certain COVID-19
expenses from their gross receipts for the period from July 1, 2020, to July 1, 2021
§§ 36-41 — CREDIT CARD SERVICE FEES
Generally requires state agencies accepting credit, debit, or charge card payments to
charge payors a service fee for doing so and disclose the fee before imposing it
§ 42 — HIGHWAY USE TAX
Beginning January 1, 2023, imposes a HUT on carriers operating certain heavy, multi-
unit motor vehicles on roads in Connecticut and deposits the revenue into the Special
Transportation Fund 2021HB-06443-R000638-BA.DOCX
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§ 43 — DRS TAX AMNESTY PROG RAM
Requires DRS to establish a tax amnesty program for individuals, businesses, or other
taxpayers that owe Connecticut state taxes that gives eligible taxpayers a 75% reduction
in the interest that would otherwise be due
§ 44 — TRANSFER FROM THE GENERAL FUND TO THE TOURISM
FUND
Requires the comptroller to transfer specified amounts from the General Fund to the
Tourism Fund for FYs 21 and 22
§ 45 — GAAP DEFICIT
Deems that $1 is appropriated in FYs 22-23 to pay off the state’s GAAP deficit for FYs 13
and 14
§ 46 — TRANSFER OF FY 21 GENERAL FUND REVENUE TO FY 22
AND FY 23
Requires the comptroller to designate $235 million of FY 21 General Fund resources for
use in FYs 22 and 23
§ 47 — TRANSFER FROM BUDGET RESERVE FUND (BRF) TO
GENERAL FUND
Requires the comptroller to transfer specified amounts from the BRF to the General Fund
for FYs 22 and 23
BACKGROUND
SUMMARY
This bill makes numerous changes to state tax laws. Among the
provisions affecting individual taxpayers, the bill (1) establishes a new
consumption tax on taxpayers with incomes above $500,000; (2)
imposes a 2% surcharge on capital gains for taxpayers with incomes in
the top income bracket; (3) establishes a child tax credit for resident
taxpayers with qualifying incomes; (4) increases the earned income tax
credit from 23% to 40%; (5) extends the limits for the property tax
credit to the 2021 and 2022 tax years; and (6) phases out the income tax
on qualifying taxpayers’ income from individual retirement accounts
under the same conditions that currently apply to pension and annuity
income.
The bill makes various business tax changes, including (1)
establishing a per-mile highway use tax on carriers operating certain
heavy, multi-unit motor vehicles on roads in Connecticut and
depositing tax revenue into the Special Transportation Fund (STF); (2)
establishing a new voluntary wage compensation tax; (3) making the 2021HB-06443-R000638-BA.DOCX
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10% corporation surcharge permanent; (4) eliminating the admissions
tax; (5) establishing a new tax on digital advertising services on
companies with at least $100 million in global annual gross revenues;
and (6) increasing the cap on the amount of research and development
tax credits corporations may claim against their corporation business
tax liability.
The bill authorizes the Department of Revenue Services (DRS) to
establish a tax amnesty program for individuals, businesses, or other
taxpayers that owe specified Connecticut state taxes. It also generally
requires state agencies accepting credit, debit, or charge card payments
to charge payors a service fee for doing so and disclose the fee before
imposing it.
Lastly, the bill establishes the Connecticut Equitable Investment
Fund as a permanent investment fund to receive, invest, and distribute
specified tax revenue and creates a nine-member Connecticut
Equitable Investment Council to manage and oversee the fund.
EFFECTIVE DATE: Various; see below.
§§ 1 & 2 — VOLUNTARY WAGE COMPE NSATION TAX PROGRAM
Establishes a new voluntary wage compensation tax program under which eligible
employees and vendors may elect to have employers pay a 5% tax on their respective
wages or compensation; allows (1) electing employees and vendors to claim a refundable
credit against their personal income tax equal to 95% of the taxes paid by the employer
and (2) electing employees to deduct Roth IRA contributions made during applicable tax
years; directs the revenue from the tax to the Connecticut Equitable Investment Fund
established under the bill (§ 13)
Beginning with the 2022 tax year, the bill authorizes eligible
employees and vendors to elect to participate in a wage compensation
tax program. Under this program, the employee’s or vendor’s
employer must pay a tax on their respective wages or compensation.
The employee and vendor, in turn, may claim a credit against their
personal income tax for 95% of the taxes paid by the employer.
Employees may also claim a deduction for any contributions made to a
Roth individual retirement account (IRA), as described below.
Tax Rate and Base 2021HB-06443-R000638-BA.DOCX
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Under the bill, each employer required to deduct and withhold
Connecticut state income tax from employee wages (i.e., “employer”)
that employs an “electing employee” is subject to a 5% tax on the
electing employee’s wages. An “electing employee” is one who (1) is
required to have Connecticut state income tax withheld from their
wages; (2) has annual gross wage income from the employer of more
than $40,000; and (3) has elected to participate in the program.
The bill bars employers from prohibiting employees from
participating in the program, but it allows them to establish a
reasonable minimum time period for which electing employees must
continue participating in the program.
Requirement to Notify Employees about the Program
The bill requires each employer to inform its current and newly
hired employees about the program and give them (1) information on
how they may elect to participate in the program and (2) an estimated
tax table that projects their wages and income tax liability if they do or
do not participate. DRS must assist employers in preparing the
estimated tax table.
Vendors Issued 1099 Forms by Employers
Beginning with the 2022 tax year, for any individuals to whom an
employer issues a federal Form 1099 (i.e., vendors), the employer must
offer to pay the wage compensation tax on the amount reportable on
the form as if that amount were wages paid to the individual. The
employer must provide these vendors with the same estimated tax
table described above.
Remitting the Tax
Employers subject to the tax on employee wages or vendor
compensation must remit the tax payments to DRS at the same time
and in the same manner as they would for withholding tax payments.
The DRS commissioner must prescribe the form and manner for
remitting the payments. Any individual responsible for remitting the
tax on an employer’s behalf is jointly and severally liable with the
employer for any tax, amount, interest, or penalty owed. 2021HB-06443-R000638-BA.DOCX
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Refundable Income Tax Credit
Beginning with 2022 tax year, the bill establishes an income tax
credit for electing employees and vendors equal to 95% of the taxes
paid by the employer on their respective wages or compensation. If the
credit amount exceeds the taxpayer’s income tax liability, the DRS
commissioner must treat the excess as an overpayment and refund it to
the taxpayer (subject to withholding it to pay certain debts or
obligations) without interest.
Revenue
The bill requires DRS to deposit any revenue it collects from the tax,
including related interest and penalties, to the Connecticut Equitable
Investment Fund (see § 13).
Collection and Enforcement
The bill applies to the wage compensation tax certain tax collection
and enforcement provisions that apply to the admissions and dues tax
under existing law, unless these provisions are inconsistent with the
bill. Among other things, these provisions cover (1) refunds for tax
overpayments, (2) hearing and appeals processes, (3) penalties for
certain willful violations or fraud, (4) record retention requirements for
taxpayers, and (5) the issuance of tax warrants.
Deduction for Roth IRA Contributions
The bill allows electing employees to deduct from their Connecticut
adjusted gross income the amount of any contributions they made
during the tax year to a Roth IRA, so long as the electing employee
participated in the wage compensation tax program for at least six
months of the applicable tax year.
Federal law caps the total contributions taxpayers can make each
year to IRAs. For 2021, the cap is generally $6,000 (or $7,000 for
taxpayers age 50 or older) or, if less, the taxpayer’s compensation for
the year. (Roth IRA contributions are further limited based on a
taxpayer’s filing status and income.)
EFFECTIVE DATE: Upon passage, except that the Roth IRA 2021HB-06443-R000638-BA.DOCX
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deduction is effective January 1, 2022, and applicable to tax years
beginning on or after that date.
§ 3 — CONSUMPTION TAX
Establishes a new consumption tax on state residents with federal AGIs of $500,000 or
more, ranging from 0.7% to 1.5% of their federal AGI; directs the revenue from the tax to
the Connecticut Equitable Investment Fund
Rate and Base
The bill imposes a new consumption tax on each state resident with
a federal adjusted gross income of $500,000 or more. (It is unclear how
this $500,000 threshold would apply across different filing statuses.)
The tax applies to anyone who is considered a state resident for income
tax purposes. By law, an individual is a Connecticut resident for a
particular tax year if he or she (1) was domiciled here for the entire tax
year, subject to certain exceptions, or (2) was not domiciled here but
maintained a “permanent place of abode” here during the entire year
and spent more than 183 days here during the year.
To calculate the tax due, taxpayers must multiply their federal
adjusted gross income (AGI) for the preceding tax year by the
applicable adjustment rate shown in Table 1.
Table 1: Consumption Tax Rates
Federal AGI Adjustment Rate
$500,000 to less than $2 million 0.7%
$2 million to $13 million 1.4%
$13 million or more 1.5%
Taxpayers must file a tax return with the DRS commissioner, as he
prescribes, by the 15th day of the fourth month following the end of
their tax year. They must pay the tax by this date regardless of any
extension for filing the return. The return must calculate the tax due
for the preceding tax year.
The bill authorizes the commissioner to adopt implementing
regulations for the tax.
Delinquent Taxes 2021HB-06443-R000638-BA.DOCX
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Delinquent taxes are subject to a penalty of 10% of the tax due and
unpaid or $50, whichever is greater, plus interest at 1% for each month
or fraction of a month from the due date to the payment date.
Subject to the Penalty Review Committee provisions, the
commissioner may waive all or part of these penalties when it is
proven to the commissioner’s satisfaction that failing to pay the tax
within the timeframe was due to reasonable cause and was not
intentional or due to neglect.
Collection and Enforcement
It applies the same collection, enforcement, and appeal process
requirements established in statute for the admissions and dues taxes
to the consumption tax, unless the provisions are inconsistent with the
bill.
Revenue
The bill requires DRS to deposit the revenue collected from the tax,
including any related interest and penalties, in the Connecticut
Equitable Investment Fund (see § 13).
EFFECTIVE DATE: January 1, 2022, and applicable to tax years
beginning on or after that date.
§ 4 — DIGITAL ADVERTISING SERVICES
Imposes a new tax on the gross revenue from digital advertising services in the state that
applies to companies with at least $100 million in global annual gross revenues; directs
the revenue from the tax to the Connecticut Equitable Investment Fund
Tax Rate and Base
The bill imposes a new tax on the annual gross revenue businesses
derive from digital advertising services in the state. It defines “digital
advertising services” as advertisement services on a digital interface
(i.e., software that anyone can access with a device, including a website
or application), including banner, search engine, and interstitial
advertising and other comparable advertising services. (This tax could
be vulnerable to a legal challenge that it violates the Internet Tax
Freedom Act, which generally prohibits state and local governments
from imposing discriminatory taxes on electronic commerce.) 2021HB-06443-R000638-BA.DOCX
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The tax rate imposed depends on the company’s global annual
gross revenues. “Annual gross revenues” is income or revenue from all
sources, before expenses or taxes, calculated in accordance with
generally accepted accounting principles. The tax rate is:
1. 2.5% for companies with revenues of $100 million to $1 billion;
2. 5% for companies with revenues greater than $1 billion but less
than or equal to $5 billion;
3. 7.5% for companies with revenues greater than $5 billion but
less than or equal to $15 billion; and
4. 10% for companies with revenues greater than $15 billion.
The rate applies to the company’s annual gross revenues derived
from digital advertising services in Connecticut (i.e., its “assessable
base”). The DRS commissioner must adopt regulations to establish the
method for apportioning digital advertising services revenue to the
state for determining the assessable base.
Taxpayers subject to the tax must file a return with DRS, as
prescribed by the commissioner, that calculates the tax due for the
preceding tax year.
Delinquent Taxes
Delinquent taxes are subject to a penalty of 10% of the tax due and
unpaid or $50, whichever is greater, plus interest at 1% for each month
or fraction of a month from the due date to the payment.
Subject to the Penalty Review Committee provisions, the
commissioner may waive all or part of these penalties when it is
proven to the commissioner’s satisfaction that failing to pay the tax
within the timeframe was due to reasonable cause and was not
intentional or due to neglect.
Collection and Enforcement
The bill applies the same collection, enforcement, and appeal
process requirements established in statute for the admissions and 2021HB-06443-R000638-BA.DOCX
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dues taxes to the digital advertising services tax, unless the provisions
are inconsistent with the bill.
Revenue
The bill requires DRS to deposit the revenue collected from the tax,
including any related interest and penalties, in the Connecticut
Equitable Investment Fund (see § 13).
EFFECTIVE DATE: January 1, 2022
§ 5 — EARNED INCOME TAX CR EDIT
Increases the EITC from 23% to 40% and requires it to be funded through the
Connecticut Equitable Investment Fund
Beginning with the 2021 tax year, the bill increases the earned
income tax credit (EITC) from 23% to 40% of the federal credit. The
EITC is a refundable tax credit available to people who work and earn
incomes below certain levels.
The bill requires the Connecticut Equitable Investment Council (as
described in § 13 below) to transfer or disburse from the new
Connecticut Equitable Investment Fund the amount sufficient to
provide the EITC at the 40% rate.
EFFECTIVE DATE: July 1, 2021, and applicable to tax years
beginning on or after January 1, 2021.
§ 6 — ESTATE TAX REDUCTION FOR QUALIFYING
INVESTMENTS
Expands the existing estate tax reduction for decedents that made qualifying investments
during their lifetimes and ties the reduction to investments made in the Connecticut
Equitable Investment Fund
The bill expands the existing estate tax reduction for decedents that
made qualifying investments during their lifetimes. Under current law,
decedents qualify for the deduction for amounts they invested for at
least 10 years in a private investment fund or “fund of funds” through
the Connecticut Innovations, Inc. investment program for state
residents. The bill instead allows the deduction for investments made
in the Connecticut Equitable Investment Fund (§ 13). As under current
law, the reduction is equal to 50% of the eligible investment, up to $5 2021HB-06443-R000638-BA.DOCX
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million per decedent. The bill also eliminates the $30 million cap on the
total amount of reductions allowed under this program.
EFFECTIVE DATE: July 1, 2021, and applicable to the estates of
decedents dying on or after January 1, 2021.
§§ 7-12 — ONLINE LOTTERY
Requires CLC to establish an online lottery program and directs the program’s revenue to
the Connecticut Equitable Investment Fund
Program Establishment (§ 7)
The bill requires the Connecticut Lottery Corporation (CLC) to
establish a program to sell lottery tickets for lottery draw games
through its website, an online service, or mobile application (i.e.,
online lottery). It defines a “lottery draw game” as any game, other
than keno, in which (1) one or more numbers, letters, or symbols are
randomly drawn from a range at predetermined times, up to four
times per day, and (2) prizes are paid to players with winning plays.
Under the bill, CLC may not establish the online lottery program
until the consumer protection commissioner adopts regulations to
implement the program and assure its integrity. CLC must also submit
official game rules to the commissioner for each lottery draw game it
seeks to offer through the program; the commissioner must approve
them, in writing, before CLC can offer the game.
Program Requirements (§§ 7 & 8)
The bill requires that the online lottery program, at a minimum,
meet the following requirements:
1. verify that a person who establishes an online lottery account to
purchase lottery tickets is at least age 18 and located in the state;
2. restrict sales to transactions initiated and received within the
state;
3. allow a person to deposit money into an online lottery account
and, through that account, use a credit or debit card or verified
bank account; 2021HB-06443-R000638-BA.DOCX
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4. limit online account users to only one debit or credit card;
5. provide that any money in an online lottery account belongs
solely to the account’s owner, who may withdraw the money at
any time;
6. establish a voluntary process to allow individuals to exclude
themselves from establishing an online lottery account or
purchasing a ticket through the program;
7. be the subject of an independent review for responsible play at
least every five years as assessed by industry standards;
8. provide responsible gambling and problem gambling
information;
9. limit the amount of money a person may deposit into an online
lottery account and spend per day through the program; and
10. display the results of lottery draw game drawings on the CLC
website, online service, or mobile application, but the drawings
must not take place on the website, service, or application.
The bill authorizes CLC, once it has established the program, to
implement initiatives to promote (1) lottery ticket purchases through
lottery sales agents and (2) online lottery draw games and lottery ticket
purchases through lottery sales agents. It also requires CLC to conduct
an online public awareness campaign on responsible gambling and
programs available for preventing, treating, and rehabilitating
compulsive gamblers in the state.
Additionally, the bill authorizes CLC to advertise lottery games on
its website, online services, or mobile application.
Revenue (§ 7)
The bill requires all revenue collected under the online lottery
program to be deposited in the Connecticut Equitable Investment
Fund (see § 13). 2021HB-06443-R000638-BA.DOCX
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Promotional Interactive Lottery Games (§ 8)
Current law prohibits CLC from offering any interactive online
lottery games, including online video lottery games for promotional
purposes. The bill allows CLC to sell promotional games through its
website, online service, or mobile application, so long as (1) there is no
cost to play the promotional games, (2) no prizes or rewards of
monetary value are awarded, and (3) there is no lottery ticket purchase
required to play.
Regulatory Cost (§ 9)
By law, the Office of Policy and Management (OPM) annually
assesses CLC an amount sufficient to compensate the Department of
Consumer Protection (DCP) for its reasonable and necessary costs in
regulating the lottery for each preceding fiscal year. The bill expands
the range of regulatory costs covered by this assessment to include the
online lottery program.
Freedom of Information Act (FOIA) (§ 10)
Under the bill, the name and any personally identifying information
of a person who participates or participated in CLC’s voluntary self-
exclusion process are not public records and are exempted from
disclosure under FOIA, with one exception. The CLC president may
disclose the name and any records of a person who claims a winning
lottery ticket from using the online program. By law, FOIA applies to
the CLC. This means, among other things, that most of CLC’s records
are considered public and subject to disclosure, with limited
exceptions (e.g., unclaimed lottery ticket serial numbers).
Online Lottery on Credit (§§ 11 & 12)
The bill makes conforming changes related to its provisions
allowing online lottery program tickets to be bought using credit cards.
Specifically, it exempts participation in the program from the laws
voiding and recovering certain wagering contracts.
EFFECTIVE DATE: Upon passage
§ 13 — CONNECTICUT EQUITABL E INVESTMENT FUND 2021HB-06443-R000638-BA.DOCX
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Establishes the Connecticut Equitable Investment Fund as a permanent investment fund
to receive, invest, and distribute specified tax revenue; establishes the Connecticut
Equitable Investment Council to oversee the fund
Establishment of the Fund
The bill establishes the Connecticut Equitable Investment Fund as a
permanent investment fund to receive, invest, and distribute specified
tax revenue. The fund must (1) contain any money the law requires to
be deposited into it and (2) be held in trust separate from all other
moneys, funds, and accounts. The fund’s investment earnings must be
credited to its assets, and any balance remaining in the fund at the end
of each fiscal year is carried forward to the next year.
The bill requires the Connecticut Equitable Investment Council
established under the bill to use the fund’s assets for the purposes
described below.
Revenue Deposited in the Fund
The bill directs to the fund revenue from the following sources:
1. the wage compensation (§ 1), consumption (§ 3), and digital
advertising taxes (§ 4) established under the bill;
2. any private investments made by state residents to be invested
in venture capital firms in the state, as described below; and
3. any taxes the state collects and retains on or after July 1, 2021,
on recreational cannabis and cannabis products and online
wagering.
Connecticut Equitable Investment Council
The bill establishes a nine-member council to manage and oversee
the fund. The council’s members are (1) the governor, state treasurer,
and OPM secretary and (2) six members of the public, two each
appointed by the governor, Senate president, and House speaker.
The governor chairs the council and must schedule meetings as
needed, but at least once every calendar quarter, to implement and
accomplish the programs and strategies described below. 2021HB-06443-R000638-BA.DOCX
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Use of the Fund. The bill requires the council to (1) protect and
grow the fund for current and future generations through prudent,
professional investment management and (2) support the state’s
economic growth through investment -in-place programs and
strategies. These strategies must include:
1. building wealth in traditionally underserved communities by
(a) attracting and retaining neighborhood wealth, (b) investing
in human capital and infrastructure, (c) rebuilding community
assets, (d) supporting community reinvestment, (e) increasing
homeownership, and (f) creating employment pipelines;
2. reducing income inequality in the state by (a) funding the state
EITC, (b) compensating worker value over productivity, and (c)
expanding skill development and vocational and technical
training opportunities;
3. retaining and attracting talent to the state by increasing the
availability of venture capital; and
4. working with the state to reduce municipal reliance on property
taxes through a statewide commercial property tax credit and
initiatives to (a) prioritize municipal need and capacity, (b) fully
fund the payment in lieu of taxes program, (c) reduce or
eliminate intertown tax rate advantages, and (d) monetize land
use.
The council must establish a review process and standards to
evaluate the program and strategies that will help achieve these goals.
It must annually distribute at least half of the fund’s assets, other than
the private investments described below, that are generated through
the revenue streams that the council determines are less volatile.
Program to Solicit Investments. The council must establish a
program to solicit private investments from state residents that the
council will invest in a private investment fund or “fund of funds.”
The investments must be in venture capital firms (1) with offices in
Connecticut and (2) that assist business growth in a way that supports 2021HB-06443-R000638-BA.DOCX
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the funding goals described above.
EFFECTIVE DATE: July 1, 2021
§§ 14-16 — CORPORATION BUSINESS TAX SURCHARGE
Makes permanent the 10% corporation business tax surcharge
The bill makes permanent the 10% corporation business tax
surcharge, which under current law expires after the 2020 income year.
As under current law, the surcharge applies to companies that have
more than $250 in corporation tax liability and either (1) have at least
$100 million in annual gross income in those years or (2) are taxable
members of a combined group that files a combined unitary return,
regardless of their annual gross income amount. Companies must
calculate their surcharges based on their tax liability, excluding any
credits.
Under the bill, taxpayers are not subject to estimated tax payment
requirements and interest on underpayments for the 2021 income year
for any additional tax due as a result of this change for the period
before the provisions take effect.
EFFECTIVE DATE: Upon passage
§ 17 — R&D TAX CREDITS
Increases the cap on the amount of R&D tax credits corporations may claim each year
from 50.01% to 70% of their annual tax liability
Beginning with the 2021 income year, the bill increases the cap on
the amount of R&D tax credits corporations may claim each year
against the corporation business tax. Current law caps the total value
of credits corporations may claim at 50.01% of their annual tax liability.
The bill allows them to use credits for research and development
expenditures to reduce up to 70% of their liability (CGS §§ 12-217j and
12-217n).
EFFECTIVE DATE: Upon passage and applicable to income years
beginning on or after January 1, 2021.
§ 18 — INVEST CT TAX CREDIT CAP 2021HB-06443-R000638-BA.DOCX
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Increases the aggregate cap on Invest CT tax credits by $200 million
The bill increases the aggregate cap on Invest CT tax credits by $200
million, from $350 million to $550 million. It retains the program’s
existing $40 million annual cap. By law, the credits apply to the
insurance premiums and surplus lines brokers tax, and investors
qualify for them by investing in eligible businesses through state-
certified business investment funds (i.e., Invest CT funds).
EFFECTIVE DATE: July 1, 2021
§ 19 — DIGITAL MEDIA TAX CREDIT
Allows film and digital media production tax credits to be claimed against the sales and
use tax under certain conditions
Beginning January 1, 2022, the bill allows film and digital media
production tax credits to be claimed against the sales and use tax
under certain conditions.
Specifically, under the bill, eligible production companies or other
taxpayers claiming the credit (i.e., transferees) may only claim 92% of
the credit’s value when using it against the sales and use tax, and
transferees may claim the credit against the tax only if there is at least
50% common ownership between the transferee and eligible
production company that transferred the credit. Similar limitations
apply under existing law to credits claimed against the gross receipts
tax on cable, satellite, and competitive video services.
As under existing law, film and digital media production tax credits
may also be claimed against the corporation business and insurance
premiums taxes at full face value and may be sold, assigned, or
otherwise transferred to other taxpayers up to three times.
EFFECTIVE DATE: January 1, 2022
§§ 20-24 — ADMISSIONS TAX ELIMINATION
Eliminates the admissions tax beginning July 1, 2021
The bill eliminates the admissions tax beginning July 1, 2021.
Under current law, the admissions tax is generally 10% of amounts 2021HB-06443-R000638-BA.DOCX
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paid for tickets; licenses; skybox, luxury suite, or club seat rentals; and
any other admission charges, including any charges for the right to
buy seats, with certain exceptions. The tax is (1) 6% for movie tickets
costing more than $5 and (2) 5% for admissions to specified venues,
such as the XL Center in Hartford and Oakdale Theatre in Wallingford.
Certain events and facilities are exempt from the tax.
The tax covers, among other things, theaters; concert halls;
amusement parks; sporting facilities, ball parks, race tracks, golf
courses, beaches, and gyms; stadiums and amphitheaters; convention
centers; auto, boat, antique, and dog shows; and other similar venues
and events. The bill retains the 10% dues tax, which applies to amounts
paid as dues or initiation fees to any social, athletic, or sporting club
(i.e., organizations owned or operated, or both owned and operated,
by members).
EFFECTIVE DATE: June 30, 2021
§ 25 — CHILD TAX CREDIT
Beginning with the 2022 tax year, establishes a child tax credit against the income tax for
resident taxpayers with qualifying incomes and allows such taxpayers to claim the credit
for up to three children
The bill establishes a child tax credit (CTC) that resident taxpayers
with qualifying incomes may claim against the personal income tax.
Taxpayers may claim the credit for up to three children (age 16 and
younger) that they validly claimed as dependents on their federal
income tax return for the applicable tax year. The credit phases in over
two tax years (2022 and 2023). It does not apply against withholding
tax.
The bill specifies that, for purposes of the CTC, a taxpayer’s tax
liability must be calculated without regard to the state earned income
tax credit.
EFFECTIVE DATE: January 1, 2022
Credit Amount
Under the bill, taxpayers may claim either a nonrefundable or a 2021HB-06443-R000638-BA.DOCX
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refundable credit. The refundable credit is lower in value than the
nonrefundable credit, but taxpayers who claim this credit may receive
a refund for the portion of the credit that exceeds their income tax
liability. The bill also caps the refundable credit amount at a specified
percentage of a taxpayer’s federal AGI. Table 2 shows the maximum
credit amount by tax year.
Table 2: Maximum Child Tax Credit Amount (Per Child)
Tax Year Nonrefundable
Credit Amount
Refundable Credit
Amount Cap (% of AGI)
2022 $300 $210 2.25 %
2023 and
thereafter
$600 $420 4.50 %
Income Thresholds and Credit Phase Out
Under the bill, taxpayers are eligible for the full CTC if their federal
AGIs are less than or equal to certain thresholds, which vary by filing
status. For taxpayers with incomes exceeding these thresholds, the
credit phases out at a rate of 10% for every $1,000, or fraction of $1,000,
of AGI exceeding the threshold (e.g., a single filer with a federal AGI of
$101,500 is eligible for 80% of the full credit amount). Table 3 indicates
the income thresholds at which taxpayers are (1) eligible for the full
credit and (2) not eligible for the credit.
Table 3: Child Tax Credit Income Thresholds
Filing Status Maximum Credit
Threshold
No Credit
Federal AGI ≤ Federal AGI >
Single or Married Filing Separately $100,000 $110,000
Head of Household $160,000 $170,000
Married Filing Jointly or Surviving
Spouse
$200,000 $210,000
§ 26 — INCOME TAX EXEMPTION FOR RETIREMENT INCOM E
Phases out the income tax on certain taxpayers’ income from IRAs, other than Roth IRAs,
under the same conditions that apply to pension and annuity income
The bill phases out the income tax on certain taxpayers’ 2021HB-06443-R000638-BA.DOCX
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distributions from IRAs, other than Roth IRAs, under the same
conditions that apply to pension and annuity income.
As under existing law for pension and annuity income, the bill
exempts an increasing portion of the IRA income until the income is
fully exempt in the 2025 tax year as shown in Table 4. Taxpayers are
eligible for the exemption only if their federal AGI is below (1) $75,000
for single filers, married people filing separately, or heads of
households and (2) $100,000 for married people filing jointly.
Table 4: Phase-In of Income Tax Exemption for Pension, Annuity, and IRA
Income
Tax Year Percent of Pension, Annuity,
and IRA Income Exempt
2022 56
2023 70
2024 84
2025 and
thereafter
100
EFFECTIVE DATE: January 1, 2022
§ 27 — CAPITAL GAINS SURCHA RGE
Imposes a 2% surcharge on capital gains for taxpayers with incomes in the top income tax
bracket
Beginning with the 2022 tax year, the bill imposes a 2% surcharge on
net gain from the sale or exchange of capital assets (i.e., capital gains)
for taxpayers, other than trusts or estates, with incomes that exceed
specified thresholds. The surcharge (1) applies to income classified as
capital gains under federal income tax rules and (2) is in addition to
any other tax, fee, or surcharge for which the taxpayer is liable.
Under the bill, the surcharge applies to taxpayers with Connecticut
AGI of more than (1) $500,000 for single filers and married individuals
filing separately, (2) $800,000 for heads of households, and (3)
$1,000,000 for married joint filers and surviving spouses.
The bill requires taxpayers subject to the surcharge to file a report 2021HB-06443-R000638-BA.DOCX
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with DRS by April 15 in the form, and containing the information, the
commissioner prescribes. The report must accurately list the taxpayer’s
capital gains for the preceding tax year and the amount of the
taxpayer’s surcharge liability for that year. Any taxpayer who is
required to file a report must pay, without assessment, notice, or
demand, the surcharge by April 15.
The bill imposes, on any taxpayer who fails to pay the surcharge
owed, a penalty of 10% of the tax due or $50, whichever is greater. The
penalty gathers interest at the rate of 1% per month or partial month
from the due date of the surcharge until the date of payment. The
commissioner may waive all or part of any penalty, subject to the law’s
provisions on the Penalty Review Committee, when the taxpayer
proves to the commissioner’s satisfaction that the failure to pay the
surcharge was due to reasonable cause and not intentional or due to
neglect.
The bill applies several collection, enforcement, and appeal process
requirements established in statute for the admissions and dues taxes
to the surcharge, except those provisions that are inconsistent with the
bill. Under these provisions, the DRS commissioner can (1) impose a
deficiency assessment and penalty; (2) impose record retention
requirements on taxpayers and examine their records; and (3)
administer oaths, subpoena witnesses, and receive testimony. DRS
must collect the tax and any penalties using the same methods for
collecting unpaid admissions and dues taxes (i.e., tax warrants, liens
against real property, and foreclosure against that property).
Taxpayers can request a hearing on the amount of taxes they must pay
and appeal the hearing decision if aggrieved. They may also request
refunds from the commissioner if they believe they have overpaid.
Lastly, an additional penalty may be imposed on taxpayers for willful
violations or filing fraudulent returns.
The bill additionally allows the DRS commissioner to adopt
implementing regulations for the surcharge.
EFFECTIVE DATE: January 1, 2022 2021HB-06443-R000638-BA.DOCX
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§ 28 — PROPERTY TAX CREDIT AGAINST THE INCOME TAX
Extends, to the 2021 and 2022 tax years, the limits on eligibility for the property tax
credit against the personal income tax
For the 2017 through 2020 tax years, the law limits eligibility for the
property tax credit against the personal income tax to people who (1)
are age 65 or older before the end of the tax year or (2) validly claim at
least one dependent on their federal income tax return for that year.
The bill extends these limits to the 2021 and 2022 tax years.
By law, taxpayers earn the credit for property taxes paid on their
primary residences or motor vehicles, and the amount of property
taxes paid that can be taken as a credit declines as adjusted gross
income increases until it completely phases out. The maximum credit
is $200 per tax return. The bill also makes technical changes.
EFFECTIVE DATE: Upon passage, and applicable to tax years
beginning on or after January 1, 2021.
§ 29 — SALES AND USE TAX EX EMPTION FOR BREASTFE EDING
SUPPLIES
Exempts breast pumps and certain related parts, supplies, kits, and repair services from
the sales and use tax beginning July 1, 2021
The bill exempts from the sales and use tax (1) breast pumps and
breast pump collection and storage supplies, when sold to individuals
for home use; (2) repair services and repair or replacement parts for
such breast pumps; and (3) breast pump kits, under certain conditions.
The bill defines a “breast pump” as an electric or manual pump device
for expressing milk from a human breast, including external power
supply units for the pump that are packaged and sold with it.
Breast Pump Kits
Under the bill, a breast pump kit is a prepackaged set that contains
one or more of the following items: (1) a breast pump, (2) breast pump
collection and storage supplies, and (3) other items that may be useful
to initiate, support, or sustain breastfeeding using a breast pump.
Breast pump kits prepackaged by the manufacturer are tax exempt
if they are sold to individuals for home use and contain only tax- 2021HB-06443-R000638-BA.DOCX
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exempt breast pumps and breast pump collection and storage
supplies. Breast pump kits are taxable if they contain taxable items for
which the sales price is more than 10% of the kit’s total sale price.
Breast Pump Collection and Storage Supplies
The bill defines “breast pump collection and storage supplies” as
items that are used in conjunction with a breast pump to collect milk
expressed from a human breast and store it until it is ready for
consumption. It specifically includes the following:
1. breast shields and their connectors,
2. breast pump tubes and tubing adapters,
3. breast pump valves and membranes,
4. backflow protectors and their adapters,
5. bottles and bottle caps specific to the pump’s operation,
6. breast milk storage bags, and
7. related items sold in a breast pump kit prepackaged by the
breast pump manufacturer.
The bill specifies that the following are not considered breast pump
collection and storage supplies:
1. bottles and bottle caps not specific to the breast pump’s
operation;
2. breast pump travel bags or similar carrying accessories (e.g., ice
packs and labels), unless sold in a breast pump kit prepackaged
by the breast pump manufacturer;
3. breast pump cleaning supplies, unless sold in a breast pump kit
prepackaged by the breast pump manufacturer;
4. nursing bras, bra pads, breast shells, or similar products; 2021HB-06443-R000638-BA.DOCX
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5. creams, ointments, and other similar products that relieve
breastfeeding-related symptoms or conditions of the breast or
nipples. (Some of these creams and ointments may already be
exempt under the nonprescription drug exemption (CGS § 12-
412(120).)
EFFECTIVE DATE: July 1, 2021, and applicable to sales occurring
on or after that date.
§ 30 — REVENUE FROM MEALS A ND BEVERAGES TAX
Allows certain businesses to keep a portion of the sales tax they collect on sales of meals
and beverages for FY 22
For FY 22, the bill allows certain businesses (e.g., hotels, restaurants,
and bars) to keep 13.6% of the 7.35% sales tax they collect on sales of
meals and beverages. It applies to any establishment that sells meals
(i.e., food sold in ready-to-eat form or wrapped as “take-out” or “to-
go” to be eaten elsewhere) and is included in the accommodation and
food services industry sector (i.e., sector 72 of the North American
Industrial Classification System).
Under the bill, the establishments must report the amount of tax
collected from these sales for the period reported, the amount they
retained, and any other information or documentation the DRS
commissioner requires.
EFFECTIVE DATE: July 1, 2021, and applicable to sales occurring
on or after that date.
§§ 31-35 — AMBULATORY SURGICAL CENTERS
Beginning July 1, 2021, terminates the 6% ASC gross receipts tax and instead subjects
ASC services to a 6.35% sales tax, subject to certain exclusions; authorizes a refundable
state credit against the sales tax for ASCs; allows ASCs to deduct certain COVID-19
expenses from their gross receipts for the period from July 1, 2020, to July 1, 2021
Sales Tax on ASC Services
Beginning July 1, 2021, the bill subjects to sales tax ambulatory
surgical center (ASC) services performed by ASCs for a consideration,
excluding services performed by an employee for his or her employer.
Definition of ASC. By law, and under the bill, an ASC is a distinct 2021HB-06443-R000638-BA.DOCX
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entity that (1) operates exclusively to provide surgical services to
patients not requiring hospitalization, where the services are not
expected to take more than 24 hours; (2) has an agreement with the
Centers for Medicare and Medicaid Services (CMS) to participate in
Medicare as an ASC; and (3) meets the federal requirements to do so.
ASC Services Subject to Tax. Under the bill, “ASC services” are
the procedures and services included in a facility fee payment to an
ASC that are (1) associated with a surgical procedure and (2) not
reimbursable ancillary or professional procedures or services. They (1)
include facility services only and (2) exclude surgical procedures and
physicians’, anesthetists’, radiology, diagnostic, and ambulance
services separately reimbursed to an ASC from the facility fee
payment.
Gross Receipts for Purposes of the Tax. The bill limits the gross
receipts from ASC services that are subject to sales tax to the amounts
received (cash or in kind) from patients, third-party payers, and others
for the provision of ASC services, including retroactive adjustments
under reimbursement agreements with third-party payers. Gross
receipts exclude the following:
1. the first $1.5 million of gross receipts received during each 12-
month period beginning July 1, excluding Medicaid and
Medicare payments, for ASC services (presumably the ASC
would track its gross receipts and begin applying sales tax after
reaching this threshold);
2. Medicaid or Medicare payments received for ASC services;
3. payer discounts, charity care, and bad debts (as defined below);
4. amounts received by an ASC for tangible personal property
used in connection with an ASC service (e.g., implants, devices,
drugs, and biologicals), regardless of the payer; and
5. amounts received by an ASC that were or are subject to the
current ASC gross receipts tax. 2021HB-06443-R000638-BA.DOCX
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Under the current ASC gross receipts tax, gross receipts exclude (1)
the first $1 million of the ASC’s gross receipts in the applicable fiscal
year, excluding Medicaid and Medicare payments, and (2) gross
receipts from any Medicaid and Medicare payments the ASC receives.
Payer Discounts, Charity Care, and Bad Debts. “Payer
discounts” is the difference between an ASC’s published charges and
the actual payments it received from third-party payers for a different
or discounted rate or payment method. It excludes charity care and
bad debts.
“Charity care” is free or discounted health care services provided to
individuals who cannot afford to pay, including to the uninsured
patient or patients who are not expected to pay all or part of an ASC’s
bill based on income guidelines and other financial criteria established
in statute or in an ASC’s charity care policies on file at its office. It does
not include bad debts and payer discounts.
Reporting Method. The bill allows ASCs to report their sales of
ASC services on the cash basis of accounting, rather than on an accrual
basis. It does so by extending to ASCs an existing provision that allows
retailers whose only sales are certain enumerated services and who
report their sales on the cash basis of accounting for federal income tax
purposes to do so for sales tax reporting purposes. Under the cash
basis method of accounting, the retailer reports its sales during the
filing period in which the customer provides payment regardless of
when the services were rendered.
Tax Credit. The bill establishes a tax credit against the sales tax for
ASCs equal to the following:
1. the greater of 50% of the aggregate amount of Medicaid
payments (a) the ASC received during the applicable reporting
period for ASC services or (b) that would have been due had
those services been performed by and at a hospital instead (i.e.,
the “Medicaid investment”), plus
2. 25% of the aggregate payments received from or on behalf of 2021HB-06443-R000638-BA.DOCX
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each individual who is covered under the state employee health
plan or MEHIP for the provision of ASC services (i.e., the “state
health plan investment”).
If the credit amount allowed exceeds the ASC’s sales tax liability for
the reporting period, the ASC must file a refund claim with DRS in the
form and manner the DRS commissioner prescribes. After verifying
the claim, the DRS commissioner must treat the excess as an
overpayment and refund it to the ASC. DRS must add interest to the
overpayment at a rate of 0.67% for each month or fraction of a month;
the accrual period for this interest begins 90 days after DRS receives
the ASC’s refund claim and runs until the date DRS provides notice
that the refund is due.
Under the bill, an ASC that claims this credit and receives a refund
is entitled to retain it for its own account and is not required to refund
or pay it to any user or payer for ASC services.
ASC Gross Receipts Tax
The bill terminates the ASC gross receipts tax as of July 1, 2021, and
makes conforming changes.
It also allows ASCs to retroactively deduct COVID-19 expenses
from their gross receipts for purposes of the tax for FY 21 (i.e., for
calendar quarters from July 1, 2020, to July 1, 2021). Specifically, they
may deduct any amounts they incurred, directly or indirectly, as a
result of COVID-19, for the ASC’s personnel, patients, service
providers, visitors, facilities, or tangible personal property. This
includes amounts for purchasing, leasing, licensing, or using tangible
or intangible property in connection with COVID-19 tests, protection,
prevention, or treatment.
Under the bill, “COVID-19” means the respiratory disease
designated by the World Health Organization (WHO) on February 11,
2020, as coronavirus 2019 and any related mutation of it that the WHO
recognizes as a communicable respiratory disease.
EFFECTIVE DATE: July 1, 2021, and applicable to calendar quarters 2021HB-06443-R000638-BA.DOCX
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beginning on or after July 1, 2021, except that the changes to the
existing ASC gross receipts tax are effective June 1, 2021, and
applicable to calendar quarters beginning on or after July 1, 2020.
§§ 36-41 — CREDIT CARD SERVICE FEES
Generally requires state agencies accepting credit, debit, or charge card payments to
charge payors a service fee for doing so and disclose the fee before imposing it
The bill generally requires state agencies accepting credit, debit, or
charge card payments to (1) charge payors a service fee for doing so
and (2) disclose the fee to payors before imposing it, in accordance
with any disclosure requirements set by the card issuer or processor. It
allows agencies to waive the service fee for a category of fees, costs, or
fines if the OPM secretary approves the waiver.
Under current law, the OPM secretary may authorize agencies to
charge a service fee for these payments, which must be (1) related to
the cost of the service and (2) uniform for all cards accepted. The bill
instead requires the service fee to (1) defray the service cost and (2) not
exceed the charge imposed by the card issuer or processer, including
any discount rate. As under existing law, the fee must be applied only
when allowed or authorized in writing by the card issuer or processor.
Current law also authorizes agencies to accept payments through an
electronic payment service. The bill retains this authorization but
eliminates the agencies’ authorization to charge a service fee for these
payments.
The bill makes conforming changes to statutes on credit card
payments to certain state agencies. Specifically, the bill:
1. requires, rather than allows, the motor vehicles commissioner to
charge a service fee to payers making fee payments by credit
card (§ 38);
2. requires the Department of Public Health (DPH) to charge a
service fee for each credit card payment made under its online
license renewal system (§ 39); 2021HB-06443-R000638-BA.DOCX
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3. requires, rather than allows, the Probate Court to charge a
service fee for any court fee card payments (§ 40); and
4. requires, rather than allows, the chief court administrator to
charge a service fee for credit card payments made to the
judicial branch (§ 41).
The bill requires these agencies to apply the same criteria described
above in determining the rate or amount of their respective service
fees. It also authorizes both the Department of Motor Vehicles (DMV)
and DPH to waive their respective service fees if the OPM secretary
has approved the fee category for a waiver, as described above. The
bill also makes technical and conforming changes.
EFFECTIVE DATE: July 1, 2022
§ 42 — HIGHWAY USE TAX
Beginning January 1, 2023, imposes a HUT on carriers operating certain heavy, multi-
unit motor vehicles on roads in Connecticut and deposits the revenue into the Special
Transportation Fund
Beginning January 1, 2023, the bill imposes a highway use tax
(HUT) on every “carrier” for the privilege of operating, or causing to
be operated, certain heavy, multi-unit motor vehicles on any highway
(i.e., public road) in the state.
Under the bill, a “carrier” is any person that operates a taxable
motor vehicle (i.e., “eligible motor vehicle”) or causes one to be
operated. Carriers do not include the United States, the federal
government, or the state or any of its political subdivisions.
The bill establishes tax rates for eligible motor vehicles and requires
carriers to obtain a permit from DRS and file monthly returns with the
department. It applies to the HUT various collection, enforcement, and
appeals process provisions that apply to other taxes under existing
law.
The bill authorizes the DRS commissioner to adopt implementing
regulations for the HUT and prohibits tax credits from being applied
against the HUT. 2021HB-06443-R000638-BA.DOCX
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EFFECTIVE DATE: Upon passage, and applicable to calendar
months beginning on or after January 1, 2023.
Vehicles Subject to Tax (§ 42(a) & 42(j))
The HUT applies to “eligible motor vehicles,” which are those (1)
with a gross weight of 26,000 pounds (lbs.) or more and (2) in classes 8
through 13 of the Federal Highway Administration’s (FHWA) vehicle
classification system (see Table 5).
Under the bill, “gross weight” is the light weight of a vehicle plus
the weight of its load. In the case of a tractor-trailer unit, it means the
tractor’s light weight plus (1) the light weight of the trailer or
semitrailer and (2) the weight of the vehicle’s load. “Light weight”
means the weight of an unloaded vehicle ordinarily equipped and
ready for use, minus the driver’s weight.
Table 5: FHWA Vehicle Classification and Tax Status
Not Subject to HUT Subject to HUT
Class Vehicles Class Vehicles
1 Motorcycles 8 Single trailer, 3- or 4- axle trucks
2 Passenger cars 9 Single trailer, 5-axle trucks
3 Pickups, panels, and vans 10 Single trailer, 6+ axle trucks
4 Buses 11 Multi-trailer, 5 or fewer axle trucks
5 Single unit, 2-axle trucks 12 Multi-trailer, 6-axle trucks
6 Single unit, 3-axle trucks 13 Multi-trailer, 7+ axle trucks
7 Single unit, 4+ axle trucks
The bill requires each carrier to maintain, on a monthly basis, a list
of all eligible motor vehicles it operated or caused to be operated in the
month. Carriers must maintain these lists for at least four years after
the month’s date and make them available to DRS upon request.
Tax Rate (§ 42(b))
The bill requires carriers to determine their tax due on a monthly
basis by (1) calculating the number of miles traveled by each eligible
motor vehicle the carrier operated or caused to be operated in the state 2021HB-06443-R000638-BA.DOCX
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and (2) multiplying each vehicle's miles traveled by the rate
corresponding to its gross weight. The rates range from 2.5 cents per
mile to 17.5 cents per mile, as shown in Table 6.
Table 6: Highway Use Tax Rates (per mile)
Gross Weight
(lbs.)
Rate (cents
per mile)
Gross Weight
(lbs.)
Rate
(cents per
mile)
26,000-28,000 2.50 54,001-56,000 6.54
28,001-30,000 2.79 56,001-58,000 6.83
30,001-32,000 3.08 58,001-60,000 7.12
32,001-34,000 3.37 60,001-62,000 7.40
34,001-36,000 3.65 62,001-64,000 7.69
36,001-38,000 3.94 64,001-66,000 7.98
38,001-40,000 4.23 66,001-68,000 8.27
40,001-42,000 4.52 68,001-70,000 8.56
42,001-44,000 4.81 70,001-72,000 8.85
44,001-46,000 5.10 72,001-74,000 9.13
46,001-48,000 5.38 74,001-76,000 9.42
48,001-50,000 5.67 76,001-78,000 9.71
50,001-52,000 5.96 78,001-80,000 10.00
52,001-54,000 6.25 80,001 and over 17.50
Returns (§ 42(c))
Under the bill, each carrier must file a monthly return with DRS in a
form and with the information that the commissioner requires and pay
the taxes owed. The returns and tax payments are due by the last day
of the month following the month for which a carrier is filing a return.
The bill requires carriers to file returns and pay the tax by electronic
funds transfer in accordance with existing law.
Deposit and Recording of Revenue (§ 42(c) & 42(r))
The bill requires the DRS commissioner to deposit HUT revenue
into the STF (see BACKGROUND). This comports with existing law,
which requires that, beginning July 1, 2015, all funds that the state
receives or collects on account of, or derived from, the use of highways 2021HB-06443-R000638-BA.DOCX
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be credited to the STF (CGS § 13b-61(b)(19)).
At the close of each fiscal year, beginning with FY 23, the bill
authorizes the state comptroller to record as revenue for the fiscal year
the amount DRS received from the HUT no later than five business
days after the end of July following the end of the fiscal year.
HUT Permits (§ 42(d) & 42(e))
Application and Issuance. The bill requires each carrier to apply to
DRS for a HUT permit in the manner and with the information he
prescribes. It prohibits carriers from operating, or causing to be
operated, any eligible motor vehicle in the state without a HUT permit
on or after January 1, 2023.
DRS must grant and issue a permit to a carrier upon receiving its
fully completed application. The permit is (1) valid only for the carrier
to which it is issued and the eligible motor vehicles the carrier operates
or causes to be operated and (2) not assignable (i.e., it cannot be
transferred to another carrier). Carriers must keep a copy of the permit
in each eligible motor vehicle they operate or cause to be operated.
Suspension, Revocation, and Cancellation. Under the bill, DRS
must order a hearing if a carrier (1) fails to comply with any HUT
provision or (2) files a return for four successive months indicating that
none of the eligible motor vehicles that the carrier operated or caused
to be operated used roads in the state. During the hearing, the carrier
must show cause as to why its permit should not be (1) suspended or
revoked for failing to comply with any HUT provision or (2) cancelled
for filing returns showing no road use in Connecticut.
The commissioner must give written notice of the hearing’s date,
time, and location, personally or via registered or certified mail, at least
(1) 10 days before a hearing for failure to comply with any HUT
provision and (2) 30 days before a hearing for returns indicating no
road use in the state. If the commissioner revokes or suspends a permit
after a hearing, he must not restore it or issue a new permit to the
carrier until he is satisfied that it will comply with the HUT. If he 2021HB-06443-R000638-BA.DOCX
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cancels a permit, he must not issue a new one until he is satisfied that
the carrier will use roads in the state.
Tax Collection and Enforcement (§ 42(f)-42(n) & 42(p))
The bill applies various collection, enforcement, and appeals process
provisions to the HUT that apply to other taxes under existing law.
They include the following:
1. The DRS commissioner may (a) impose a deficiency assessment
and penalty; (b) impose record retention requirements on
taxpayers and examine all of their records; (c) administer oaths,
subpoena witnesses, and receive testimony; and (d) collect the
tax and any penalties using the same methods for collecting
unpaid admissions and dues taxes (i.e., tax warrants, liens
against real property, and foreclosure against that property).
2. Carriers may (a) request a hearing from the commissioner on
the amount of taxes or related penalties they must pay and
appeal the hearing decision to Superior Court if aggrieved and
(b) apply for a refund if they believe they overpaid the HUT.
Table 7 lists the penalties in existing law that the bill applies to the
HUT. Additionally, any person that knowingly violates a HUT-related
provision for which a penalty is not provided must be fined $1,000.
Table 7: Penalties Applicable to the HUT
Action Penalty
Deficiency assessment Amount of deficiency plus 1% monthly interest
10% of deficiency amount or $50, whichever is greater, if the
deficiency was due to negligence or intentional disregard
25% of the deficiency amount if the deficiency was due to fraud
or an attempt to evade
Return made by DRS
commissioner when no return has
been filed
10% of the tax due or $50, whichever is greater, plus 1%
monthly interest
Willful failure to pay tax, file
return, keep records, or supply
information
Up to one year of imprisonment, fine of up to $1,000, or both, in
addition to any other penalty provided by law 2021HB-06443-R000638-BA.DOCX
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Willful delivery or disclosure to
DRS commissioner of false or
fraudulent documents
Class D felony (i.e., up to five years' imprisonment, fine of up to
$5,000, or both), in addition to any other penalty provided by
law
Willful failure by a person, other
than a carrier, that is required on
the carrier's behalf to collect,
truthfully account for, and pay the
HUT
Total amount of tax evaded, not collected, or not accounted for
and paid, including any penalty or interest attributable to the
above violations
Applies in addition to other penalties the law provides
§ 43 — DRS TAX AMNESTY PROG RAM
Requires DRS to establish a tax amnesty program for individuals, businesses, or other
taxpayers that owe Connecticut state taxes that gives eligible taxpayers a 75% reduction
in the interest that would otherwise be due
The bill requires the DRS commissioner to establish a tax amnesty
program for individuals, businesses, or other taxpayers that owe
Connecticut state taxes (other than motor carrier road taxes) to DRS.
Under the program, eligible taxpayers may receive a 75% reduction in
the interest that would otherwise be due. The amnesty runs from
November 1, 2021, to January 31, 2022, and covers any taxable period
ending on or before December 30, 2020.
Amnesty Conditions
The DRS commissioner must prepare an amnesty application that
requires applicants to specify the taxes and taxable periods for which
they seek amnesty. The bill allows the commissioner to require that
taxpayers file amnesty applications and pay any associated amounts
electronically. Applicants must pay all amounts due to the state under
the program with their applications.
If a taxpayer files the application and pays all the taxes and interest
owed for the applicable tax periods, the commissioner must refrain
from seeking to collect applicable civil penalties and seeking criminal
prosecution for those periods.
If the commissioner grants amnesty, the affected taxpayer
relinquishes all unexpired administrative and judicial appeal rights as
of the payment date. The act bars taxpayers from receiving any refund
or credit of amnesty tax payments. Failure to pay all amounts due 2021HB-06443-R000638-BA.DOCX
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makes a taxpayer ineligible for amnesty. The commissioner may not
consider any request to cancel the unpaid portion of any erroneously
or illegally assessed tax, penalty, or interest in connection with any
amnesty application.
The commissioner may not accept amnesty applications for any
applicable tax periods in which the taxpayer’s liability for such period
has already been paid, unless the application is filed to report an
additional tax amount for that period. Amnesty applications may not
result in a refund or credit of any tax, penalty, or interest previously
paid.
Interest Reduction
Eligible taxpayers who apply for the amnesty program qualify for a
75% reduction of the interest that would otherwise be owed on the
taxes for the applicable periods. (The interest rate on overdue taxes is
generally 1% per month.) A taxpayer’s eligibility for this interest
reduction is subject to the commissioner’s review of his or her
application and, if granted by the commissioner, compliance with the
amnesty program’s requirements.
Amnesty Exclusions
The bill bars any amnesty for those who:
1. are parties to any criminal investigation or criminal litigation
pending on July 1, 2021, in any federal or Connecticut court;
2. are parties to a closing agreement with the DRS commissioner;
3. have made a compromise offer that has been accepted by the
commissioner; or
4. are parties to a managed audit agreement.
Penalty for Failing to File for 2013 Amnesty Program
Current law imposes a penalty on any taxpayer who (1) owes any
tax for tax periods on or before November 30, 2012, for which a tax
return was required but not previously filed and (2) failed to file a 2021HB-06443-R000638-BA.DOCX
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timely amnesty application under the state’s 2013 amnesty. The
penalty is equal to 25% of the tax owed and may not be waived.
Under the bill, the penalty does not apply to tax periods ending on
or before November 30, 2012, for which no return was previously filed
if the (1) tax period is the subject of or included in an amnesty
application granted by the commissioner under the bill’s provisions
and (2) taxpayer pays all amounts due to the state in connection with
the application, as described above.
Penalty for Fraud
Under the bill, anyone who willfully delivers or discloses to the
commissioner or the commissioner’s authorized agent any application,
list return, account, statement, or other document known by him or her
to be fraudulent or false in any material matter is ineligible for the
amnesty program and, in addition to any other penalties provided by
law, subject to a fine of up to $5,000, imprisonment for between one
and five years, or both.
Implementation
The bill gives the DRS commissioner authority to do anything
necessary to implement the program in a timely fashion.
EFFECTIVE DATE: Upon passage
§ 44 — TRANSFER FROM THE GE NERAL FUND TO THE
TOURISM FUND
Requires the comptroller to transfer specified amounts from the General Fund to the
Tourism Fund for FYs 21 and 22
The bill requires the comptroller to transfer, from the General Fund
to the Tourism Fund, (1) $9.8 million for FY 21 and (2) $3.1 million for
FY 22.
EFFECTIVE DATE: Upon passage
§ 45 — GAAP DEFICIT
Deems that $1 is appropriated in FYs 22-23 to pay off the state’s GAAP deficit for FYs 13
and 14
The bill deems that $1 is appropriated in FYs 22 and 23 to pay off 2021HB-06443-R000638-BA.DOCX
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the General Fund's unassigned negative balances (i.e., Generally
Accepted Accounting Principles (GAAP) deficits) for FYs 13 and 14,
which reflect the negative balances that accumulated before the state
adopted GAAP in FY 14. By law, the OPM secretary must annually
publish recommended schedules to fully amortize the deficits by FY
28.
EFFECTIVE DATE: Upon passage
§ 46 — TRANSFER OF FY 21 GE NERAL FUND REVENUE TO FY
22 AND FY 23
Requires the comptroller to designate $235 million of FY 21 General Fund resources for
use in FYs 22 and 23
By June 30, 2021, the bill requires the comptroller to designate $235
million of FY 21 General Fund resources to be accounted for as FY 22
and FY 23 General Fund revenue ($117.5 million for each year).
EFFECTIVE DATE: Upon passage
§ 47 — TRANSFER FROM BUDGET RESERVE FUND (BRF) T O
GENERAL FUND
Requires the comptroller to transfer specified amounts from the BRF to the General Fund
for FYs 22 and 23
The bill requires the comptroller to transfer, from the BRF to the
General Fund, (1) $890 million on July 1, 2021, to be used as FY 22
revenue and (2) $995 million on July 1, 2022, to be used as FY 23
revenue. He must reduce these transfers by the amount of any federal
aid the state receives that is used to reduce state budgetary
requirements for the fiscal year.
EFFECTIVE DATE: Upon passage
BACKGROUND
Related Bills
SB 1107, favorably reported by the Finance, Revenue and Bonding
Committee, contains identical provisions on the ASC gross receipts tax
and sales tax on ASC services.
sSB 888 (File 569), favorably reported by the Judiciary Committee, 2021HB-06443-R000638-BA.DOCX
Researcher: RP Page 38 5/10/21
establishes a state excise tax on cannabis and directs the revenue to the
General Fund and two new accounts for specified purposes.
sSB 570 (File 396) and sHB 6451 (File 384), favorably reported by the
Public Safety and Security Committee, among other things, authorize
CLC to operate an online lottery program subject to several conditions,
including specific contractual agreements with the Mashantucket
Pequot and Mohegan tribes.
sSB 146 (File 395), favorably reported by the Public Safety and
Security Committee, prospectively directs funds received from an
online lottery program the CLC establishes to the state’s debt-free
community college program.
Special Transportation Fund
The STF is a dedicated fund used to finance the state’s
transportation infrastructure program and operate Department of
Transportation (DOT) and DMV (CGS § 13b-68). The law requires that
specified tax revenue (e.g., fuel taxes and a portion of sales and use tax
revenue) and various transportation-related fees, fines, and charges be
credited to the STF. By law, STF revenue is pledged to Special Tax
Obligation (STO) bonds issued for transportation projects through
DOT’s capital program (CGS §§ 13b-74 to 13b-77), and its resources
must be used first to pay off STO bond debt service.
Both the state constitution and the general statutes contain a
“lockbox” provision, which preserves the STF as a perpetual fund;
requires that the fund be used exclusively for transportation purposes,
including paying transportation-related debt; and requires that any
funding sources directed to the STF by law continue to be directed
there, as long as the law authorizes the state to collect or receive them
(Conn. Const., art. III § 19; CGS § 13b-68(b)).
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable Substitute
Yea 26 Nay 22 (04/22/2021) 2021HB-06443-R000638-BA.DOCX
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