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OLR Bill Analysis
sSB 443
AN ACT CONCERNING THE ACCRUAL OF INTEREST ON CERTAIN
TAX UNDERPAYMENTS AND THE BUSINESS OPERATING LOSS
CARRY-OVER PERIOD.
SUMMARY
This bill exempts taxpayers from paying interest on underpayments
of corporation business, pass-through entity, and personal income taxes
if the underpayment was due to an amended return filing necessitated
by Internal Revenue Service (IRS) guidance on the federal employee
retention credit (IRS Notice 2021-20). It requires the Department of
Revenue Services to treat any interest already paid on these
underpayments as an overpayment and refund it to taxpayers without
interest.
The bill also extends, from 20 to 30 income years, the period when
corporations may carry forward a net operating loss (NOL) deduction
for corporation business tax purposes. (NOL is the amount by which a
corporation’s total allowable deductions exceed its gross income.) The
bill’s extended carry forward period applies to NOLs incurred in
income years starting on or after January 1, 2025.
EFFECTIVE DATE: Upon passage for the NOL provision and July 1,
2025, for the underpayments provision.
BACKGROUND
Federal Employee Retention Credit
The federal employee retention credit is a refundable credit against
employment taxes designed for eligible businesses that continued
paying employees during the COVID-19 pandemic. Eligible employers
were allowed to claim the credit on an original or amended employment
tax return for qualified wages paid between March 13, 2020, and
December 31, 2021. In September 2023, the IRS ordered a moratorium 2024SB-00443-R000576-BA.DOCX
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on processing new credit claims due to its concerns that a substantial
share of new claims were fraudulent. It subsequently implemented
stricter compliance reviews, a voluntary disclosure program that allows
taxpayers to pay back a credit they received but were not entitled to,
and a special withdrawal program for taxpayers with pending claims
who realize they may have filed an inaccurate tax return.
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable Substitute
Yea 51 Nay 0 (04/03/2024)