BY TONY SWITAJEWSKI
The 2014 legislative session of the Connecticut General Assembly that concluded in May saw important tax measures approved and signed into law by Gov. Dannel Malloy. They include:
Manufacturing Reinvestment Account ”” Under the MRA program, administered by the state Department of Economic and Community Development, a manufacturer may make annual cash contributions to a designated savings account, not to exceed the lesser of $100,000 or the manufacturer”™s domestic gross receipts. This comes with a state income tax deduction for the amount contributed to the account as long as the money is utilized for qualified purchases.
Under recently enacted tax legislation and beginning Jan. 1, contributions to the MRA continue to be 100 percent deductible for Connecticut income tax purposes (for both C corporations and pass-through entities) in the year in which the contribution is made, but “qualified distributions” from the account are no longer considered taxable income.
Qualified distributions include the purchase of machinery or equipment; purchase (construction and expansion) of manufacturing facilities; or utilization of the funds for workforce training, development or expansion in Connecticut. The legislation also reduces the number of manufacturers that can participate in the MRA program from 100 to 50, but increases the maximum number of employees a manufacturer may have to be eligible as a small manufacturer, from 50 to 150.
Apprenticeship Tax Credit ”” Effective July 1, 2015, and applicable to tax years commencing on or after Jan. 1, 2015, pass-through entities (such as S corporations, limited liability companies and partnerships) are now allowed to earn the apprenticeship training credit and may sell, assign or otherwise transfer the credit, in whole or in part, to other taxpayers (i.e. generally, to C corporations). As of this writing, although the credit may be earned by a pass-through entity, it may not be passed through to the owners of the pass-through entity to reduce their tax liabilities.
Historic Structures and Homes Credits ”” Applicable to tax years beginning or after Jan. 1, legislation consolidates the historic structures rehabilitation credit and the historic preservation credit into a new historic rehabilitation tax credit that expands the types of property that may be eligible for a credit. Seventy percent of the annual $3 million credit cap must be reserved for historic homes in “regional centers” within 24 designated municipalities (effective July 1, 2015).
Neighborhood Assistance Act Tax Credit ”” Effective July 1, the NAA tax credit is available against the Connecticut corporation business tax for 100 percent of the cash amount invested in a “comprehensive college access loan forgiveness program” in an “educational reform district” that has established certain minimum eligibility criteria. Pass-through entities are not eligible for the NAA tax credit.
Sales and Use Tax Exemptions Added ”” Effective July 1, 2016, sales of goods and services to Connecticut credit unions are exempt from sales and use taxes (federal credit unions are currently exempt).
Sales and Use Tax Return Due Date Accelerated ”” Effective Oct. 1, the due date for remitting monthly sales and use tax returns and payments is moved to the 20th day of each month, rather than the last day. In addition, the state is authorized to require delinquent taxpayers to remit sales and use taxes collected on a weekly basis.
Property Taxes ”“ There are several significant changes regarding property taxation. They include:
”¢Â a property tax pilot program for the assessment of commercial property based on net profits of a business rather than market value of the property;
”¢Â changes to the property tax exemption for machinery and equipment;
”¢Â allowing certain municipalities to delay real estate revaluation that is required every five years; and
”¢Â authorizing municipalities to fix the assessment period for a period of years for improvements on land used for any retail business in a designated area.
These are all significant changes that were approved this year and are either now state law or will soon become state law.
Tony Switajewski, CPA, is a state and local tax partner with BlumShapiro, with offices in Shelton and West Hartford, plus Massachusetts and Rhode Island.
