Tax panel makes recommendations

Presenting six months of work on a dozen or so PowerPoint slides, a task force determined that Connecticut taxes similar businesses “inequitably” on the basis of their corporate structure, and said Gov. Dannel P. Malloy should push for a simplified code that better stimulates business investment.

Among specific recommendations, the task force suggested the state scrap its tax on gifts and cap estate taxes, and create “safe harbors” for part-time residents, acknowledging the impact personal income taxes have on influencing corporate executives in deciding whether to live in Connecticut or establish an office here.

The task force was led by Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services, and Catherine Smith, commissioner of the state Department of Economic and Community Development. Members included Chris Bruhl, CEO of the Business Council of Fairfield County in Stamford.

The panel had previously indicated it would recommend Connecticut eliminate a $250 biennial “business entity” tax, which Sullivan estimated about half of small businesses in the state have not bothered paying.

Instead, the panel suggested the state require any company doing business in Connecticut to file electronically with the state and pay a fee, with Sullivan previously having suggested setting at $120 ”“ possibly resulting in more revenue for the state given the delinquency rate the DRS commissioner stated his agency is seeing.

The Connecticut secretary of state currently fines companies that do business here without registering with that office. The panel did not recommend any fine that might be levied on companies that do not register under a new system.

The task force also recommended the state:

• phase out Connecticut’s practice of enacting surcharges on corporate taxes;
• provide a simplified, “EZ” tax form for smaller businesses;
• sunset tax credits that generate few or any takers;
• “phase down” sales taxes on consumers;
• expand access to tax credits a wider range of businesses;
• track and rationalize tax credits based on their performance; and
• create safe harbors for charitable activity and limited business activity.

The task force recommended the state clarify the current definition of “engaging in business” in Connecticut to ensure out-of-state businesses do not enjoy any advantages compared to their rivals with locations here, and said the state should create a working group to study the taxation of e-commerce.

The panel said the state should also study business property taxes, which it otherwise did not address in its recommendations as it lies primarily within the jurisdiction of municipalities.