State lawmakers approved a number of laws this year that impact Connecticut businesses. Most significant were the far-ranging tax increases contained in the new budget, while other bills addressed economic development, the environment and the workplace. The following is a recap.
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Personal income tax
Numerous changes included increasing the top rate to 6.7 percent and phasing out the marginal rates for many taxpayers under a plan referred to as “recapture.” The budget also implemented an earned income tax credit and reduced the property tax credit from $500 to $300.
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Corporate taxes
A corporation tax surcharge of 20 percent was imposed for the 2012 and 2013 income years under the tax package.
Insurance companies will see their tax credits capped at 30 percent (down from 70 percent), for income years 2011 and 2012.
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Sales and use taxes
The state”™s general sales and use tax rate increased from 6 percent to 6.35 percent.
The hotel room occupancy tax increased from 12 percent to 15 percent.
The tax on the rental or leasing of a passenger vehicle for 30 consecutive days or less increased from 6 percent to 9.35 percent.
A sales tax rate of 7 percent now applies for vessels costing more than $100,000, vehicles costing more than $50,000, jewelry costing more than $5,000, and clothing and footwear costing more than $1,000.
New taxable services include airport valet parking, yoga instruction at a studio, packing and crating services, towing and road services, pet grooming, and nail and spa services.
Miscellaneous taxes
The estate and gift tax threshold was lowered from $3.5 million to $2 million. The existing 7.2 percent estate tax rate was extended to estates and gifts valued at between $2 million and $3.5 million.
The real estate conveyance tax increased from 0.5 percent to 0.75 percent with deletion of the sunset date.
The gross earnings tax on hospitals was repealed, while the budget imposed a new tax on net patient revenue, set at the maximum rate allowable under federal law.
Economic development
The new “First Five” program provides incentives to companies already in Connecticut and those that would locate here that create at least 200 jobs in the state.
The Manufacturing Reinvestment Account allows 100 manufacturers, with 50 employees or less, to invest in an interest-bearing, tax-deferred account for up to five years to save for the purchase of machinery, equipment, facilities or for workforce training and development.
The DECD Express offers a series of loans, forgivable loans and matching grants to state-approved small-business applicants that create or retain jobs.
Lawmakers designated $15 million in “pre-seed” funding for distribution to qualified technology companies with fewer than 25 employees.
The Job Expansion Tax Credits program, also known as JET, expands state job-creation tax credits that can be applied against the insurance premium, corporation business, utility company or personal income tax.
The Subsidized Training and Employment Program, or STEP, pays small businesses to hire and train workers who have been unemployed for more than six months.
The state has created a nine-member Connecticut Airport Authority charged with ensuring state”™s airports better compete and generate much-needed economic activity.
Health care
Seven new or expanded health benefit mandates that increase the cost of health insurance for individuals and many businesses, especially small businesses, were approved.
Connecticut already has more than 60 health insurance mandates on the books, one of the highest, and costliest, totals in the U.S.
Labor
Connecticut became the first state in the nation to mandate paid sick leave for businesses. From Jan. 1, 2012, companies (excluding manufacturers) with 50 or more employees face significant penalties if they do not provide paid sick leave.
Another bill prevents employers from requiring employees or applicants to consent to a credit check as a condition of employment, unless the employer is a financial institution, the employee is in certain financial occupations or it is required by law.
In addition, employers now are liable for even unintentional violations of personnel records laws, with increased penalties ($500 for first offenses, $1,000 for subsequent violations).
Bonnie Stewart is vice president of government affairs with the Connecticut Business and Industry Association. Reach her at bonnie.stewart@cbia.com.
