June 1, 2018 Connecticut enacts tax bill in response to changes in the federal Tax Cuts and Jobs Act, includes new tax on pass-through entities, state and local tax deduction workaround On May 31, 2018, the Connecticut Governor Dannel Malloy signed into law SB 11, "An Act Concerning Connecticut's Response to Federal Tax Reform" (the Bill). The Bill makes various changes to Connecticut's tax laws, including the following: — Imposes a new 6.99% income tax on most pass-through entities (PTEs) and provides a credit to offset the tax at the personal or corporate income tax level — Allows municipalities to provide a property tax credit to eligible taxpayers who make voluntary payments to municipally-approved "community supporting organizations" — Requires individuals, for personal income tax purposes, to apportion the federal deduction for bonus depreciation over four tax years — Requires individuals and corporations, for personal income and corporation business tax (CBT) purposes respectively, to apportion the federal asset expensing deduction over five years — Specifies that for purposes of calculating the dividends received deduction under the CBT, expenses related to dividends equal 5% of all dividends received by a company during an income year (in essence, CBT taxpayers can only deduct 95% of the dividends received from 100% owned subsidiaries) — Decouples from the new federal business expense interest limitation in Internal Revenue Code Section 163(j) For an in-depth discussion of these changes, see Tax Alert 2018-1032. ——————————————— | ||||
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