Finance Committee approves
tax package

(April 7, 2006) The legislature’s Finance Committee has acted on many tax bills affecting Connecticut’s business community and the state’s ability to compete in the global economy.

Property tax on MME phased out
One of the most significant measures is a phasing out of the property tax on manufacturing machinery and equipment (MME) over a five-year period. The measure, contained in SB-1, is similar to the proposal offered by the business community.

Newly acquired machinery and equipment will continue to be exempt for the first five years. Machinery and equipment six years old or older will gradually be exempted, beginning with the Oct. 1, 2006 assessment year and ending with the Oct. 1, 2011 assessment year. The depreciation schedule for valuing MME, now optional, will be mandatory for towns. The state will make payment in lieu of taxes to towns. Once the exemption is fully implemented, the state will freeze payments to towns for the exempt property at the level towns will receive beginning Oct. 1, 2011. CBIA thanks the committee members who supported SB-1.

• SB-676 also contained a phase out of the property tax on MME as well as other non-business related tax measures.

Property tax revaluation
A number of property tax measures concerning revaluation were approved. Although the actual text of the bills is not yet available, summaries indicate:

• SB-668 makes a variety of changes to ensure that towns conduct revaluation and requires the Office of Policy and Management to establish a working group on the revaluation process. CBIA supports this measure.
  
• SB-531 permits towns to shift the property tax burden among various classes of properties by limiting the extent of increases for certain classifications, and allowing towns to impose different assessment ratios for different classifications.
  CBIA strongly opposes various classification schemes that permit towns to tax different classes of properties at different rates. Some legislators and towns are looking at less onerous ways to reduce the impact of revaluation on residents. We encourage the legislature to take a more reasoned approach than that contained in SB-531.
  
• SB-701 permits towns to phase-in the effects of their revaluation over 5-years for any or all of their property classes if the assessed value increased by fifty percent or more. CBIA opposes this measure as drafted because, in part, we do not believe that real property should be treated differently based on its classification.

Narrowing of R&D tax credit
Although the Finance Committee made changes to SB-669, it still significantly narrows the state’s research and development (R&D) tax credit and tax credit exchange by changing the definition of research and development expenditures. As approved, the bill harms many manufacturers, bioscience and technology companies in Connecticut.

R&D is one of Connecticut’s fastest growing industries, resulting in thousands of jobs being created here. CBIA opposes modifying current R&D tax programs.

Corporate surcharge
Repeal of the corporate income tax surcharge was not included in the Finance Committee’s package. Repealing the corporate tax surcharges for 2006 and 2007 would improve the state’s business climate. Policy-makers should include repeal of the surcharges in the final package.

For more information on these measures contact Bonnie Stewart at (860) 244-1900.