Assembly OKs elimination of property tax on manufacturing machinery and equipment
 
(April 28, 2006) The General Assembly has approved without opposition the phased elimination of Connecticut’s property tax on manufacturing machinery and equipment. Gov. Rell says she will sign the bill, which includes several additional measures to improve economic development in the state.

By eliminating the property tax on manufacturing machinery and equipment, SB-702 removes a significant deterrent for manufacturers to locate or expand their operations in Connecticut. CBIA applauds legislative leaders who made the elimination of the tax a major priority for the 2006 General Assembly and thanks Gov. Rell for her promise to sign the bill. SB-702 also establishes:

• Several education and workforce development initiatives
• Tax credits for the film industry
• New funding for small-business incubator programs
• New programs at Connecticut Innovations Inc. to finance early stage business ventures
• A new Office of Business Advocate within the Office of Policy and Management to serve as an information source for both public and private business assistance programs.

Lawmakers appropriately understood that eliminating the property tax on manufacturing machinery and equipment would boost prospects for job growth in manufacturing in the state. Under SB-702, newly acquired machinery and equipment (MME) will continue to be tax-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.

Eliminating the surcharge - Another step lawmakers can still take to improve Connecticut’s business climate and encourage more job creation is to eliminate both the 20% corporate tax surcharge for 2006 and the 15% surcharge for 2007.

According to the state comptroller’s office, the corporate tax will generate $105 million over budget this fiscal year — representing one of the biggest contributions to Connecticut’s expected $600 million surplus. It makes little sense to increase corporate taxes by 20% this year given the substantial budget surplus and heightened statewide concern over job growth and economic vitality. Business tax reform — such as the property tax exemption for manufacturers and the elimination of the corporate tax surcharge — is critical to removing barriers to job growth.

Maintaining the R&D tax credit - Numerous meetings have been held with legislators to discuss the importance of the research and development tax credit and tax credit exchange programs. CBIA, Connecticut United for Research Excellence and representatives of Connecticut companies explained how the programs should be maintained because they have encouraged R&D facilities and thousands of jobs to be located in the state. The current laws continue to encourage construction of new facilities and the creation of more jobs.

The business community asked that nothing be done to change this advantageous situation. Lawmakers agreed, and SB-669, which narrowed the definition of what constitutes R&D, was removed from the Senate’s agenda by placing it on the “foot” of the Senate calendar.

For more information, contact CBIA’s Bonnie Stewart at stewartb@cbia.com or 860-244-1900.