Car Tax Fix Prevails in Special Session

The Connecticut General Assembly addressed a troublesome issue with municipal car taxes in a special session this week. 

SB 501, which Gov. Ned Lamont is expected to sign, helps avert a massive tax increase for many commercial vehicle owners.

The legislation also changes the South Central Connecticut Regional Water Authority’s charter to allow it to bid for Aquarion Water Company’s service and assets. 

Divided by party lines in the state Senate, the bill passed on a 82-42 vote in the House with support and opposition from both parties. 

The passage of the bill impacts commercial vehicle owners in more than 50 towns across the state. 

Car Tax

A 2022 law, originally set to take effect July 1 this year, required business owners to declare commercial vehicles as personal property, with vehicles subject to the town’s mill rate on personal property rather than the capped motor vehicle rate. 

During the recent legislative session, the Senate passed a last-minute amendment allowing towns to eliminate the car tax by shifting the burden to real and commercial property.

The amendment also permitted localities to set their own assessment rates on real and personal property, allowing municipalities to tax residential and commercial properties at different rates.

SB 501 removes the provision, allowing commercial vehicles to still fall under the motor vehicle tax cap. 

This change doubled the tax rate on commercial vehicles in cities with mill rates higher than the motor vehicle mill rate cap of 32.46 mills. 

SB 501 removes the provision, allowing commercial vehicles to still fall under the motor vehicle tax cap. 

It also establishes a new depreciation schedule based on MSRP at the time of purchase rather than the vehicles’ market value.

This is intended to mitigate fluctuations in tax assessment for motor vehicles while providing greater predictability.  

Additional Changes 

Opposition to the bill largely centered around amending the water authority’s charter without a public hearing. 

The change to the charter allows the regional authority to borrow or bond to acquire Aquarion Water Company or its subsidiaries—although there is no guarantee the agency will win the bidding process. 

In addition, SB 501 addresses a number of other procedures:

• Replaces “uninsured banks” with “innovation banks” in the state—a title for banks that are a Connecticut-chartered or -organized bank and trust company, savings bank, or savings and loan association that does not accept retail deposits. 
• Exempts taxpayers from paying interest on underpayments of corporation business, pass-through entity, and personal income taxes if the underpayment was due to an amended return filing required by Internal Revenue Service guidance on the federal employee retention credit. 
• Changes the basis for calculating the annual general assessment that domestic insurers and HMOs pay the Connecticut Insurance Department to the total amount of insurance premium taxes insurers and HMOs reported to the Department of Revenue Services two years prior before applying any allowable or available tax credits. 
• Revises the process for the State Historic Preservation Office to make determinations for proposed projects that could have an impact on the state’s historic structures and landmarks. 
• Prohibits construction managers on school construction projects from bidding on project subcontracts. 

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For more information, contact CBIA’s Chris Davis (860.244.1931).