This year's General Assembly avoided any sweeping changes in state tax laws but adopted at least one proposal of great interest to Connecticut's family-owned businesses.
Double taxation in Connecticut's estate and gift tax laws has been a problem for some time. State gift taxes are often paid when trusts are established by many small and family-owned businesses as part of their succession planning.
Yet if a death occurs within a certain amount of time after the trust is established, the trust's assets are brought back into the estate--and the Connecticut Department of Revenue Services (DRS) then taxes the estate without granting a credit for taxes already paid.
Thus, double taxation. But lawmakers took steps to stop that by passing legislation requiring the DRS to grant credit for gift taxes paid when the gifts are drawn back into the estate.
Connecticut's gift and estate tax law will be made fairer and more consistent with federal Internal Revenue Code--a positive development for Connecticut's small and family-owned businesses.
Apprenticeship Tax Credits
Lawmakers this year also extended the ability to earn the state's apprenticeship tax credit to pass-through entities (S corporations, LLCs, LLPs and sole proprietorships) for income years beginning on or after Jan. 1, 2015. While only C corporations can claim the credit, pass-through entities that earn the credit will be able to sell, transfer or assign the credit. This will particularly help small and midsize businesses in Connecticut build their talent base through apprentices.
And in view of what some competitor states: including New York: have achieved in changing their tax structures to boost economic development, the legislature mandated a comprehensive look at state and local tax structures. A panel of experts will conduct the study to be completed by Jan. 1, 2015, but the group may recommend extending the reporting deadline out to January 1, 2016.
Subcommittees will focus on:
- Personal income taxes, including estate and gift taxes
- Business taxes, including excise taxes
- Consumer taxes
- Property taxes
All of these are extremely important because many employers pay their business taxes through the personal income tax; and estate and gift tax laws impact family owned businesses, succession planning and the availability of investment dollars.
For more information, contact CBIA's Bonnie Stewart at 860.244.1925 or email@example.com.