Connecticut: Budget Bill Includes Corporate Tax Increases: Tax Amnesty and Hotel and Restaurant Relief

Senate Bill 1202, which was signed into law on June 23, 2021, contains the revenue provisions necessary to implement the state budget.  One of the changes is the extension of the ten percent corporate surtax that expired in 2021. The surtax now applies for the 2021 income year through income years beginning prior to January 1, 2023. Recall, the surtax does not apply to taxpayers that pay the $250 minimum tax or that have less than $100 million in gross income for the tax year. However, taxpayers filing combined returns are subject to the surtax regardless of income level. In addition, the phase-out of the capital tax, which was scheduled to be completed by 2024, has been slowed. For income tax years commencing prior to January 1, 2024, the tax will be imposed at a rate of 3.1 mills ($.0031) on each dollar of capital. Thereafter, the rate will be reduced each year until the tax is phased out for income years commencing on or after January 1, 2028. Senate Bill 1202 authorizes tax amnesty program that allows taxpayers the opportunity to file and pay, without civil penalties or criminal prosecution, any taxes and interest owed for any tax year ending on or before December 30, 2020. Under the program, qualifying taxpayers may receive an abatement of 75 percent of any interest owed for the affected taxable period. The tax amnesty program will be held from November 1, 2021 to January 31, 2022. During that period, taxpayers must file a tax amnesty application and pay all taxes and interest determined to be due for the tax years in question. Taxpayers that participate in the program relinquish their rights to administrative or judicial appeals, and rights to a refund or credit for amounts paid under the amnesty program. Additionally, amnesty will not be granted to taxpayers who are party to any criminal investigation or litigation pending on July 1, 2021. Nor will amnesty be granted to any taxpayer who is party to a closing agreement or managed audit agreement with the commissioner, or who has made an offer in compromise that has been accepted by the commissioner.

The bill further provides for a 100 percent retention of sales tax attributable to the sale of meals by certain establishments during specified weeks. Qualifying establishments include those classified under Sector 72, Accommodation and Food Services, of the North American Industry Classification System. Such establishments, which include hotels and restaurants, may retain 100 percent of applicable Connecticut sales tax attributable to the sales of meals made during one of the following weeks: August 1, 2021 to August 7, 2021; December 12, 2021 to December 18, 2021; or May 15, 2022 to May 21, 2022. For more information, please contact Cheryl Ladyzhets or Andy Koutroumanis.