|
|
Governor Lamont Announces 2023 Legislative Proposal: Save Money for Small Businesses by Restoring Pass-Through Entity Tax Credit
(HARTFORD, CT) – Governor Ned Lamont today held a news conference in Hartford to announce his first legislative proposal of 2023, which includes restoring Connecticut’s pass-through entity tax credit to its original, revenue-neutral level of 93.01% and enabling small business owners in the state to save money by claiming a larger credit on their personal returns.
The recommendation will be included as a component of the governor’s fiscal years 2024 and 2025 budget proposal, which he will present to the Connecticut General Assembly in February.
“These changes we are proposing will help small businesses in Connecticut save money, which they can use to reinvest back into their establishments to support their continued growth and the development of new jobs,” Governor Lamont said. “By making this change, we can provide confidence to businesses that they can receive the full benefit of this tax credit.”
Connecticut’s pass-through entity tax credit is a mechanism for business owners to avoid the state tax deduction limitation imposed on them during the administration of former President Donald Trump. For federal tax purposes, state business taxes are fully deductible, while deductions for state personal income taxes are limited to $10,000. To avoid this limitation, the pass-through entity tax is imposed directly on the business rather than the owner. Because the business income that “passes through” to the owner has already been reduced by the pass-through entity tax, the owner is able to fully deduct it, without limitation, on their federal income tax return. As the pass-through entity tax has already been paid by the pass-through entity, and to avoid taxing the same income again on the owner’s personal income tax return, a corresponding personal-income tax credit is provided to the owner.
Connecticut was the first state in the nation to implement a pass-through entity tax credit, and since then more than 25 states have followed. At its inception, it was not intended to be a revenue raiser for the state, rather it was solely intended to help small business owners avoid the unfair deduction limits placed on them by the federal government.
In addition to increasing the credit, Governor Lamont’s budget proposal will recommend that businesses be allowed to elect whether to pay the tax on their income at the business or personal level. By providing this option, business owners can make the decision for themselves regarding what is more advantageous for their specific circumstances.
This proposal builds on several tax relief measures that have been approved by the Lamont administration over the last four years, including:
Repealing the business entity tax
Phasing out the capital base tax by income year 2028
Repealing the ambulatory surgical center tax
Repealing the movie theater admissions tax
Reducing the unemployment insurance tax in 2023
Restoring the cap on the R&D credit from 50.01% to 70% of tax liability
Expanding the employer student loan tax credit
Enacting the Jobs CT tax credit
Alexandra Daum, commissioner designate of the Department of Economic and Community Development, said, “This proposal, which directly benefits more than 120,000 companies, is the latest example of how Governor Lamont is prioritizing small businesses and boosting confidence in our state. Connecticut was the first state to implement a pass-through entity tax solution to benefit small businesses. We will continue to think creatively to make sure this is a great state in which to do business.”
Mark Boughton, commissioner of the Department of Revenue Services, said, “The intent of the pass-through entity tax was to provide a mechanism for members of pass-through entities to benefit from a state and local tax deduction despite federal limitations. Restoring the credit percentage to its original level provides such benefit, while helping businesses save money and empowering business owners to make the best tax decisions based on their individual circumstances. It’s a win-win for Connecticut.”
Jeffrey Beckham, secretary of the Office of Policy and Management, said, “In developing the governor’s budget proposal, we are listening to the concerns expressed by the business community. The restoration of the pass-through entity tax credit to 93.01% provides relief so businesses can continue grow and invest in our state.”
The Connecticut Business and Industry Association (CBIA) – the state’s largest group advocating on behalf of businesses – applauded Governor Lamont’s proposal.
Chris DiPentima, president and CEO of CBIA, said, “Restoring the pass-through entity tax credit will have an immediate and positive impact, allowing small businesses to invest tens of millions of dollars in jobs. It’s one of the critical steps needed to help Connecticut’s smaller employers compete and grow their workforce.”
Governor Lamont’s full package of legislative proposals for the 2023 regular session, including the entirety of his biennial budget proposal, will be presented to the Connecticut General Assembly in February.
The recommendation will be included as a component of the governor’s fiscal years 2024 and 2025 budget proposal, which he will present to the Connecticut General Assembly in February.
“These changes we are proposing will help small businesses in Connecticut save money, which they can use to reinvest back into their establishments to support their continued growth and the development of new jobs,” Governor Lamont said. “By making this change, we can provide confidence to businesses that they can receive the full benefit of this tax credit.”
Connecticut’s pass-through entity tax credit is a mechanism for business owners to avoid the state tax deduction limitation imposed on them during the administration of former President Donald Trump. For federal tax purposes, state business taxes are fully deductible, while deductions for state personal income taxes are limited to $10,000. To avoid this limitation, the pass-through entity tax is imposed directly on the business rather than the owner. Because the business income that “passes through” to the owner has already been reduced by the pass-through entity tax, the owner is able to fully deduct it, without limitation, on their federal income tax return. As the pass-through entity tax has already been paid by the pass-through entity, and to avoid taxing the same income again on the owner’s personal income tax return, a corresponding personal-income tax credit is provided to the owner.
Connecticut was the first state in the nation to implement a pass-through entity tax credit, and since then more than 25 states have followed. At its inception, it was not intended to be a revenue raiser for the state, rather it was solely intended to help small business owners avoid the unfair deduction limits placed on them by the federal government.
In addition to increasing the credit, Governor Lamont’s budget proposal will recommend that businesses be allowed to elect whether to pay the tax on their income at the business or personal level. By providing this option, business owners can make the decision for themselves regarding what is more advantageous for their specific circumstances.
This proposal builds on several tax relief measures that have been approved by the Lamont administration over the last four years, including:
Repealing the business entity tax
Phasing out the capital base tax by income year 2028
Repealing the ambulatory surgical center tax
Repealing the movie theater admissions tax
Reducing the unemployment insurance tax in 2023
Restoring the cap on the R&D credit from 50.01% to 70% of tax liability
Expanding the employer student loan tax credit
Enacting the Jobs CT tax credit
Alexandra Daum, commissioner designate of the Department of Economic and Community Development, said, “This proposal, which directly benefits more than 120,000 companies, is the latest example of how Governor Lamont is prioritizing small businesses and boosting confidence in our state. Connecticut was the first state to implement a pass-through entity tax solution to benefit small businesses. We will continue to think creatively to make sure this is a great state in which to do business.”
Mark Boughton, commissioner of the Department of Revenue Services, said, “The intent of the pass-through entity tax was to provide a mechanism for members of pass-through entities to benefit from a state and local tax deduction despite federal limitations. Restoring the credit percentage to its original level provides such benefit, while helping businesses save money and empowering business owners to make the best tax decisions based on their individual circumstances. It’s a win-win for Connecticut.”
Jeffrey Beckham, secretary of the Office of Policy and Management, said, “In developing the governor’s budget proposal, we are listening to the concerns expressed by the business community. The restoration of the pass-through entity tax credit to 93.01% provides relief so businesses can continue grow and invest in our state.”
The Connecticut Business and Industry Association (CBIA) – the state’s largest group advocating on behalf of businesses – applauded Governor Lamont’s proposal.
Chris DiPentima, president and CEO of CBIA, said, “Restoring the pass-through entity tax credit will have an immediate and positive impact, allowing small businesses to invest tens of millions of dollars in jobs. It’s one of the critical steps needed to help Connecticut’s smaller employers compete and grow their workforce.”
Governor Lamont’s full package of legislative proposals for the 2023 regular session, including the entirety of his biennial budget proposal, will be presented to the Connecticut General Assembly in February.
Ready for reliable and friendly service in a towing company? Combined with competitive rates? Call Force 1 Towing and Auto Body in Catasauqua at 610-266-6721