The Connecticut transfer entity, created to help small businesses, has now forced many of them to pay the state’s highest income tax rate.
The corresponding tax and credit were implemented in 2018 for companies to complete after federal tax changes limit the deductibility of state and local taxes, penalizing small businesses throughout the country.
However, when the state legislature reduced the credit to 87.5% the following year to fill a budgetary vacuum, small businesses, the soul of Connecticut’s economy, were again unjustly penalized.
The president and CEO of CBIA, Chris dipentima, asked legislators to restore credit to their original 93.01%, and “return approximately $ 60 million to more than 100,000 of the smallest employers of Connecticut.”
Dipentima told him to February 26 Finance, Income and Linking Committee He helped that while 28 states followed the example of Connecticut promulgating fiscal measures to mitigate federal limits in salt deductions, only two chose to maintain a part of the corresponding credit: Massachusetts and Connecticut.
Highest tax rate
He testified that small businesses established as transfer entities generally pay their state taxes through personal income tax, with a maximum rate of 6.99%.
“However, the reduction in the tax credit of the transfer entity means that these small businesses are now paying an effective tax rate of 7.8%,” he said.
“That is more than the corporate tax rate of 7.5% and the highest income tax rate of the State. Not to mention that it is also regressive.
“Note that small businesses are directly covering other income expenses, including payroll, unemployment, social security and other taxes and insurance.
“Unlike corporations, transfer entities are also taxed with the income invested in the business. In other words, they have been promoted to do exactly what we want to do: make their mark here. “
Dipentima was talking in support of HB 5549which restores credit at the original level of 93.01%.
The bill was presented by the minority leader of the House of Representatives Vincent Candelora (R-Norte Branford), Sen. Jason Perillo (R-SHelton), representatives Tim ackert (R-Coventry), Devin Carney (R-Saybrook), Tom O’dea (R-New Canaan), David Rutigliano (R-TRUMBULL), Tami Zawistowski (R-AAST GRANBY), and Lezlye Zupkus (R-Prosta). It is co -colored by Sen. Rob Sampson (R-Wolcott).
‘Double Tax’
The National Federation of Independent Business Statement, Andy Markowski, told the Committee to reduce credit represented a tax increase in small businesses.
“[It’s] Essentially, a tax increase or perhaps considered double taxes on a part of the state income of certain owners of small businesses organized as transfer entities, ”he said.
“The restoration of full pet credit would allow the fiscal treatment of the owners of small businesses affected to be in line with the original intention of the pet.”
Andy Markowski of NFIB said that reducing credit represented a tax increase in small businesses.
Diprentima asked legislators to provide more support for small businesses, “often compete in an unequal playing field.”
“For example, they are not eligible for the Fiscal Credit of Investigation and Development or the Fiscal Credit Program for Student Loans,” he said.
“Restoring the tax credit of the transfer entity is a crucial element of that support: promoting and promoting small businesses while promoting economic growth, with the increase in the resulting economic activity and employment creation also generating additional income for the State.”
For more information, communicate with CBIA Chris Davis (860.244.1931).