Connecticut Governor Signs Bill With Important Tax Changes

On June 6, Connecticut’s governor signed HB 5524, an omnibus bonding bill containing several important tax law amendments.

Section 112 of the bill extends the net operating loss (NOL) deduction from 20 years to 30 years, beginning with NOLs incurred in years commencing on or after January 1, 2025. The Office of Fiscal Analysis expects the amendment to generate tax savings of $2.8 million in 2046 and $4.7 million annually thereafter.

Section 137 of the bill allows certain combined groups to deduct, over a 30-year period, amounts necessary to offset the increase in the valuation allowance against NOLs and tax credits that resulted from the state’s shift to combined reporting in 2016. This additional deduction applies to combined groups that meet the following qualifications:

• The combined group was a publicly traded company (including specified affiliates) as of January 1, 2016.
• The shift to combined reporting resulted in an aggregate decrease in the amount of NOLs or tax credits the combined group could realize in Connecticut, for which a valuation allowance was reported.
• The group is claiming the FAS 109 corporate income tax deduction.
• When calculating the FAS 109 deduction, the group did not include the impact of the valuation allowance resulting from the shift to combined reporting.

The Office of Fiscal Analysis stated that Section 137 would provide tax savings of “indeterminate magnitude” beginning as early as 2026 and continuing through 2056.

Other provisions of interest include the following:

• Section 67 authorizes the Department of Revenue Services commissioner to reaudit insurance premiums tax returns and impose multiple deficiency assessments.
• Section 69 affects and makes optional tax withholding for certain retirement income distributions.
• Section 70 increases local option property tax exemptions for certain farm machinery and buildings.
• Section 71 allows municipalities to provide a 5–35% assessed value exemption for certain owner-occupied primary residences.
• Sections 72–79 extend the deadline to claim certain property tax exemptions even when the filing deadline has already passed.
• Section 126 creates a working group to examine the state’s tax expenditures and issue a report by January 1, 2025.

It is critical to begin planning today for the tax savings available in the coming years. Contact Ryan’s income, insurance, and property tax experts to ensure that your business is capturing the savings made possible by HB 5524.

TECHNICAL INFORMATION CONTACTS:

Argi O’Leary
Principal
Ryan
212.871.3901
argi.oleary@ryan.com

Duane Dobson
Director
Ryan
571.481.9428
duane.dobson@ryan.com

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.