The Tax Cuts and Jobs Act of 2017 made significant revisions to federal personal income taxation. In response, the Connecticut General Assembly enacted legislative changes that effect the Connecticut personal income tax calculation.
Modification of IRC Section 168(k) Bonus Depreciation
For taxable years beginning on or after January 1, 2017, a taxpayer who deducts Internal Revenue Code (IRC) section 168(k) bonus depreciation on his federal income tax return for property placed in service after September 27, 2017, must add back such deduction when computing Connecticut adjusted gross income.
Modification of IRC Section 179 Deduction
For taxable years beginning on or after January 1, 2018, taxpayers must add back 80% of the IRC section 179 deduction taken for federal income tax purposes.
Subtraction Modification of Bioscience Investment Income
Beginning on or after January 1, 2018, a general partner of a qualified venture capital fund (as defined in the Code of Federal Regulations) can, in calculating Connecticut adjusted gross income, subtract the income generated by investments in eligible Connecticut bioscience businesses that was included in federal adjusted gross income.
Payment by Pass-Through Entities on Behalf of Nonresident Partners and Shareholders
Beginning on or after January 1, 2018, partnerships and S corporations doing business in Connecticut or with Connecticut-sourced income are no longer required to pay Connecticut income tax on behalf of their non partners or shareholders.
Penalty for Failure to Disclose Reportable Transactions
After January 1, 2018, audits of returns where there is a failure to disclose a reportable transaction (as defined in the IRC section 6707A) that is also required to be disclosed for federal purposes will be subject to a 75% penalty.
More Changes to Come
Because Connecticut is facing a large budget deficit, additional tax changes are expected for the 2019 legislative session. Most recently, Connecticut’s new governor proposed massive sales and use tax changes that effect most industries, including a proposal for sales tax on professional accounting services.