SB 443 — AN ACT CONCERNING THE ACCRUAL OF INTEREST ON CERTAIN TAX UNDERPAYMENTS AND THE BUSINESS OPERATING LOSS CARRY-OVER PERIOD.

If the appeal has been taken without probable cause, the court may charge double or triple costs, as the case demands, and upon all such appeals [which] that may be denied, costs may be taxed against the appellant at the discretion of the court but no costs shall be taxed against the state.

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(Effective from passage) Sections 12-204c, 12-242d, 12-699a and 12-722 of the general statutes shall not apply with respect to the accrual of any interest, in the case of any underpayment of tax by a taxpayer under chapter 208, 228z or 229 of the general statutes, to the extent such underpayment was due to the filing of an amended return necessitated LCO No.

2899 4 of 8 Raised Bill No.443 by the guidance in Notice 2021-20, issued by the Internal Revenue Service, concerning the federal employee retention credit program.

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Subdivision (4) of subsection (a) of section 12-217 of the 2024 supplementsSB443 to/ theFile generalNo. statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

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576 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(i) For income years commencing prior to January 1, 2015, the portion of such operating loss that may be deducted as an operating loss carry- over in any income year following such loss year shall be limited to the lesser of (I) any net income greater than zero of such income year following such loss year, or in the case of a company entitled to apportion its net income under the provisions of this chapter, the amount of such net income that is apportioned to this state pursuant thereto, or (II) the excess, if any, of such operating loss over the total of such net income for each of any prior income years following such loss year, such net income of each of such prior income years following such LCOloss No.year for such purposes being computed without regard to any operating loss carry-over from such loss year allowed under this subparagraph and being regarded as not less than zero, and provided further the operating loss of any income year shall be deducted in any subsequent year, to the extent available for such deduction, before the operating loss of any subsequent income year is deducted;

2899(ii) 5For ofincome 8years Raisedcommencing Billon No.443or lossafter yearJanuary for1, such2015, purposesthe beingportionof computed without regard to any operating loss carry-over from such loss year allowed under this subparagraph and being regarded as not less than zero, and provided further the operating loss ofthat anymay income year shall be deducted inas anyan subsequentoperatingloss year,sSB443 to/ theFile extentNo. available for such deduction, before the operating loss of any subsequent income year is deducted;

(ii)576 For2 incomesSB443 yearsFile commencingNo. on or after January 1, 2015, the portionof such operating loss that may be deducted as an operatingloss carry-over in any income year following such loss year shall be limited to the lesser of (I) fifty per cent of net income of such income year following such loss year, or in the case of a company entitled to apportion its net income under the provisions of this chapter, fifty per cent of such net income that is apportioned to this state pursuant thereto, or (II) the excess, if any, of such operating loss over the operating loss deductions allowable with respect to such operating loss under this subparagraph for each of any prior income years following such loss year, such net income of each of such prior income years following such loss year for such purposes being computed without regard to any operating loss carry-over from such loss year allowed under this subparagraph and being regarded as not less than zero, and provided further the operating loss of any income year shall be deducted in any subsequent year, to the extent available for such deduction, before the operating loss of any subsequent income year is deducted;

576 carry-over in any income year following such loss year shall be limited to the lesser of (I) fifty per cent of net income of such income year following such loss year, or in the case of a company entitled to apportion its net income under the provisions of this chapter, fifty per cent of such net income that is apportioned to this state pursuant thereto, or (II) the excess, if any, of such operating loss over the operating loss deductions allowable with respect to such operating loss under this subparagraph for each of any prior income years following such loss year, such net income of each of such prior income years following such loss year for such purposes being computed without regard to any operating loss carry-over from such loss year allowed under this subparagraph and being regarded as not less than zero, and provided further the operating loss of any income year shall be deducted in any subsequent year, to the extent available for such deduction, before the operating loss of any subsequent income year is deducted;

Only after the LCOcombined No.group's remaining operating loss carry-over for operating losses incurred prior to income years commencing January 1, 2015, has been fully utilized, will the limitations prescribed in subparagraph (A)(ii) of this subdivision apply.

2899 6 of 8 Raised Bill No.

443 combined group's remaining operating loss carry-over for operating losses incurred prior to income years commencing January 1, 2015, has been fully utilized, will the limitations prescribed in subparagraph (A)(ii) of this subdivision apply.

Only combined groups with unused operating losses in excess of six billion dollars from income years beginning prior to January 1, 2013, may make the election prescribedsSB443 in/ thisFile clause;No.

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576 prescribed in this clause;

Section 1 July 1, 2024,2025 andNew 12-237section applicable to written protests filed prior to, on or after July 1, 2024 Sec.

2 Julyfrom 1,passage 2024,12-217(a)(4) andFIN 12-422Joint applicableFavorable toSubst. hearing applications and written protests filed prior to, on or after July 1, 2024 LCO No.

2899sSB443 7/ ofFile 8 Raised Bill No.

443576 Sec.4 sSB443 File No.

3576 JulyThe 1,following 2024,Fiscal Impact Statement and 12-730Bill applicableAnalysis toare writtenprepared protestsfor filedthe priorbenefit to,of onthe members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or aftereither Julychamber 1,thereof 2024for Sec.any purpose.

4In fromgeneral, passagefiscal Newimpacts sectionare Sec.based upon a variety of informational sources, including the analyst’s professional knowledge.

5Whenever fromapplicable, passageagency 12-217(a)(4)data Statementis consulted as part of Purpose:the analysis, however final products do not necessarily reflect an assessment from any specific department.

ToOFA (1)Fiscal provideNote thatState anImpact: aggrieved taxpayer may, under certain circumstances, file a written request that the Commissioner of Revenue Services issue an order, decision, determination or disallowance, (2) require that interest not accrue on tax underpayments resulting from certain amended returns related to the employee retention credit program, and (3) allow business operating losses incurred in income years commencing on or after January 1, 2025, to be deductible over thirty income years.

[ProposedAgency deletionsAffected areFund-Effect enclosedFY in25 brackets.$ FY 26 $ Revenue Serv., Dept.

ProposedGF additions- areRevenue indicatedNone byMinimal underline,Loss exceptNote: that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.] LCO No.

2899GF=General 8Fund ofMunicipal 8Impact:

None Explanation The bill, which extends by 10 years the period when corporations may carryforwardanet operating loss (NOL)deductionfor corporation business tax purposes, results in a General Fund revenue loss estimated at $2.8 millioninFY 46 and$4.7million inFY 47andannually thereafter.

The bill also exempts taxpayers from paying interest on underpayments of corporation business, pass-through entity, and personal income taxes if the underpayment was due to an amended return filing necessitated by Internal Revenue Service (IRS) guidance on the federal employee retention credit (IRS Notice 2021-20).

This results in a minimal General Fund revenue loss as early as FY 26.

The Out Years The impact of the bill's NOL provision is limited to FY 46 and later as the carryforward period is extended from 20 to 30 years applicable to NOLs incurred in income years starting on or after January 1, 2025.

No out year impact is anticipated from the provision of the bill exempting interest related to underpayments due to IRS Notice 2021-20.

sSB443 / File No.

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576 OLR Bill Analysis sSB 443 AN ACT CONCERNING THE ACCRUAL OF INTEREST ON CERTAIN TAX UNDERPAYMENTS AND THE BUSINESS OPERATING LOSS CARRY-OVER PERIOD.

SUMMARY This bill exempts taxpayers from paying interest on underpayments of corporation business, pass-through entity, and personal income taxes if the underpayment was due to an amended return filing necessitated by Internal Revenue Service (IRS) guidance on the federal employee retention credit (IRS Notice 2021-20).

It requires the Department of Revenue Services to treat any interest already paid on these underpayments as an overpayment and refund it to taxpayers without interest.

The bill also extends, from 20 to 30 income years, the period when corporations may carry forward a net operating loss (NOL) deduction for corporation business tax purposes.

(NOL is the amount by which a corporation’s total allowable deductions exceed its gross income.) The bill’s extended carry forward period applies to NOLs incurred in income years starting on or after January 1, 2025.

EFFECTIVE DATE:

Upon passage for the NOL provision and July 1, 2025, for the underpayments provision.

BACKGROUND Federal Employee Retention Credit The federal employee retention credit is a refundable credit against employment taxes designed for eligible businesses that continued paying employees during the COVID-19 pandemic.

Eligible employers were allowedtoclaimthecredit onanoriginalor amendedemployment tax return for qualified wages paid between March 13, 2020, and sSB443 / File No.

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576 December 31, 2021.

In September 2023, the IRS ordered a moratorium on processing new credit claims due to its concerns that a substantial share of new claims were fraudulent.

It subsequently implemented stricter compliance reviews, a voluntary disclosure program that allows taxpayers to pay back a credit they received but were not entitled to, and a special withdrawal program for taxpayers with pending claims who realize they may have filed an inaccurate tax return.

COMMITTEE ACTION Finance, Revenue and Bonding Committee Joint Favorable Substitute Yea 51 Nay 0 (04/03/2024) sSB443 / File No.

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