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Bill blocking double taxation, adding municipal funding tier passes House

Journal Inquirer - 2/25/2021

Feb. 25—The House approved a bill Wednesday that would prevent Connecticut residents from being double taxed as they work remotely amid the coronavirus pandemic and also would create a new tier formula for Payment In Lieu of Taxes grants to municipalities.

As many office employees avoid the pandemic and work from home, surrounding states, including New York and Massachusetts, are requiring those who normally commute to Connecticut to pay income taxes to their states instead of Connecticut.

Under the House-backed bill, those working in Connecticut and paying nonresident income taxes to other states while working from home would be allowed a credit against their Connecticut personal income tax for taxes paid in the 2020 income year.

TAXES

DOUBLE TAXATION: Those who are employed out of state but who are working from home amid the pandemic would not have to pay taxes to both states.

PILOT PROGRAM: The municipal funding program would have three tiers of eligibility that would provide grants based on grand list per capita.

NEXT: Awaiting action in the Senate.

Following a 125-24 vote, the measure moves to the Senate for further action.

If the bill does not become law, Connecticut residents would owe about $300 million in additional personal income tax payments for 2020, according to the nonpartisan Office of Fiscal Analysis.

Gov. Ned Lamont called the House's approval "a great step forward toward tax fairness in our state," noting that thousands of residents have chosen to protect their health and the health of others by working remotely. "They should be protected against paying a penny in extra taxes last year as a result."

Overall, about 110,000 Connecticut taxpayers would avoid double taxation, with about 80,000 normally commuting to New York and about 30,00 to Massachusetts, Rep. Sean Scanlon, D-Guilford, said.

The bill also includes a new Payment In Lieu of Taxes, or PILOT, program that would be based on a municipality's net grand list per capita.

Municipalities with a grand list of $100,000 per capita would fall into the first tier, $100,000 to $200,000 into the second, and more than $200,000 per capita into the third.

Critics of the new PILOT formula argue the state has not kept past promises, but the bill explicitly states that no PILOT payments for any municipality would be less than what they received this fiscal year.

Proponents say the new formula would be more equitable and help cover lost property tax revenue for municipalities with an abundance of state-owned land.

"Changes to our PILOT program will help lift up our cities, the cultural heartbeats of our state, and provide them the resources they need to thrive," Lamont said.

The only municipality listed in the bill is Bridgeport, which would receive an additional $5 million because of a delayed revaluation and Sacred Heart University acquiring a significant amount of land in the city, Scanlon said.

The PILOT program is, however, tied to the budget, which will be negotiated over the next several months.

While Republican legislators said grants could be a promise to municipalities that isn't fulfilled, Rep. Toni Walker, D-New Haven, the House chairwoman of the Appropriations Committee, assured lawmakers that the PILOT funding will be included in the final budget.

While the state relies on April tax revenue numbers to provide a clearer fiscal outlook, "municipalities are working on their budgets as we speak and they want to know what the state is going to do," Scanlon said.

Finally, people who have received certain state aid, but have a lien on their homes, would be provided forgiveness under the bill, removing obstacles to refinancing.

Proponents argue those who were once struggling shouldn't have to pay back the state once they are able to afford their own home.

"This represents a commitment to a policy approach that helps provide necessary action for a fair shot at success for all families across our state," Lamont said.

The state is expected to lose up to $12 million annually beginning next fiscal year because of the lost revenue from the recouped aid, according to OFA.

Many Republicans, including Rep. Tammy Nuccio, R-Tolland, said each provision of the bill was legitimate, but should have been individually debated. The only provision that required immediate action, critics said, was the one to prevent double taxation.

Nuccio said that all three provisions were worthy of a debate, but that Democrats grouped them together to pass each quickly.

"I feel like this bill has taken the easy way out," she said.

Nuccio ultimately voted in favor of the measure.

Rep. Craig Fishbein, R-Wallingford, attempted to amend the bill to eliminate all provisions except those pertaining to double taxation, of which he said he was "fully in favor," but the amendment failed on a party-line vote.

During session, Eric can be found at the Capitol in Hartford, reporting the information that readers want and need to know. For insights and updates on legislation, politicians, committees, and commissions that affect the entire state of Connecticut, follow Eric on Twitter: @BednerEric.

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