Connecticut Legislature Passes Tax Bill To Help Small Businesses In The States
The Connecticut legislature has passed a bill that would preserve small businesses’ ability to deduct state and local taxes. As the S-Corp Association explained, the Tax Cuts and Jobs Act passed last December by the U.S. House and Senate allowed pass-through businesses to only deduct states and local taxes if they paid the taxes at the entity level. If businesses paid the taxes at the owner level, they could not deduct their state and local tax bills.
The Connecticut bill helps Connecticut small businesses by requiring all S-Corps to pay taxes at the entity level. The Connecticut Business and Industry Council supported the bill and Gov. Dan Malloy is expected to sign it. The S-Corp Associations estimates the bill would reduce small businesses’ effective tax rates by 2.8 percentage points. However, because the reform requires all Connecticut pass-through businesses to pay an entity level tax, the bill would reduce taxes for in-state owners, but likely increase them for out-of-state owners.