My Plan For

Property Tax Reform

General Assembly

 Amendment

February Session, 2004

LCO No. 5207

Offered by:

To: Subst. House Bill No. 5661

 File No. 607

 Cal. No. 399

"AN ACT CONCERNING PROPERTY TAXES. "

After the last section, add the following and renumber sections and internal references accordingly:

"Sec. 501. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) The provisions of sections 501 to 510, inclusive, of this act may be known and cited as the "Property Tax Fairness Act".

Sec. 502. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) Notwithstanding any provision of the general statutes, any municipality may provide income-based property tax relief in accordance with the provisions of sections 501 to 510, inclusive, of this act and such rules and procedures as may be established by the Secretary of the Office of Policy and Management for the purposes of implementing sections 501 to 510, inclusive, of this act.

Sec. 503. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) As used in sections 501 to 510, inclusive, of this act:

(1) "Connecticut adjusted gross income" shall have the same meaning as provided in chapter 229 of the general statutes.

(2) "Connecticut taxable income" shall have the same meaning as provided in chapter 229 of the general statutes.

(3) "Eligible taxpayer" means a household whose gross property taxes for the fiscal year in question exceed such taxpayer's joint state personal income taxes.

(4) "Gross property taxes" means property taxes that would be owed by an eligible taxpayer without a credit provided pursuant to section 504 of this act on (A) contiguous real property with, a dwelling with up to three housing units used as a permanent residence by the members of the household, and (B) up to two motor vehicles owned by such persons.

(5) "Growth of mandated expenditures" means an increase in expenditures of a municipality in the fiscal year in question over the previous fiscal year, calculated as the sum of (A) the larger of (i) the increase in the state educational minimum expenditure requirement applied to the municipality in question or (ii) any increase permissible under such standards of reasonable education expenditures as shall be defined by the State Board of Education, (B) the increase in all mandated special education expenditures, (C) all costs incurred in infrastructure or other improvements carried out under order from state or federal authorities, (D) increased costs under collective bargaining contracts, and (E) any other increased expenditure which the municipality in question claims as state or federally mandated, provided the secretary concurs with such claim.

(6) "Household" means one or more natural persons sharing the same housing unit as their primary residence who are related to one another either by marriage or as dependents for the purposes of personal income taxes.

(7) "Joint state personal income taxes" means the sum of the personal income taxes due under chapter 229 of the general statutes by the fifteenth day of April previous to the fiscal year in question by all of the persons who are members of a household.

(8) "Property taxes" means property taxes owed in a fiscal year by a household.

(9) "Secretary" means the Secretary of the Office of Policy and Management.

Sec. 504. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) Each municipality may, using such forms and procedures as may be adopted by the Secretary of the Office of Policy and Management, provide a credit against each eligible taxpayer's gross property taxes and reduce such eligible taxpayer's liability for property taxes to such municipality during the fiscal year in question by the amount of such credit. Except as provided under subsection (b) of section 506 of this act, the amount of such credit shall be equal to three-quarters of the difference between such eligible taxpayer's gross property taxes for the fiscal year in question and such eligible taxpayer's joint state personal income taxes, provided the credit allowed under this section shall not exceed seven thousand dollars per eligible taxpayer per fiscal year.

Sec. 505. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) Each municipality providing credits under section 504 of this act shall receive a payment in lieu of taxes for the full amount of all such credits that are granted from the revenue of the state-wide municipal tax imposed pursuant to section 507 of this act. Such payment shall be made to each such municipality by the Secretary of the Office of Policy and Management by February 1, 2005, for the fiscal year ending June 30, 2005, and by February first of each fiscal year thereafter. To be eligible for such payment, each municipality shall provide such documentation as shall be required by the secretary. The secretary may audit such documentation and adjust any requested payment to ensure compliance with sections 501 to 510, inclusive, of this act.

Sec. 506. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) (a) If the revenue from the state-wide municipal tax under section 507 of this act exceeds the payments that are made pursuant to section 505 of this act, the Secretary of the Office of Policy and Management shall hold such surplus funds in trust for the municipalities of the state. Such surplus funds, and any income derived from such surplus, may only be used to make payments in accordance with section 505 of this act.

(b) On or before June 1, 2004, for the fiscal year ending June 30, 2005, and on or before the first day of May prior to the commencement of each fiscal year thereafter, the Secretary of the Office of Policy and Management shall estimate the sum of the revenue from the state-wide municipal tax under section 507 of this act for the fiscal year in question and the current balance of funds held in trust pursuant to subsection (a) of this section. If such sum is less than the amount the secretary estimates to be sufficient to fully fund the payments that are made pursuant to section 505 of this act, the secretary shall estimate the percentage by which such sum is insufficient to fully fund such payments, and the amount of the credit provided under section 504 of this act to each eligible taxpayer shall be reduced by such percentage during the fiscal year in question. On or before June 1, 2004, for the fiscal year ending June 30, 2005, and on or before the first day of May prior to the commencement of each fiscal year thereafter, the secretary shall notify each municipality providing property tax relief in accordance with the provisions of sections 501 to 510, inclusive, of this act of the percentage by which such credits shall be reduced pursuant to this subsection during such fiscal year.

(c) The Secretary of the Office of Policy and Management may annually draw up to one-half of one per cent of the revenues of the state-wide municipal tax under section 507 of this act to reimburse the state for expenses incurred by the state in administering the provisions of sections 501 to 510, inclusive, of this act. Such amount shall be deducted prior to the calculations of revenue under subsections (a) and (b) of this section.

Sec. 507. (NEW) (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) (a) The Commissioner of Revenue Services shall, on behalf of the municipalities of the state, impose a state-wide municipal tax on the Connecticut taxable income of each resident of this state at a rate of two and one-half per cent:

(1) On the Connecticut taxable income in excess of two hundred sixty-five thousand seven hundred fifty dollars of any person who files a return under the federal income tax for such taxable year as an unmarried individual.

(2) On the Connecticut taxable income in excess of three hundred ninety-six thousand dollars of any person who files a return under the federal income tax for such taxable year as a head of household, as defined in Section 2(b) of the Internal Revenue Code.

(3) On the Connecticut taxable income in excess of five hundred thousand dollars of any married individuals who file a return under the federal income tax for such taxable year as married individuals filing jointly or any person who files a return under the federal income tax for such taxable year as a surviving spouse, as defined in Section 2(a) of the Internal Revenue Code.

(4) On the Connecticut taxable income in excess of two hundred fifty thousand dollars of any person who files a return under the federal income tax for such taxable year as a married individual filing separately.

(5) On the Connecticut taxable income of trusts or estates.

(b) The Commissioner of Revenue Services shall, on behalf of the municipalities of the state, impose a state-wide municipal tax on the Connecticut taxable income derived from or connected with sources within this state of each nonresident a tax which shall be the product of an amount equal to the tax computed in accordance with subsection (a) of this section as if such nonresident were a resident, multiplied by a fraction, the numerator of which is the nonresident's Connecticut adjusted gross income derived from or connected with sources within this state and the denominator of which is the nonresident's Connecticut adjusted gross income, provided, if the nonresident's Connecticut adjusted gross income is less than such nonresident's Connecticut adjusted gross income derived from or connected with sources within this state, (1) such nonresident's Connecticut adjusted gross income derived from or connected with sources within this state, reduced by the amount of the exemption provided in section 12-702 of the general statutes, as amended, shall be such nonresident's Connecticut taxable income derived from or connected with sources within this state and shall be multiplied by the tax rate specified in subsection (a) of this section for the purposes of determining the tax pursuant to this section, and (2) such nonresident's Connecticut adjusted gross income derived from or connected with sources within this state shall be such nonresident's Connecticut adjusted gross income for the purposes of determining the credit pursuant to section 12-703 of the general statutes, as amended. The provisions of this subsection shall also apply to nonresident trusts and estates and, wherever reference is made in this subsection to nonresidents of this state, such reference shall be construed to include nonresident trusts and estates, provided any reference to a nonresident's Connecticut adjusted gross income derived from sources within this state or to a nonresident's Connecticut adjusted gross income shall be construed, in the case of a nonresident trust or estate, to mean the nonresident trust or estate's Connecticut taxable income derived from sources within this state and the nonresident trust or estate's Connecticut taxable income, respectively.

(c) (1) The Commissioner of Revenue Services shall, on behalf of the municipalities of the state, impose a state-wide municipal tax on the Connecticut taxable income derived from or connected with sources within this state of each part-year resident a tax which shall be a product equal to the tax computed in accordance with subsection (a) of this section as if such part-year resident were a resident, multiplied by a fraction, the numerator of which is the part-year resident's Connecticut adjusted gross income derived from or connected with sources within this state, as described in subsection (a) of section 12-717 of the general statutes, and the denominator of which is the part-year resident's Connecticut adjusted gross income, as described in subdivision (2) of this subsection, provided, if the part-year resident's Connecticut adjusted gross income is less than such part-year resident's Connecticut adjusted gross income derived from or connected with sources within this state, (A) such part-year resident's Connecticut adjusted gross income derived from or connected with sources within this state, reduced by the amount of the exemption provided in section 12-702 of the general statutes, as amended, shall be such part-year resident's Connecticut taxable income derived from or connected with sources within this state and shall be multiplied by the tax rate specified in subsection (a) of this section for the purposes of determining the tax pursuant to this section, and (B) such part-year resident's Connecticut adjusted gross income derived from or connected with sources within this state shall be such part-year resident's adjusted gross income for the purposes of determining the credit pursuant to section 12-703 of the general statutes, as amended. The provisions of this subsection shall apply to part-year resident trusts and, wherever reference is made in this subsection to part-year residents, such reference shall be construed to include part-year resident trusts, provided any reference to a part-year resident's Connecticut adjusted gross income derived from sources within this state or a part-year resident's Connecticut adjusted gross income shall be construed, in the case of a part-year resident trust, to mean the part-year resident trust's Connecticut taxable income derived from sources within this state and the part-year resident trust's Connecticut taxable income, respectively.

(2) For purposes of subdivision (1) of this subsection and subsection (a) of this section, the Connecticut adjusted gross income of a part-year resident (A) changing his or her status from resident to nonresident shall be increased or decreased, as the case may be, by the items accrued under subdivision (1) of subsection (c) of section 12-717 of the general statutes, to the extent not otherwise includable in Connecticut adjusted gross income for the taxable year, and (B) changing his or her status from nonresident to resident shall be increased or decreased, as the case may be, by the items accrued under subdivision (2) of subsection (c) of section 12-717 of the general statutes, to the extent included in Connecticut adjusted gross income for the taxable year.

(d) The provisions of this section shall be applicable with respect to any person, trust or estate. Whenever, in this section, "any person" appears without "trust or estate", the reference to any person shall be deemed to include any trust and any estate unless, in the context of the particular provision, the reference to any person could not be applicable in the case of a trust or in the case of an estate.

(e) Taxpayer liability for the state-wide municipal tax imposed pursuant to this section shall be in addition to liability for the tax imposed pursuant to section 12-700 of the general statutes, as amended.

(f) The provisions of this section shall apply to taxable years commencing on or after January 1, 2004.

Sec. 508. (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) The Commissioner of Revenue Services shall adjust the withholding tables issued for purposes of administering the personal income tax imposed under chapter 229 of the general statutes to take into account any changes due to the new state-wide municipal tax imposed under sections 501 to 510, inclusive, of this act and, on or before June 1, 2004, shall issue new withholding tables applicable to taxable years commencing on or after January 1, 2004, provided the tables applicable to the period from the effective date of sections 501 to 510, inclusive, of this act to December 31, 2004, shall provide for the collection of a tax computed in such manner as to result, so far as practicable, in withholding from the employee's wages during such period an amount substantially equivalent to the tax reasonably estimated to be due from the employee under said chapter 229 with respect to the amount of such wages during a twelve-month period and further provided the tables applicable to any period after January 1, 2005, shall be prepared to take into account any changes due to the new tax imposed under sections 501 to 510, inclusive, of this act.

Sec. 509. (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) Notwithstanding the provisions of section 12-722 of the general statutes, any taxpayer required to make an estimated payment in June, 2004, for the tax due under chapter 229 of the general statutes shall make such payment in an amount which is adjusted for any change in the rate applicable to the current taxable year, as provided in section 12-700 of the general statutes, as amended, and as provided by sections 501 to 510, inclusive, of this act.

Sec. 510. (Effective from passage and applicable to taxable years commencing on or after January 1, 2004) Each municipality providing income-based property tax relief in accordance with the provisions of sections 501 to 510, inclusive, of this act shall, during each fiscal year for which it receives a payment under section 505 of this act, limit its total expenditures, excluding the growth of mandated expenditures, to the larger of the rate of inflation, as measured by the annualized federal consumer price index for urban consumers for the first two quarters of the fiscal year in question or the annualized growth in the gross state product for the state for the first two quarters of the fiscal year in question. If the secretary determines that a municipality has exceeded such limit on expenditures, such municipality shall be required to return to the secretary a portion of the payment it received pursuant to section 505 of this act equal to the amount such municipality exceeded such limit. "

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