January 8, 2018

CT sees $900M in early income-tax receipts

The State Capitol in Hartford.

The governor says Connecticut's strained coffers are drawing an unexpected $900 million early windfall in income-tax collections as a result of federal tax reform.

Gov. Dannel P. Malloy announced Monday that collections of estimated personal income taxes in December and January will exceed his administration's projection by more than $900 million.

This, he said in a statement, is the result of repatriation of foreign profits ahead of the Dec. 31, 2017 federal deadline.

Also, some individual state taxpayers remitted their income-tax payments earlier than usual, Malloy said, to avoid the new federal cap on state and local tax deductions that began on Jan. 1.

Connecticut in recent years, the governor said, has collected about $750 million in income taxes in December and January combined, and well over $1 billion in April.

He attributed the unexpectedly large revenue sum to one-time payments required under Section 457A of the Internal Revenue Code, a federal law enacted in Oct. 2008 to require hedge fund managers to bring overseas profits back into the United States by the end of 2017.

According to the "volatility cap'' provision of Connecticut's bipartisan state budget, any revenue from estimated and final income tax payments in excess of $3.15 billion must be diverted to the budget reserve fund.

The November consensus revenue projection for these payments was $3.14 billion, of which more than $2 billion has been collected to date, Malloy said.

This means that only $10 million of any increased collections can offset any budget deficit in fiscal 2018, which ends June 30, while the rest will be transferred into the rainy day fund under the new law.

"This is very promising news for the state," Malloy said. "And while I have been critical of many parts of the bipartisan budget, the legislature deserves praise for implementing the new volatility cap. Because of this new law, we know that any unexpected revenue will be set aside to meet future needs in a responsible way.''

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