Lamont’s proposed corporate tax reforms would cost businesses $348M over 2 years
Contributed | CT-N
Gov. Ned Lamont presents his budget to a joint session for the General Assembly on Wednesday.
In his two-year, $55.2 billion spending plan released Wednesday, Gov. Ned Lamont included several proposals to reform corporate taxes, but the result is an increased burden on businesses of nearly $348 million over the biennium.
During a briefing on the budget plan for news media before Lamont’s formal address, Jeffrey Beckham, secretary of the state Office of Policy and Management, provided an overview of the governor’s proposals, including those related to business taxes.
Of the six corporate tax policy changes proposed in Lamont’s budget, just two reduce the burden on businesses, while four would increase their taxes. Overall, corporate taxes would increase by $181.5 million in fiscal year 2026 and $166.4 million in fiscal 2027.
Among the changes that would reduce taxes is one Lamont mentioned Jan. 27 during a bioscience industry legislative breakfast in New Haven, which would increase the research and development (R&D) tax credit exchange rate from 65% to 90% for biotechnology firms. Beckham said raising the exchange rate would result in “only a $1.8 million hit to the General Fund” in each fiscal year.
Lamont also proposed eliminating two years early the capital base tax method of the corporation business tax, which is filed by approximately 6,500 firms. That would cost the state approximately $15.3 million in fiscal 2026 and $20.4 million in fiscal 2027, Beckham said.
Currently, corporations must calculate this tax in three different ways — the net income method, capital base method and $250 minimum tax method — and then pay the higher tax among the three. The capital base method combines the average capital stock, surplus and undivided profits and surplus reserves, and then subtracts the average value of deficits and the average value of stockholding in private corporations.
The capital base tax method currently is set to expire on Jan. 1, 2028; Lamont’s proposal would eliminate it on Jan. 1 next year.
Those two changes are the only ones that would reduce taxes for corporations.
The biggest increase would come from the governor’s proposal to eliminate the $2.5 million cap on the impact of combined unitary reporting, which would raise $132.1 million for the state in fiscal 2026 and $83.2 million in fiscal 2027. Beckham said Connecticut is the only state that has the cap feature.
The governor also proposes closing the net operating loss (NOL) provision that applies only to firms with cumulative NOL in excess of $6 billion. That move would raise $16.6 million over the next two fiscal years.
Lamont also proposed reducing the top film production tax credit from 30% to 25% (raising $26.3 million over two years) and extending the 10% corporation tax surcharge for three income years, raising $128 million over two years.
In addition to the corporate tax changes, Lamont also proposed eliminating license fees for certain professions. Under his plan, application and renewal fees for select professions would be eliminated, including nursing, dental hygienist, mental health clinician, paramedic, plumber, teaching and more.
Combined, for the 11 professions cited eliminating the fees would help more than 178,000 people.
The changes proposed by the governor would all have to be approved by the legislature.
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