Gov. Lamont Proposes Restoring Popular Business Tax Credit

CONNECTICUT — Gov. Ned Lamont is aiming to restore the pass-through entity tax credit to its original 93.01 percent reimbursement level in an effort to help small and mid-sized business owners.

The credit was created as a mechanism for getting around the $10,000 state tax deduction limitation that was created under former President Donald Trump’s administration.

“These changes we are proposing will help small businesses in Connecticut save money, which they can use to reinvest back into their establishments to support their continued growth and the development of new jobs,” Lamont said in a statement.

House Republican Leader Vincent Candelora said the move was a reversing a previous tax hike, something which Republicans proposed in last year's legislative session.

"It's good news that Governor Lamont continues to show that he's on board with the tax relief Republicans are pursuing, in this case correcting a tax hike on businesses that was included in the budget he and legislative Democrats put into action in 2019," Candelora said in a statement.

State business taxes are fully deductible from federal tax returns, but personal ones are subject to a $10,000 limit. Many small business owners will pass through earnings as personal income, but run into the limit.

The state pass-through entity tax is imposed on businesses, and the small business owner receives a personal income tax credit. Connecticut was the first state to implement the pass-through entity tax credit and it was followed by more than 25 states.

State legislators and Lamont reduced the credit from the original 93 percent to 87 percent early in Lamont’s first term, according to the CT Mirror.

Small and mid-sized businesses have urged Lamont to restore the credit to its original value. CBIA, Connecticut’s largest business advocacy group, urged Lamont to restore the credit during re-election campaign.

“Restoring the pass-through entity tax credit will have an immediate and positive impact, allowing small businesses to invest tens of millions of dollars in jobs,” CBIA CEO Chris DiPentima said in a statement, “It’s one of the critical steps needed to help Connecticut’s smaller employers compete and grow their workforce.”