CT SB00981

Extends the 10% corporate business tax surcharge (for companies with gross income of $100 million or more) through January 1, 2026, previously set to expire January 1, 2023, and increases the state earned income tax credit from 30.5% to 45% of the federal credit for taxable years beginning on or after January 1, 2023.

Reduces the lowest personal income tax bracket rate from 3% to 2% and the second bracket rate from 5% to 4.75% for taxable years beginning on or after January 1, 2024, while expanding pension/annuity and IRA distribution income tax subtractions with phased-in deduction schedules for individuals with federal AGI under $100,000 (or $150,000 for joint filers).

Imposes an additional 1% sales tax on meals and beverages sold by eating establishments, caterers, and grocery stores (effective July 1, 2023), with revenue split among three new accounts: 50% to a municipal host grants account, 25% to an arts, culture and tourism account, and 25% to a municipal needs capacity account.

Establishes a municipal tax revenue sharing framework requiring the Commissioner of Revenue Services to track and attribute corporate business tax, pass-through entity tax, and withholding tax revenue to municipalities, with excess revenue above projected growth rates transferred to a new municipal tax revenue account for distribution as grants (60% based on municipal attribution, remainder based on municipal needs capacity gap).

Requires the Department of Revenue Services to annually estimate the state tax gap, evaluate staffing needs, conduct cost-benefit analyses of compliance initiatives, and publish a strategic plan; also expands the biennial tax incidence report to cover additional taxes and income distribution categories including the top 0.5% of taxpayers.