In June of 2015, Connecticut passed legislation that implements combined reporting for tax years beginning on, or after January 1, 2016. Part of the new regime, which is codified by Conn. Gen. Stat. P.A. 15-5, § 144 (2015), requires water’s-edge combined groups to include entities incorporated in tax havens in the combined group. Just before the holidays, the Connecticut General Assembly passed legislation that narrowed the definition of a “tax haven” from the originally adopted definition. Under the originally passed combined reporting law, the determination of whether a jurisdiction was a “tax haven” was made using five different definitions. If any one definition was satisfied, the jurisdiction was a “tax haven.” None of the five definitions is entirely clear and each generally required an analysis of facts related to the jurisdiction’s government rather than the activities of a taxpayer in the jurisdiction. The original definition of tax haven was similar, but not identical to the Multistate Tax Commission Proposed Model Statute for Combined Reporting. The new law required the commissioner of revenue to publish a list of jurisdictions determined to be tax havens by September 30, 2016. In December, the Connecticut General Assembly convened a special session and passed Public Act 15-1, which amends the newly enacted tax haven law in section 37. As amended, the Connecticut statute still contains the five different definitions. However, the amended law excludes from the definition of a tax haven “a jurisdiction that has entered into a comprehensive income tax treaty with the United States” and which meets certain other requirements. Additionally, the December legislation also repealed the requirement for the commissioner to publish a list of tax havens. In sum, the limiting amendment to the tax haven law should provide taxpayers with some clarity, although that will be somewhat offset by the lack of a formal list. Connecticut is one of four New England states that considered and/or passed legislation adding tax haven provisions to their combined reporting regimes. Tax haven legislation passed in Rhode Island in 2015, as part of Rhode Island’s adoption of combined reporting effective for tax years beginning on or after January 1, 2015. The Maine and Massachusetts legislatures considered tax haven provisions, but ultimately did not pass such laws in 2015.
Multistate Tax Commission Proposed Model Statute for Combined Reporting