Paid Sick Leave Mandate, Tax Cut Lead New State Business Laws

HARTFORD — State lawmakers this year approved new laws and changes to existing laws that go into effect on January 1 and impact Connecticut businesses either directly or indirectly, according to a release from the Connecticut Business and Industry Association.

Most prominent is the paid sick leave mandate that establishes a minimum number of days for paid time off for Connecticut employees and increases labor costs for many.

Also effective on New Year’s Day will be a 50 percent reduction in the business entity tax, new job-creation tax credits, more cost-driving health care mandates and a new investment account for manufacturers. Below are some highlights:

Mandatory paid sick leave. Connecticut becomes the first state in the nation to mandate paid sick leave on certain businesses of 50 or more employees, requiring them to provide a minimum of one hour of paid leave for every 40 hours an employee works, regardless of employers’ financial resources or business demands. The new mandate applies to all employers of “service workers” as defined by the legislation in a list of more than 60 job titles and functions.

Business entity tax. In the special session this fall, lawmakers essentially cut this annual $250 tax in half by making it payable to the state every other year (HB 6801, Section 23). Under the bill, the tax is payable annually through the 2012 tax year and every other year for subsequent tax years. The change could also reduce costs and administrative burdens within the state Department of Revenue Services.

Job expansion tax credits. Three previous state job-creation tax credits are combined into an expanded new one that can be applied against the insurance premium, corporation business, utility company, or personal income tax for businesses that create new jobs and hire certain Connecticut residents to fill them. Credits are increased to $500 per month per job created, or $900 for hiring individuals who are unemployed, disabled, and veterans. The credits were also modified to allow both pass-through entities and C corps to take advantage.

Manufacturers’ investment account. This year, state lawmakers created a vehicle to allow some smaller manufacturers to put aside money to grow their operations and workforces in Connecticut. The Jobs Bill expanded the new Manufacturing Reinvestment Account (MRA) program to 100 companies and an annual deposit potential of $100,000. When manufacturers decide to withdraw funds for the program’s express purposes, money withdrawn will be taxed at a rate of 3.5 percent, regardless of the company’s corporate or business structure.

Health insurance mandates. This year, state lawmakers passed several new or expanded health insurance mandates that will take effect on January 1. The problem is, Connecticut already has the fifth-highest total of health care mandates in the United States, according to the Council for Affordable Health Insurance (CAHI). And just one type of mandate alone, says CAHI, adds an estimated 20 percent to 50 percent to the cost of health insurance in Connecticut.