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HB 5186

AN ACT CONCERNING THE AFFECTED BUSINESS ENTITY TAX AND THE CREDIT RELATED THERETO AND ESTABLISHING A SURCHARGE ON THE AMOUNT OF FEDERAL QUALIFIED BUSINESS INCOME DEDUCTIONS CLAIMED BY CERTAIN FILERS.

2026 Regular Session Introduced by Patrick Biggins and 34 co-sponsors

Connecticut bill establishes surcharge on federal Qualified Business Income deductions for certain business entities, increasing state taxes on business owners and pass-through entities.

REF. TO JOINT COMM. ON Finance, Revenue and Bonding
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Bill Summary · HB 5186

Legislative bill overview

HB 5186 modifies Connecticut's tax treatment of business entities and establishes a new surcharge on federal Qualified Business Income (QBI) deductions claimed by certain taxpayers. The bill appears to adjust existing "Affected Business Entity" tax provisions while introducing an additional tax mechanism targeting those who claim significant federal business income deductions.

Why is this important

This legislation directly impacts Connecticut's business tax revenue and could affect pass-through entities (like S-corps, partnerships, and LLCs) and self-employed individuals. The changes could increase tax burdens on small business owners and entrepreneurs, potentially influencing business location decisions and competitiveness compared to neighboring states.

Potential points of contention

  • Definition of "certain filers": The bill's specificity regarding which business structures and income levels trigger the surcharge remains unclear from the title alone; broader definitions could catch more small businesses than intended
  • Double taxation concerns: A surcharge on federal QBI deductions could create a compounding tax effect, as federal deductions are designed to reduce federal taxes, and this state-level surcharge may be viewed as penalizing legitimate business income
  • Economic competitiveness: Connecticut already has relatively high business tax rates; additional surcharges may encourage business relocation to lower-tax states or deter entrepreneurship and business expansion

Compiled from official sources — confirm details with the bill’s official record.

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