Contributed by Ian Butler
Connecticut’s two-year budget passed in June 2019 includes some long-term changes that will impact business owners for many years to come.
Business Entity Tax
The $250 Business Entity Tax was paid every other year, due on April 15 for calendar year filers. All business entities, including LLCs, were subject to the tax. Effective January 1, 2020, the Business Entity Tax no longer applies.
However, before you get your hopes up that the state would really eliminate a source of tax revenue, note that the state simultaneously has increased the fee to file an annual report from $20 to $80, effective July 1, 2020. The annual report must be filed to maintain an organization’s “good standing” with the Secretary of State, and to avoid “administrative dissolution” which will occur if an annual report is not filed for more than one year. Although there is not a fine or penalty for failing to file annual reports on time, as was the case with the business entity tax, there are negative consequences.
Effective January 1, 2022, Connecticut’s Family and Medical Leave Act will apply to employers with one or more employees – drastically reducing the threshold from what used to be 75 employees.
Notably, the CT FMLA counts only employees and not independent contractors. The statute does not address how independent contractors are treated. Connecticut courts have taken the position that the CT FMLA should be interpreted consistently with Federal FMLA. There are far more court cases involving the federal FMLA, and there the courts have essentially said an independent contractor may still be considered an “employee” for purposes of the Federal FMLA where the independent contractor carries on its business for a single employer and does not maintain a distinct business serving others (e.g., a “captive” independent contractor that only works for one employer). Upon hearing the CT FMLA will apply to all employers with at least one employee, some creative employers likely had hopes of reorganizing to switch their employees to independent contractor status in order to avoid the application of the CT FMLA. However, according to the caselaw, doing so will still not escape the application of the CT FMLA so long as the “independent contractor” serves a single employer.
Do you have questions about how these new laws will impact your business? Contact Brown Paindiris & Scott LLP today for a free consultation. Also, visit our business law page for more legal information relevant to business owners in Connecticut.