CTCPA State Tax Group Testifies in Support of Proposal to Simplify Bond Premium Rules

CTCPA State Tax Group Chair Alan Clavette recently testified before the Connecticut General Assembly’s Finance, Revenue and Bonding Committee in support of the State Tax Group’s proposal, HB 5445 – An Act Concerning the Amortizable Bond Premium Subtraction for Purposes of the Personal Income Tax. More than a dozen group members also submitted written testimony supporting the proposal.

Under current Connecticut law, tax practitioners must perform intricate calculations to disallow bond premium amortization when the bonds are issued by municipalities outside of Connecticut. This requirement creates unnecessary complexity in the preparation of personal income tax returns, extends preparation time, and increases the likelihood of filing errors.

Allowing bond premium amortization on non-Connecticut municipal bonds – or alternatively providing a basis adjustment – would greatly simplify compliance and reduce administrative burdens for both taxpayers and practitioners. The current rule effectively creates a hidden penalty for investing in municipal bonds issued outside Connecticut, resulting in inconsistent tax treatment between Connecticut and non-Connecticut municipal issuers.

Simplifying this provision would improve clarity in the tax code, promote fairness among municipal bond investments, and reduce unnecessary audit inquiries related to complex adjustments. Streamlining this treatment would ultimately conserve administrative resources for both taxpayers and the state.

We will keep you informed as the proposal continues through the legislative process.