CTCPA State Tax Group Testifies in Support of Proposal to Simplify Bond Premium Rules, but Urges Further Action

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 and CTCPA Executive Director Bonnie Stewart also submitted written testimony supporting the proposal.

Under current law, taxpayers may subtract amortizable bond premiums only if the premium is tied to a trade or business – a rule that forces practitioners to perform “complex calculations” for non‑Connecticut municipal bonds and increases the risk of filing errors.

HB 5445 would remove that trade‑or‑business requirement, a change that would make the system more intuitive and reduce unnecessary audit scrutiny. The bill accomplishes this by eliminating bond‑premium language from the section of law dealing with business‑related expenses.

In her written testimony, Bonnie Stewart called the bill “a positive step” but urged lawmakers to strengthen it. She noted that taxpayers should not face “a more complex or less favorable state tax outcome just because a municipal bond was issued outside Connecticut.” We’ve asked legislators to go further by explicitly allowing amortizable bond premium deductions for non‑Connecticut municipal bonds or, at minimum, providing a basis adjustment. We believe that either change would improve fairness, reduce administrative burdens, and make compliance easier for taxpayers and preparers.

We will keep you apprised as this moves forward.