SN 95(11)
1995 Legislative Changes Affecting the
Neighborhood Assistance Act Tax Credit
PURPOSE: The purpose of this Special Notice is to summarize the legislative changes made to the R. E. Van Norstrand Neighborhood Assistance Act (hereinafter referred to as the Neighborhood Assistance Act) during the 1995 Session of the Connecticut General Assembly.
STATUTORY AUTHORITY: Conn. Gen. Stat. §§12-631 through 12-638, as amended by 1995 Conn. Pub. Acts 268; 1995 Conn. Spec. Acts 26; Conn. Agencies Regs. §§12-638-1 through 12-638-8.
EFFECTIVE DATE: July 6, 1995.
ADMINISTRATIVE RESPONSIBILITY: The responsibility for administering the Neighborhood Assistance Act now resides in the Department of Revenue Services. (Formerly, the Department of Social Services was responsible for administering the Neighborhood Assistance Act.) Conn. Gen. Stat. §12-632, as amended by 1995 Conn. Pub. Acts 268, §2.
TOTAL AMOUNT OF CREDITS AVAILABLE: The total amount of all Neighborhood Assistance Act tax credits allowed in a program year remains $3 million. However, $2 million of that amount must be allowed for program investments that are approved under Conn. Gen. Stat. §12-635 (involving programs serving low income persons, properties occupied by charitable organizations, or employment and training programs directed at older unemployed persons or at disabled persons). Conn. Gen. Stat. §12-632(h), as amended by 1995 Conn. Pub. Acts 268, §2.
PARTICIPATING PROGRAMS: Neighborhood organizations, as defined in Conn. Gen. Stat. §12-631(h), and Connecticut municipalities desiring to obtain benefits under the Neighborhood Assistance Act shall complete Parts I, II and III of Form NAA-01 and submit it to the municipal agency that will be overseeing the implementation of the proposal. (The overseeing municipal agency will then complete Part IV of Form NAA-01 and submit Form NAA-01 to the Department.) For the 1995 program year only, a completed Form NAA-01 for each proposal must be submitted to the Department by the overseeing municipal agency on or before September 1, 1995. For subsequent program years, completed Forms NAA-01 must be submitted on or before July 1.
The Department will disqualify a multi-year program that was approved by the legislative body of a Connecticut municipality for a program year earlier than the 1995 program year if a Form NAA-01 is not completed and submitted, as discussed above, on or before September 1, 1995. However, if a public hearing was held on such program by a municipality prior to 1995 and the legislative body thereof approved the program prior to 1995, such program will not be disqualified on the grounds that a public hearing was not held thereon during 1995 or that such legislative body did not approve such program during 1995.
ELIGIBLE PROGRAMS: The Department will compile a list of participating municipal programs by town and by estimated tax credit by September 1 each year. (Formerly, this list was compiled by October 1 each year.) The Department will issue an Announcement concerning how and where this list will be available. Conn. Gen. Stat. §12-632(b), as amended by 1995 Conn. Pub. Acts 268, §2.
PROGRAM DURATION RESTRICTED: In order to be eligible, a program may not reasonably be expected to exceed two consecutive calendar years. (Formerly, the eligibility of a program was not affected by its expected duration.)
However, the Department will not disqualify a multi-year program that was approved by the legislative body of a Connecticut municipality for a program year earlier than the 1995 program year on the grounds that the program may reasonably be expected to exceed two consecutive calendar years, as long as its program completion date, as shown on its Form NAA-01, falls within the 1995 or 1996 program year. Conn. Gen. Stat. §12-632(d), as amended by 1995 Conn. Pub. Acts 268, §2.
PROGRAM PROPOSALS BY BUSINESS FIRMS: Business firms that wish to make a program proposal in order to be eligible for the Neighborhood Assistance Act tax credit are required to complete a Form NAA-02. The Department will issue an Announcement when Form NAA-02 is available.
Program proposals may be approved by the Department only if they are mailed or hand-delivered to and received by the Department on or after September 15 but no later than October 1. Program proposals that are mailed or hand-delivered and received by the Department before September 15 or later than October 1 will be disregarded, as will program proposals that are telecopied to the Department. The order in which program proposals are received by the Department is now irrelevant. (Formerly, the Department was required to approve program proposals in the order in which they were received.)
Upon receiving a program proposal, the Department will refer the proposal to the municipal agency that is responsible for overseeing the implementation of the program for approval or disapproval by such agency. If the municipal agency does not approve the program proposal within 30 days of the referral, the proposal will be deemed to be disapproved. (Formerly, if the municipal agency did not approve the proposal within 30 days of the referral, the proposal would be deemed to be approved.)
The Department will approve or disapprove of program proposals, based on their compliance with the Neighborhood Assistance Act, as well as municipal approval or disapproval. Conn. Gen. Stat. §12-632(c), as amended by 1995 Conn. Pub. Acts 268, §2.
However, the Department will disqualify a multi-year program proposal that was approved by the Department of Social Services for an earlier program year unless a program proposal is mailed or hand-delivered to the Department of Revenue Services on or after September 15 and no later than October 1.
CASH INVESTMENTS ONLY: Program proposals will be approved only if they call for cash investments by business firms in programs described in Conn. Gen. Stat. §§12-633, 12-634, 12-635 and 12-635a, as amended by 1995 Conn. Pub. Acts 268, §§4, 5, 6 and 7. (Formerly, there was no requirement that program investments be made in cash.)
However, the Department will disqualify a multi-year program proposal that was approved by the Department of Social Services for an earlier program year unless the program investments that are made during the 1995 and subsequent program years are made in cash.
"FORTY PERCENT PROGRAMS": The maximum credit allowable for approved program proposals under Conn. Gen. Stat. §12-634 (involving child day care facilities), §12-635a (involving community-based alcoholism prevention or treatment programs) and §12-633 (involving neighborhood programs other than those described in Conn. Gen. Stat. §§12-634, 12-635 or 12-635a) has been reduced to 40% of the investment. (Formerly, the maximum credit allowable for such program proposals was 50% of the investment.)
This reduction will also apply to multi-year program proposals that were approved by the Department of Social Services for an earlier program year.
LIMIT ON PROGRAM INVESTMENTS IN PROGRAM(S) CONDUCTED BY ANY ONE ORGANIZATION: No organization conducting a Neighborhood Assistance Act program or programs that are eligible to receive program investments from business firms may receive program investments aggregating more than $150,000 for a program year. Formerly, no organization could receive program investments aggregating more than $300,000 for a program year.
The Department will disallow, with respect to any organization that is conducting a multi-year program or programs that were approved by the Department of Social Services for an earlier program year, the receipt by such organization of program investments aggregating more than $150,000 for the program year. Conn. Gen. Stat. §12-632(j), as amended by 1995 Conn. Pub. Acts 268, §2.
PRORATION OF AVAILABLE CREDITS: If the approval of program proposals by the Department would otherwise cause Neighborhood Assistance Act tax credits to exceed $3 million (or, in the event that such amount is reduced under 1995 Conn. Spec. Acts 26, §2, such reduced amount), the Department is now required, by November 15 each year, to prorate the $3 million (or reduced amount) of credits among approved program proposals in two steps.
The first step involves a determination by the Department whether the approval of program proposals under Conn. Gen. Stat. §§12-633, 12-634 and 12-635a by the Department would otherwise cause Neighborhood Assistance Act tax credits to exceed in the 1995 program year $1 million (or, in the event that such amount is reduced under 1995 Conn. Spec. Acts 26, §2, such reduced amount). If so, the Department is required, by November 15, to prorate the $1 million (or reduced amount) among such approved program proposals. If less than the $1 million (or reduced amount) will be granted to business firms with approved program proposals under Conn. Gen. Stat. §§12-633, 12-634 and 12-635a, the balance may be granted to business firms with approved program proposals under Conn. Gen. Stat. §12-635.
The second step involves a determination by the Department whether the approval of program proposals under Conn. Gen. Stat. §12-635 by the Department would otherwise cause Neighborhood Assistance Act tax credits to exceed in the 1995 program year $2 million. If so, the Department is required, by November 15, to prorate $2 million among such approved program proposals. If less than the $2 million will be granted to business firms with approved program proposals under Conn. Gen. Stat. §12-635, however, the balance may not be granted to business firms with approved program proposals under Conn. Gen. Stat. §§12-633, 12-634 or 12-635a.
Credits previously reserved for the 1995 and subsequent program years by the Department of Social Services for any multi-year program proposal by a business firm will not be allowed to be taken by such firm.
CREDIT CARRYFORWARDS NO LONGER PERMITTED: A Neighborhood Assistance Act tax credit that is not claimed on the tax return of a business firm for the income year beginning during the calendar year in which the program proposal was approved may only be carried back to the two immediately preceding income years (beginning with the earlier of such years). Formerly, the credit was permitted to be carried back to the five immediately preceding income years (beginning with the earliest of such years) and then carried forward to the five immediately succeeding income years.
The Department will not disallow the claiming of a Neighborhood Assistance Act tax credit that is carried back to the five immediately preceding income years or carried forward to the five immediately succeeding income years by a business firm whose multi-year program proposal was approved by the Department of Social Services for an earlier program year. Conn. Gen. Stat. §12-632(g), as amended by 1995 Conn. Pub. Acts 268, §2.
POSTPROJECT AUDITS: Whenever approved program investments in a Neighborhood Assistance Act program conducted by a nonprofit organization equal or exceed $25,000, a postproject audit shall be completed by a certified public accounting firm and submitted by the firm within three months after the program completion date, as shown on the Form NAA-01, to the municipal agency overseeing implementation of the program. The certification shall verify that program investments were expended in accordance with the program as proposed by the organization and as approved by the Department. The municipal agency shall then submit the postproject audit to the Department within one month after its receipt by the municipal agency, and certify to the Department that program investments were expended in accordance with the program as proposed by the organization and as approved by the Department. The Department will review each postproject audit for evidence of fraud, embezzlement or unsound or irregular financial practice in relation to commonly accepted accounting standards. The Department may disqualify an audited organization's programs for future program investments by business firms under Chapter 228a. Conn. Gen. Stat. §12-637a, as amended by 1995 Conn. Pub. Acts 268, §9.
EFFECT ON OTHER DOCUMENTS: This Special Notice modifies in part and supersedes in part IP 95(2) and IP 94(6).
EFFECT OF THIS DOCUMENT: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department's informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners.
SN 95(11)
Corporation business tax
Issued: 8/14/95
Modifies in part and supersedes IP 95(2) and IP 94(6)