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Change to CT car tax assessments could trigger special session

The Connecticut State Capitol on Wednesday, May 8, 2024 in Hartford. Wednesday marks the final day of the 2024 legislative session.
Joe Buglewicz
Connecticut Public
The Connecticut State Capitol on the final day of the 2024 legislative session.

Following a disagreement between Democrats in the House and Senate, Connecticut lawmakers failed to pass a bill before the end of the session earlier this month that would have changed the way cars are assessed for property taxes.

Those changes, lawmakers say, can’t wait until next year because they need to be made before the car tax law legislators were trying to “fix” with the new bill goes into effect later this year. The problem could trigger a special legislative session to address the matter in the coming weeks.

House Bill 5172 offered what lawmakers called “fixes” to the implementation of a 2022 law that mandated that towns change the system they use to assess vehicles and introduce a depreciation schedule so that people pay less as their cars age. In 2023, lawmakers delayed implementation of the 2022 legislation by a year. It is set to go into effect in October.

The House approved the latest legislation with a bipartisan vote. But on the last day of the session, the Senate surprised many members of the House by introducing an amendment that would allow towns to phase out the car tax over a five-year period and increase their assessment ratio on real estate above the existing 70% cap to recover revenue.

It then sent the amended bill back to the House.

The House, however, didn’t vote for the amended version, meaning the 2022 law stands without changes lawmakers say are necessary.

“We have to fix it before July 1,” said Planning and Development Committee co-chair Rep. Eleni Kavros DeGraw, D-Avon. “We’ve already delayed it more than once by doing this the way we have.”

The Planning and Development Committee, which handles most municipal issues, passed the bill unanimously in March. The bill would go into effect July 1, but the first assessments wouldn’t occur until Oct. 1, Kavros DeGraw said.

House Majority Leader Rep. Jason Rojas, D-East Hartford, said it was a “must-do bill,” and that there are conversations ongoing about a special session.

The 2022 measure, included in the budget bill, mandated that towns use what’s called the manufacturer’s suggested retail price instead of a system from the National Automobile Dealers Association’s guide to assess the value of cars, so that towns would have a more uniform system.

It also introduced a 20-year schedule of depreciation as a car ages, so that owners pay a smaller percentage of the suggested retail price as vehicles get older. The list begins with an 80% valuation for vehicles that are up to a year old.

At that number, lawmakers said, towns would likely lose a noticeable amount of revenue from car taxes. This would likely result in municipalities shifting that tax burden onto property owners by raising the mill rate.

“It could have that negative impact, particularly on low-income people,” said Joe DeLong, executive director and chief executive officer of the Connecticut Conference of Municipalities. “It could make rents go up.”

H.B. 5172 would have adjusted the depreciation schedule, beginning with 85% for vehicles up to a year old. Lawmakers and officials said that 5 percentage point change would mean the change in revenue for towns would be negligible.

The 2022 legislation also left it largely up to town assessors to determine how vehicles used for both personal and business purposes should be classified, and imposed a 25% penalty if taxpayers don’t declare their vehicles on a list of personal property.

Lawmakers and members of the business community fear that would put an additional tax burden on small businesses. Many small business owners use their car for both business and personal purposes, and the cars’ tax classification would vary from town to town under the 2022 law, said Chris DiPentima, president and chief executive officer of the Connecticut Business and Industry Association.

“We definitely need this cleaned up before the underlying public act goes into effect Oct. 1, otherwise you’re just going to have unclear, uncertain standards across the state,” DiPentima said.

The House bill from the latest session would have put those vehicles on the motor vehicle list rather than personal property, Kavros DeGraw said.

Business owners in cities with higher mill rates, such as Hartford, would be the most affected if lawmakers don’t fix the issue in special session, Kavros DeGraw added.

“I think it’s important to point out that right now the city that would be hurt most by us not fixing this would be the city of Hartford,” she said.

Connecticut’s car tax has long been an issue lawmakers have worked to resolve. The car tax is based on mill rates, which vary from town to town. This means that people can pay different amounts in taxes for the same car depending on where they live.

Republican Gov. Jodi Rell proposed plans to at least partially do away with the tax in 2006 and 2007. Democratic Gov. Dannel Malloy proposed a car tax repealin 2013. Both proposals failed.

Abolishing the car tax has also been a special interest of Planning and Development co-chair Sen. MD Rahman, D-Manchester, during the past couple of sessions.

Rahman was among the 24 lawmakers who signed onto the Senate’s amendment to offer towns the option to phase out the car tax over a five-year period.

“This action represents a victory for taxpayers across the state, who have endured the burden of an unfair tax for too long,” Rahman said in a press release sent after the Senate voted on the amendment. “Today the Senate voted overwhelmingly to provide towns and cities with the tools to repeal this unpopular tax and establish a simpler and more equitable tax code.”

Members of the House felt that the change could put too much burden on taxpayers, lawmakers said.

Kavros DeGraw said their bill had been negotiated over the past two years with groups that represent municipalities, tax assessors and the governor’s office.

“It wasn’t an ideal solution, but it was one that was compromised and well-thought-out,” said Planning and Development ranking member Rep. Joe Zullo, R-East Haven. “It [the amendment] was a bit of a shock because that type of proposal would really be a sea change as far as the taxation of motor vehicles in the state.”

Senate Majority Leader Sen. Bob Duff, D-Norwalk, said the amendment was important to several members of his caucus.

“It’s a nuisance tax,” Duff said. “It’s unfair and unhelpful. It penalizes cities more than suburbs. … I thought the amendment was a good one, and we passed it down to the House and they didn’t agree.”

Betsy Gara, executive director of the Connecticut Conference of Small Towns, said there were concerns in the House about how the amendment could affect local revenues.

“It’s a big mess, and it could have a significant impact on businesses,” Gara said.

It’s not yet clear when a special session might take place or what other items might be on the agenda for the legislature.

“This isn’t something we can just leave alone,” Kavros DeGraw said.

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