Enacted Connecticut legislation delays for three years the deduction a combined group may take to offset an increase in net deferred tax liability, decrease in net deferred tax assets, or aggregate change from a net deferred tax asset to a net deferred tax liability. Under SB 1503, signed by Governor Malloy on November 21, 2017, the first year the deduction can be claimed is delayed to the income year that begins in 2021 from 2018. This change follows enactment of SB 1502, signed by the Governor on October 31, 2017, under which the period over which the deduction can be claimed was extended to thirty years.
The net deferred tax liability deduction was designed to mitigate the financial reporting impact for publicly-traded companies whose net deferred tax liabilities increased as a result of Connecticut’s shift to unitary combined reporting. However, the extension first of the deduction period from seven to thirty years, followed by further delay of the deduction to 2021, reflects the state’s concern in allowing this deduction given the state’s current fiscal situation.