An Act Establishing A Personal Income Tax Deduction For Certain Payments Received From An Insurance Company.
Summary
HB 5144 would amend Connecticut’s personal income tax law to create a deduction for a specific type of insurance-related payment. The deduction would apply to the portion of a payment a taxpayer receives from an insurance company in exchange for a buyout or cancellation of a long-term care insurance policy, but only to the extent that amount is included in federal gross income.
In practical terms, the bill is aimed at taxpayers who surrender or terminate long-term care insurance policies and receive taxable consideration from the insurer. By allowing a state income tax deduction for the taxable portion of that payment, the bill would reduce Connecticut taxable income for affected individuals and align state treatment more favorably with these transactions.
Impact
The bill would amend section 12-701 of the Connecticut General Statutes, which governs personal income tax definitions and deductions, to add a new deduction tied to long-term care insurance policy buyouts or cancellations. Its effect would be limited to taxpayers who receive qualifying payments from insurance companies and who must include those amounts in federal gross income; it would not broadly change taxation for all insurance proceeds or all retirement/health-related payments. The main affected parties would be individual policyholders, especially older residents who hold long-term care insurance, and the state Department of Revenue Services, which would need to administer the new deduction.
Sentiment
The available record shows limited public or committee debate, so there is no strong evidence of opposition or support in the transcript materials. The bill was referred to the Finance, Revenue and Bonding Committee, and the only recorded vote information is a reserved public hearing tally sheet with no yeas or nays, suggesting the measure was still in an early stage of consideration. Overall, the bill appears to be a targeted tax-relief proposal rather than a controversial broad tax change.
Contention
Because there are no committee transcripts or recorded substantive votes, no specific points of contention are documented in the available materials. Potential issues, if raised later, would likely center on whether the deduction should be limited to long-term care insurance buyouts, whether the tax benefit is justified for a narrow group of taxpayers, and the fiscal impact on state revenue. Any disagreement would most likely involve lawmakers balancing targeted relief for policyholders against concerns about narrowing the income tax base.