Hartford Business Journal

8 Hartford Business Journal • July 9, 2018 • www.HartfordBusiness.com FOCUS: Law EXPERTS CORNER New CT laws aim to counteract higher costs from federal tax reforms By Michael D'Addio The Connecticut General Assembly recently passed legislation intended to provide workarounds for taxpayers impacted by the new $10,000 limita- tion on the deduction of state and local taxes (SALT) under the Tax Cuts and Jobs Act of 2017. The Connecticut law contains two major components that individual and business taxpayers should be aware of: A new entity-level tax on pass-through entities Beginning in 2018, an entity-level flat tax of 6.99 percent (the highest personal state rate) is imposed on partnerships, certain limited liability companies and S corporations. The tax is based on either the entity's taxable income or its Alternate Tax Base, at the taxpayer's discre- tion. If the entity produces a net loss, this can be carried forward for an indefinite period. The intention is to provide a tax benefit to partners and S-corporation shareholders through a business deduc- tion that reduces flow-through income. Since the flow-through income is also included on the Connecticut individual tax return of the owner, the law pro- vides a tax credit equal to 93.01 percent of the allocated Connecticut tax. For example, consider a Connecticut resident who is a partner in a partner- ship that allocates $100,000 of income. At a 6.99 percent personal state tax rate, there is a $6,990 Connecticut in- come tax that might not be deductible if the $10,000 SALT limitation applies (i.e., if the taxpayer owes more than $10,000 in state and local taxes). The new Connecticut law addresses this problem by making the $6,990 in- come tax the responsibility of the pass- through entity, so that only $93,010 of income is allocated to the owner. Since the resident must include $93,010 in his or her personal income, an amount that has already been taxed for state pur- poses, the Connecticut law gives a credit of 93.01% of the $6,990 to the resident to offset the personal tax on this includible amount. This causes no additional per- sonal tax on the flow-through income. The law also accelerates the due date for the tax return for a pass-through en- tity. A calendar year tax return will now be due on March 15 of the following year. Estimated taxes will be required for this entity-level tax. Charitable contributions and property tax credit The new law also follows the ac- tions of several other states and authorizes municipalities to provide property tax credits to a taxpayer Job Seekers CT law-school grads finding jobs as legal-industry employment stabilizes By Joe Cooper jcooper@HartfordBusiness.com R yan Powell is among thousands of recent law graduates studying for July's multistate bar exam, but like many other Connecticut pupils, he isn't worried about finding a job. That's because Powell, 26, has al- ready accepted an employment offer from Goldberg Segalla, a corporate law firm located in downtown Hartford. And he's not alone. Of the 153 students who recently graduated from UConn's Hartford law school, about 115 pupils (or 77 percent) said they landed a job by commencement. Industry experts say the legal job market for recent grads has stabilized and begun to rebound in certain prac- tice areas over the last two years after suffering a blow during and following the Great Recession. Consequently, Connecticut's three law schools are re- porting high rates of student employ- ment following graduation. Some larger firms have been expand- ing and looking to recruit more diverse candidates to meet client needs, says Michael Menapace, new president of the 1,800-member Hartford County Bar As- sociation. Firms are looking to recruit, hire and retain more diverse junior as- sociates than ever before, he says. "Because clients are demanding better diversity … firms are respond- ing," Menapace said. "Attracting and retaining them is a big issue amongst law firms right now." Graduates are also fortunate that firms are adding lawyers to accommo- date growing practice areas such as cybersecurity, data protection, labor, employment, employee retirement and health care, said Menapace, who is also a Quinnipiac law professor and parter of Wiggin and Dana LLP. Still, smaller firms in Connecticut aren't growing as fast due to the state's limp economy, he said. "Law firms go where the clients are," Menapace said. "Until there is a change in the business climate here, the law firms that focus on corporate clients are going to look outside the region for growth." But despite the state's stagnant economy, Connecticut law graduates are finding jobs at a higher rate than the national average. The UConn School of Law reported that in 2017, 135 out of its 153 student graduates (88 percent) found work within 10 months of commencement, according to the American Bar As- sociation (ABA) ranking system. About 90 percent of UConn law student graduates secured work over that period between 2015 to 2017. By comparison, about 86 percent of Quinnipiac University School of Law graduates from 2015 to 2017 were employed less than 10 months from graduation. At Yale University School of Law, more than 94 percent of graduates found work within that period, ABA says. Nationally, more than 75 percent of 2017 graduates across the nation's 204 law schools were employed under 10 months after graduation, ABA data show. In 2016, that number was 73 percent. The jobs students landed vary, but in Connecticut most recent grads work in positions that require a state license, including gigs at law firms, businesses or within government. Making connections The traditional path to law-sector em- ployment has not changed recently at mid- to large-sized firms, experts say, as pupils begin internships after two years of instruction with the hope of that lead- Michael D'Addio HBJ PHOTO | JOE COOPER UConn School of Law graduate Ryan Powell takes a break from studying for July's multistate bar exam.

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