House Bill No. 5513, also known as File No. 546, proposes amendments to the personal income tax deduction and withholding requirements for distributions from retirement income sources such as pensions and annuities, effective January 1, 2025. The bill introduces an optional withholding system for payers, allowing them to withhold income tax from certain distributions only if the payee requests it, which is a change from the mandatory withholding requirement that is currently in place. However, for "lump sum distributions" defined as distributions of $5,000 or more, or more than 50% of the payee's account balance, the bill retains the mandatory withholding requirement unless the distribution was previously taxed or is a direct rollover. The bill also revises the method for determining the amount to be withheld from taxable payments, requiring that it be in accordance with regulations set by the commissioner, replacing the previous language that specified a method for determining the withholding amount. For lump sum distributions, if the payee does not request a specific withholding amount, the payer must withhold at the highest marginal rate from the taxable portion. The bill exempts certain distributions from withholding and requires payers with an office in Connecticut or those doing business in the state to withhold state income tax from payments to a state resident upon request, using Form CT-W4P. The Finance, Revenue and Bonding Committee has given the bill a Joint Favorable report with a vote of 49-2.

Statutes affected:
Raised Bill: 12-705
FIN Joint Favorable: 12-705
File No. 546: 12-705