AN ACT ESTABLISHING A CAPITAL GAINS SURCHARGE.

Senate
sSB510 / File No. 697 1

General Assembly File No. 697
February Session, 2026 Substitute Senate Bill No. 510

Senate, April 20, 2026

The Committee on Finance, Revenue and Bonding reported
through SEN. FONFARA of the 1st Dist., Chairperson of the
Committee on the part of the Senate, that the substitute bill
ought to pass.

AN ACT ESTABLISHING A CAPITAL GAINS SURCHARGE.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:

Section 1. (NEW) ( Effective from passage ) (a) For taxable years 1
commencing on or after January 1, 2027, there is imposed a surcharge 2
on a taxpayer, excluding trusts or estates, whose Connecticut adjusted 3
gross income is equal to or greater than (1) one million dollars for an 4
individual who files a return under the federal income tax as an 5
unmarried individual or a married individual filing separately, (2) one 6
million six hundred thousand dollars for an individual who files a 7
return under the federal income tax as a head of household, and (3) two 8
million dollars for individuals who file a return under the federal 9
income tax as married individuals filing jointly. Such surcharge shall be 10
at the rate of one and seventy-five-hundredths per cent of the net gain 11
from the sale or exchange of capital assets, as determined for federal 12
income tax purposes. The surcharge shall be in addition to any other tax, 13
fee or surcharge for which the taxpayer is liable, except that any such 14
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taxpayer shall be allowed a one-time exclusion for the net gain from the 15
sale of the taxpayer's primary residence in the state or from the sale of 16
the taxpayer's ownership interest in a business. 17
(b) Each taxpayer subject to the surcharge shall file a report with the 18
Commissioner of Revenue Services, in such form and containing such 19
information as the commissioner prescribes, on or before the fifteenth 20
day of the fourth month following the close of the taxpayer's taxable 21
year. Such report shall accurately set forth the amount of the net gain 22
calculated pursuant to subsection (a) of this section for the preceding 23
taxable year and the amount of the taxpayer's surcharge liability for 24
such year. A taxpayer required to file a report shall, without assessment, 25
notice or demand, pay any surcharge due thereon to the commissioner 26
on or before the date specified in this subsection, determined without 27
regard to any extension of time for filing the report. 28
(c) If any person fails to pay the amount of the surcharge reported 29
due on a report within the time specified, there shall be imposed a 30
penalty equal to ten per cent of such amount due and unpaid, or fifty 31
dollars, whichever is greater. Such amount shall bear interest at the rate 32
of one per cent per month or fraction thereof, from the due date of such 33
surcharge until the date of payment. Subject to the provisions of section 34
12-3a of the general statutes, the commissioner may waive all or part of 35
the penalties provided under this section when it is proven to the 36
commissioner's satisfaction that the failure to pay any surcharge was 37
due to reasonable cause and was not intentional or due to neglect. 38
(d) The provisions of sections 12-550 to 12-554, inclusive, and section 39
12-555a of the general statutes shall apply to the provisions of this 40
section in the same manner and with the same force and effect as if the 41
language of said sections had been incorporated in full into this section 42
and had expressly referred to the surcharge under this section, except to 43
the extent that any provision is inconsistent with a provision in this 44
section. 45
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This act shall take effect as follows and shall amend the following
sections:

Section 1 from passage New section

Statement of Legislative Commissioners:
In Section 1(b), "such return" was changed to "such report" for
consistency.

FIN Joint Favorable Subst.

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The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of
the General Assembly, solely for purposes of information, summarization and explanation and do not
represent the intent of the General Assembly or either chamber thereof for any purpose. In general,
fiscal impacts are based upon a variety of informational sources, including the analyst’s professional
knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final
products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note

State Impact:
Agency Affected Fund-Effect FY 27 $ FY 28 $
Department of Revenue Services GF - Revenue
Gain
None 260 million
Department of Revenue Services GF - Cost None 1.75 million
State Comptroller - Fringe
Benefits1
GF - Cost None 271,830
Note: GF=General Fund

Municipal Impact: None
Explanation
The bill, which establishes a capital gains surcharge for certain filers,
results in (1) an annual General Fund revenue gain of approximately
$260 million beginning in FY 28, (2) a one -time cost of $ 1.1 million2 to
DRS in FY 28 for programming and technology updates and form
development to implement the tax, and (3) ongoing costs of $921,830 for
ten Revenue Examiners ($65,000 each for salary and $27,183 each for
fringe benefits) beginning in FY 28 to administer, audit, and enforce the
tax.
The Out Years
The annualized ongoing fiscal impact identified above would

1The fringe benefit costs for most state employees are budgeted centrally in accounts
administered by the Comptroller. The estimated active employee fringe benefit cost
associated with most personnel changes is 41.82% of payroll in FY 27.
2 This estimate is based on the development and implementation costs of the pass -
through entity tax.
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continue into the future subject to inflation.
Sources: Internal Revenue Service Statistics of Income

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OLR Bill Analysis
sSB 510

AN ACT ESTABLISHING A CAPITAL GAINS SURCHARGE.

SUMMARY
Starting with the 2027 tax year, this bill imposes a 1.75% surcharge on
the net gain from the sale or exchange of capital assets (net capital gains)
for taxpayers, other than trusts or estates, with incomes that exceed
specified thresholds. The surcharge (1) applies to net capital gains, as
determined under federal income tax rules (see BACKGROUND), and
(2) is in addition to any other tax, fee, or surcharge for which the
taxpayer is liable. It allows taxpayers to claim a one -time exclusion for
capital gains from the sale of their (1) primary residence in Connecticut
or (2) ownership interest in a business.
Under the bill, the surcharge applies to taxpayers with Connecticut
adjusted gross income equal to or more than (1) $1 million for single
filers and married individuals filing separately, (2) $1.6 million for heads
of households, and (3) $2 million for joint filers. (The bill does not define
“taxpayer” or “Connecticut adjusted gross income.”)
EFFECTIVE DATE: Upon passage
FILING AND REMITTING RETURNS
The bill requires taxpayers subject to the surcharge to file a report
with the Department of Revenue Services by April 15 in the form, and
containing the information, the commissioner prescribes. The report
must accurately list the taxpayer’s capital gains for the preceding tax
year and the amount of the taxpayer’s surcharge liability for that year.
Any taxpayer who is required to file a report must pay the surcharge by
April 15 without receiving an assessment, notice, or demand.
PENALTIES AND INTEREST FOR LATE PAYMENTS
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The bill imposes a penalty of 10% of the tax due or $50, whichever is
greater, on taxpayers who fail to pay the surcharge. The penalty gathers
interest at the rate of 1% per month or partial month from the
surcharge’s due date until it is paid. The commissioner may waive all or
part of any penalty, subject to the law’s provisions on the Penalty
Review Committee, when the taxpayer proves to the commissioner’s
satisfaction that the failure to pay the surcharge was due to reasonable
cause and not intentional or due to neglect.
COLLECTION AND ENFORCEMENT PROCEDURES
The bill applies several collection, enforcement, and appeal process
requirements established in statute for the admissions and dues taxes to
the surcharge, except those provisions that are inconsistent with the bill.
Among other things, these provisions cover (1) refunds for tax
overpayments; (2) hearing and appeals processes ; (3) penalties for
certain willful violations or fraud; (4) record retention and examination
requirements; and (5) methods for collecting delinquent taxes, penalties,
and interest through tax warrants and liens.
BACKGROUND
Federal Tax Treatment of Capital Gains
Capital gains are the profits from the sale of capital assets, which
generally include property, such as homes and furniture, and
investments, such as stocks and bonds, held for personal or investment
purposes. A capital gain occurs when a capital asset is sold or exchanged
at a price higher than its basis (generally its purchase price), while a
capital loss occurs when an asset is sold for less than its basis. (Special
rules apply to certain assets, including assets received as a gift or an
inheritance.)
Under federal income tax law, capital gains and losses are classified
as either long - or short -term, generally depending on whether the
taxpayer held the asset for more or less than a year. Taxpayers may use
their capital losses to offset capital gains. If a taxpayer has a “net capital
gain,” that gain is usually taxe d at a lower (preferential) tax rate than
ordinary income. A net capital gain is the amount , in a given year, by
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which a taxpayer’s net long -term capital gain is more than their net
short-term capital loss (subject to certain limits on the deduction and
carryover of losses) . The term “net long -term capital gain” means the
amount by which long -term c apital gains exceed long -term capital
losses (including any unused long-term capital losses carried over from
previous years). A “net short-term capital loss” is the amount by which
short-term capital losses exceed short-term capital gains (IRS, Topic no.
409, Capital Gains and Losses).
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable Substitute
Yea 35 Nay 18 (04/01/2026)