Legislature Acts to Stop Tax Loss on Bonds
|
|
Using a power normally reserved for seizing land, the state tonight enacted a law that would take back a clause in its bond agreements, preventing the potential loss of as much as $1 billion in tax revenue over the next 15 years. The law, if it survives likely court challenges, would also eliminate the state’s liability for claims for $61 million in tax refunds dating to 1992. Adopting an unusual legal tactic, the state will use the power of eminent domain to take back a troublesome clause in some of its bond agreements. In return, the state will pay hundreds of institutional bondholders what it estimates to be the loss in value of their bonds as a result of the action — $17 million to $20 million. The power of eminent domain allows the government to seize private property for public use, providing it fairly reimburses the owner. The legislation affects about $4 billion in state bonds that cover improvements for Bradley International Airport, state-backed college loans and other programs. Under the agreements for the bonds, issued as early as 1984, corporations that bought them and did business in Connecticut were allowed an exemption on the interest they earned in paying their state corporate franchise tax. More : query.nytimes.com |