CT bill seeks to reduce business tax on energy, boost state tourism and international trade

Hartford Business Journal – Tuesday, March 24, 2026
By David Krechevsky

State lawmakers are considering a wide-ranging proposal aimed at reducing business costs, increasing municipal revenue and expanding international trade.

Senate Bill 2 was initially raised by the legislature’s Finance, Revenue and Bonding Committee as a two-page “placeholder” bill with the general theme of lowering costs for businesses. The committee has since rewritten it, producing an 18-page bill that includes provisions to reduce taxes on natural gas and electricity for businesses, redistribute the state’s meals tax revenue and create a Connecticut-India Trade Commission.

The bill has 25 co-sponsors, including 23 Senate Democrats and two House Democrats. It has been scheduled for a public hearing on Friday.

According to its statement of purpose, the legislation is intended “to lower costs for businesses and the costs businesses pass on to consumers.”

One provision proposes a significant expansion of the state’s existing sales tax exemption on electricity and natural gas used by businesses. Under existing law, the exemption is largely limited to energy used directly in manufacturing, agricultural production and certain industrial processes, and applies only if at least 75% of the energy consumed at a metered location is used for those qualifying activities.

SB 2 would broaden that approach by extending the exemption to certain commercial and industrial businesses with less than $10 million in gross income, regardless of how the energy is used.

The change would effectively move the policy away from a narrowly defined, activity-based exemption toward a broader, business-based tax break for smaller companies, while also eliminating the need for complex usage calculations and compliance requirements tied to current law.

There is no fiscal note for the bill at this point, so it is not known how much revenue the state would forfeit by allowing the wider exemption.

The legislation also would redirect revenue from the state’s 1% meals tax, which since 2019 has increased the sales tax on some prepared meals from 6.35% to 7.35%.

Under the bill, 50% of that revenue would be deposited into the state’s Tourism Fund, while the remaining 50% would be distributed to the municipalities where the tax is generated.

Currently, meals tax revenue is primarily deposited in the state’s General Fund. The shift would create a new revenue stream for cities and towns linked directly to local restaurant activity, while also increasing dedicated funding for promoting tourism statewide.

A similar bill — SB 1456 — was approved last year by the Commerce Committee but was never voted on in either chamber. Last year’s bill would have diverted just 10% of the revenue from the meals tax to the Tourism Fund beginning in fiscal year 2026.

A fiscal note included with last year’s bill said diverting 10% of meals tax revenue would remove $11 million from the General Fund and boost the Tourism Fund by a similar amount. Removing 50% of the tax from the General Fund would amount to about $55 million, a significant boost to the Tourism Fund.

This year’s bill also calls for creating a Connecticut-India Trade Commission tasked with advancing bilateral trade and investment opportunities between the state and one of the world’s largest and fastest-growing economies.

Over the past two years, the state legislature has approved bills creating trade commissions with both Ireland and Puerto Rico. A bill proposed last year to create a trade commission with Taiwan did not pass.

A separate bill, SB 132, would create a Connecticut-Germany Trade Commission. That bill was approved by the Commerce Committee earlier this month and has been placed on the Senate calendar.

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