The Connecticut General Assembly was heading toward including taxation in the expansion of the state’s False Claims Act, Conn. Gen. Stat. § 4-274, et seq. (the “FCA”) via Senate Bill 426. Expansion of the FCA is laudable to combat fraud. Including taxation in the FCA would have been a huge policy mistake. If S.B. 426 had passed, companies and high-net-worth individuals would have fled Connecticut. S.B. 426 died in the General Assembly, hopefully not to be resurrected in its current form.

What happened? The existing FCA in Connecticut is narrow. It is limited to actions with respect to state-administered health and human services programs. S.B. 426 was drafted to simply remove the limiting language, i.e., remove the references to “a state-administered health or human services program.” Removing that limit would have made taxpayers vulnerable to claims under the FCA seeking treble damages plus the costs of investigation and prosecution, which can be brought by the Connecticut Attorney General or a person initiating the action.

Further, as Distinguished Professor Richard Pomp noted, in his individual capacity, in a letter to the General Assembly, there was a fundamental fairness flaw regarding limitations periods:

• By eliminating the existing tax bar, S.B. 426 would extend the False Claims Act’s existing ten year statute of limitations to tax claims, which are now covered in general by a three year statute. The ten year statute means that years that are closed under the tax...

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