A new state tax law is catching many business owners by surprise.

The change is an attempt to help soften the blow from the federal tax reform plan passed earlier this year.

The newly enacted pass-through entity tax is considered a tax break, but it is confusing, and businesses are just finding out about the law and how it could affect them.

"I think everybody in Connecticut was concerned, even in the other states, the property tax, we were all concerned,” said Bob Colangelo, owner of Max Bibo’s, a popular deli in Hartford.

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The federal tax reform now caps what he can deduct.

In Connecticut and other states with higher incomes and property taxes, a cap of $10,000 isn't a lot.

This year, lawmakers approved changes on how the state taxes income earned by partnerships, like LLCs.

It basically allows these businesses to claim taxable income on their entity, their business, where there is no cap.

"Then, in turn, the individuals will get a credit on their individual tax return for the state of Connecticut, based on what they pay at the entity level,” said Brian Newman, an accountant at Cohnreznick.

He said the law has good intentions and he's been working with many small businesses to explain the changes.

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"Yes, it's a good thing,” he said.

We know Connecticut has high taxes, but we also have deductibles. However, that changed significantly with federal tax reform when it comes to individuals, and many small businesses.

The law, however, requires small businesses to pay estimates, which are due in two days.

"All of a sudden we are being told we have to start paying effective June 15. I just found out about it Tuesday,” Colangelo said.

Other states are enacting similar legislation. States like New York, New Jersey and California, which have high incomes and taxes.

However, some believe the federal government doesn't like states circumventing tax laws and may have something to say about that.

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