Connecticut State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Connecticut, with full citations and the original source on every page.
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When Connecticut combined-group members that were allocated net operating losses merge into another member, do those NOLs survive so the surviving group can still use them?
Yes. Net operating losses allocated to combined unitary group members that merged into another member survive the merger and may be used by the surviving member -- or shared with any other member that…
Is a court-ordered qualified settlement fund subject to the Connecticut corporation business tax?
No. A 'qualified settlement fund' -- here a court-supervised fund holding disgorgement and penalties from an SEC enforcement action, as defined in 26 C.F.R. § 1.468B-1 -- is not subject to the Connect…
When corporations make a federal I.R.C. section 338(h)(10) election to treat a stock sale as an asset sale, is the resulting gain apportionable business income for Connecticut, and is it a sale of stock or of assets in the receipts factor?
The gain is apportionable, and it is treated as a sale of ASSETS. When corporations make a federal I.R.C. section 338(h)(10) election -- treating a stock sale as a deemed sale of the target's assets -…
Does a water company's discounted (bargain) sale of open space land and conservation easements to the State and a nonprofit qualify for the open space land donation tax credit, and how is 'use value' measured given the land's restrictions?
Yes -- the discounted (bargain) sale qualifies for the credit, and 'use value' is measured net of the land's restrictions. A water company that sells Class II/III land and Class I conservation easemen…
Is a corporate 'in-house bank' that mainly lends to its own affiliates a 'financial service company' for Connecticut corporation business tax -- even though the loans are to related parties?
Yes. A corporate 'in-house bank' subsidiary that derives more than 50% of its gross income from loans is a 'financial service company' under Conn. Gen. Stat. § 12-218b(a)(6)(J) -- and it does NOT lose…
Can a mutual fund (regulated investment company) subject to Connecticut corporation business tax deduct the tax-exempt bond dividends it passes through to shareholders, plus the related expenses federal law disallows?
Yes. Connecticut's corporation business tax (unlike the federal income tax) normally includes municipal-bond interest in a company's gross income. But there's a special exception for a regulated inves…
Does a pathology-testing company qualify as a 'biotechnology company' entitled to the 15-year carryforward of Connecticut's research-and-experimental-expenditure corporation business tax credit?
No. A pathology-testing company does not qualify as a 'biotechnology company' under Conn. Gen. Stat. § 12-217j, so it cannot use the special 15-year carryforward of the corporation business tax resear…
Does a two-step corporate restructuring -- merging one subsidiary into another, then merging the survivor into a newly created holding company -- reduce or eliminate the group's Connecticut corporation business tax operating loss carry-overs?
No -- the loss carry-overs survive. Neither step of the planned restructuring reduces or eliminates the group's Connecticut corporation business tax operating loss carry-overs under Conn. Gen. Stat. §…
When a Connecticut state bank converts to a national bank, does the conversion reduce or eliminate its corporation business tax operating loss carry-overs?
No -- the loss carry-overs survive. When a Connecticut state bank converts to a national bank (a change represented to qualify as a type F tax-free reorganization), its corporation business tax operat…
Is a residents' association that was specially chartered by the legislature with municipal powers, and treated by the IRS as a political subdivision, subject to Connecticut's corporation business tax?
No. A residents' association chartered by a 1931 Special Act as a body politic and corporate, exercising municipal-type powers (fire protection, streets, beaches, police, and a real-estate tax) and tr…
For a company that sells and rents equipment used on a tribal reservation inside Connecticut's borders, do those receipts count in the Connecticut receipts factor when it apportions its corporation business tax?
Yes — they count. A company that sells or rents construction equipment for use on a federally-recognized tribe's reservation that sits within Connecticut's borders must include those receipts in BOTH …
Can a corporation deduct dividends from a mutual fund under Connecticut's dividends-received deduction when the fund's payouts are exempt-interest or capital-gain dividends?
It depends on the type of distribution. Under Connecticut's dividends-received deduction, Conn. Gen. Stat. § 12-217(a)(D), a corporation may deduct 'dividends as defined in the federal income tax law.…
Do a surviving corporation's pre-merger Connecticut net operating loss carryovers survive an ownership-change merger, free of the federal Section 382 limit?
Yes. Where a corporation is the SURVIVING corporation in a merger (here a reverse triangular merger in which the purchaser's new subsidiary merged into the holding company, and the holding company sur…
Is a non-stock cooperative housing corporation that has taxable income exempt from Connecticut's corporation business tax?
No — not if it has taxable income. A non-stock cooperative housing corporation CAN qualify as a 'cooperative housing corporation' under Conn. Gen. Stat. § 12-214(a)(5) and Conn. Agencies Regs. § 12-21…
Can a Connecticut corporation deduct dividends it receives from a regulated investment company that aren't deductible on its federal return?
No -- but note this ruling has been REVOKED by Ruling 93-24, and DRS marks it 'not current ... for reference purposes only,' so do not rely on it. As originally issued, DRS held that a Connecticut cor…
Is a qualified REIT subsidiary a separate corporation for Connecticut corporation business tax, or is it merged into the REIT?
Both, in a sense. A qualified REIT subsidiary -- a wholly-owned subsidiary of a real estate investment trust that federal law disregards as a separate corporation under 26 U.S.C. § 856(i) -- is STILL …
Is each fund of a multi-fund regulated investment company (mutual fund) a separate corporation for Connecticut corporation business tax?
Each fund is treated as a separate corporation. A multi-fund regulated investment company (a RIC -- essentially a mutual fund with several 'series' funds) asked how Connecticut's corporation business …
Must a parent company add back expenses connected to a dividend from its wholly-owned subsidiary when it has already reallocated all of its income and expenses to its subsidiaries?
No add-back on these specific facts -- and note DRS marks this Ruling 'not current,' so it is historical and highly fact-bound. A parent company filed a Connecticut combined corporation business tax (…
Did an out-of-state manufacturer become subject to Connecticut corporation business tax by leasing promotional video machines to Connecticut retailers?
Yes. The machines' advertising, order-form, and out-of-state order-solicitation functions were protected solicitation-related activities under Public Law 86-272, and unrelated contractors' repair visi…
Did excluding income from federal gross income under 26 U.S.C. § 883(a)(1) make a corporation exempt from Connecticut corporation business tax?
No. The excluded income was also outside Connecticut gross income under the historical definition, but that did not make the corporation federally tax-exempt for Connecticut's exemption rule. X Corpor…
Could capital losses reduce income other than net capital gains for Connecticut corporation business tax purposes?
No under this historical ruling. DRS said capital losses under Conn. Gen. Stat. § 12-217(a) could be used only to offset net capital gains. In the cited examples, combined taxable income was $200, inc…
Was a church exempt from Connecticut corporation business tax without an IRS determination specifically recognizing its federal tax-exempt status?
No. The ruling required an IRS determination referring specifically to the church before the Connecticut corporation business tax exemption applied. The church could choose whether to file Form 1023, …
Would Connecticut follow a corporation's federal I.R.C. § 338(h)(10) election when computing corporation business tax?
Yes. The Department concluded that Connecticut corporation business tax liability would follow federal law and incorporate the effects of the corporation's I.R.C. § 338(h)(10) election.
Is a corporation whose only income is partnership distributive shares from financial activities a 'financial service company' under Connecticut's corporation business tax?
Yes — it is a financial service company. A corporation whose entire gross income consists of its distributive shares from partnerships engaged wholly in 'financial service activities' is classified as…
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These are official tax letter rulings and advisory opinions issued by Connecticut's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.