Bulletin #6

Corporation Business Tax
APPLICABLE ONLY TO FISCAL YEARS
STARTING BEFORE JANUARY 1, 1982

WHO MUST COMPUTE CORPORATE BUSINESS TAX LIABILITY UNDER THE NEW ADDITIONAL BASE (section 12-219(1)(B))?

Any corporation whose gross income exceeds $50,000 AND whose tax liability as computed to Section 12-219(1)(B) is greater than either of the following:

• the tax as computed pursuant to Section 12-214 (the net income base); or
• the tax as computed pursuant to Section 12-219(1)(A) (the pre-existing additional base).

The tax shall not be less than $250, whatever method is used (the minimum tax). Whatever base results in the highest tax liability shall be the base used to determine the tax.

HOW IS THE TAX COMPUTED UNDER SECTION 12-219(1)(B)?

• The tax shall be computed by multiplying the rate by the measure.
• The rate, or the percentage, is five percent.
• The measure, or the base to which the tax rate is applied, is fifty percent of the sum of the following:

The entire net income or loss of a corporation is its net income or loss, as apportioned to Connecticut pursuant to Section 12-218, from business transacted within Connecticut.

WHEN IS THE TAX RETURN DUE?

The return is due within 90 days of the conclusion of the income year. (April 1 for calendar year taxpayers).

WHEN MUST THE TAX BE PAID?

It depends upon whether or not the corporation is required to make a Declaration of Estimated Tax.

A corporation must make a Declaration of Estimated Tax if it meets either of the following two conditions:

1. Its Corporation Business Tax liability in the previous income year was in excess of $500; or
2. It can reasonably expect that its Corporation Business Tax liability in the current income year will exceed $500.

If a corporation is computing its tax under Section 12-219(1)(B), the Declaration must state the amount of money which the corporation estimates will equal its tax liability for the current income year.

WHEN MUST THE DECLARATION OF ESTIMATED TAX BE MADE UNDER SECTION 12-219(1)(B)?

The Declaration must generally be made by the 15th day of seventh month of the current income year. However:

1. if the corporation's Corporation Business Tax liability in the previous income year did not exceed $500; AND
2. if the reasonable expectation that the corporation's Corporation Business Tax liability would exceed $500 first occurred AFTER the last day of the sixth month of the current income year, but BEFORE the first day of the twelfth month of the current income year, THEN the Declaration must be filed by the 15th day of the twelfth month of the current income year.

NOTE: A Corporation required to file a Declaration of Estimated Tax under the net income base (Section 12-214) or the pre-existing additional base (Section 12-219(1)(A) is still required to do so by the 15th day of the sixth month of the current income year. (June 15 for calendar year taxpayers).

WHEN MUST INSTALLMENT PAYMENTS OF THE ESTIMATED TAX BE MADE?

A payment of 50% of the estimated tax is due at the time by which a Declaration must be made.

WHAT IF THE INSTALLMENT PAID IS INSUFFICIENT?

Statutory interest will accrue on that portion of an installment not paid, at the rate of 1 2/3% per month or fraction thereof, from the date by which the installment was due and owing to the date of payment.

EXAMPLES:

Each corporation (Corporation A and B) has gross income of $150,000, officer compensation apportioned to Connecticut of $60,000 and net income of $80,000. Sixty percent of Corporation A's net income is received from business transacted within Connecticut (the entire net income), while 100% of Corporation B's net income is received from business transacted within Connecticut.

Corporation A will pay $4,800, being the higher tax liability.

Corporation B will pay $8,000, being the higher tax liability.