The surtax has been reduced to 10% for the 2018 income year. Companies with less than $100 million of gross income continue to be exempt from the surtax. However, companies that file as part of a combined unitary tax return are not eligible for this exemption.
5% Addback for Expenses Related to Dividends
Certain companies that receive dividends are entitled to claim a deduction for those dividends, less any expense related to those dividends, in calculating income subject to the Corporation Business Tax. For income years that begin on or after January 1, 2017, expenses related to dividends are fixed at 5% of the dividend. Prior law provided no fixed percentage.
I.R.C. Section 179 Deduction Modification
Connecticut has decoupled from the federal deduction provided by I.R.C. § 179 for income years beginning on or after January 1, 2018. A company must add back 80% of the deduction it claims under I.R.C. § 179.
In each of the four income years following the year the deduction is disallowed, a company may claim a Connecticut subtraction to income equal to 25% of the disallowed deduction.
Business Interest Expense
For income years beginning on or after January 1, 2018, Connecticut has decoupled from federal changes affecting the business interest deduction under I.R.C. § 163(j). For Connecticut Corporation Business Tax purposes, a corporation may deduct the entire amount of its business interest in the year the interest is paid or accrued.