Q & A: The Connecticut Alternative Minimum Tax
PURPOSE: The Connecticut alternative minimum tax is a tax imposed on certain individuals, estates and trusts in addition to the regular Connecticut income tax. This publication is intended to answer some of the most common questions concerning the application and calculation of this tax.
BACKGROUND: Conn. Gen. Stat. § 12-700a provides that, for taxable years beginning on or after January 1, 1993, certain taxpayers are subject to the Connecticut alternative minimum tax.
WHO IS SUBJECT TO THE CONNECTICUT ALTERNATIVE MINIMUM TAX?
You are subject to the Connecticut alternative minimum tax and are required to file Form CT-6251, Connecticut Alternative Minimum Tax Return - Individuals, if for the taxable year:
you were a Connecticut resident or part-year resident and had a federal alternative minimum tax liability;
you were a Connecticut nonresident with a federal alternative minimum tax liability and you had Connecticut-source income.
If you meet either of the requirements above, you must file Form CT-6251 even if you do not have to pay the Connecticut alternative minimum tax. Certain individuals may be required to file federal Form 6251, Alternative Minimum Tax - Individuals, even though they do not have to pay the federal alternative minimum tax. These individuals are not subject to the Connecticut alternative minimum tax and are not required to file Form CT-6251. If you have questions about the federal alternative minimum tax, please call the Internal Revenue Service at 1-800-829-1040.
WHEN IS A TRUST OR ESTATE SUBJECT TO THE CONNECTICUT ALTERNATIVE MINIMUM TAX?
Any trust or estate liable for the federal alternative minimum tax must complete and attach Schedule I, Connecticut Alternative Minimum Tax Computation of Trust or Estate, to Form CT-1041, Connecticut Income Tax Return for Resident, Nonresident, and Part-Year Resident Trusts and Estates. (The rules in this informational publication apply primarily to individuals. Guidance for trusts and estates can be found in the instructions to Form CT-1041 and Schedule I of that form.)
HOW IS THE CONNECTICUT ALTERNATIVE MINIMUM TAX COMPUTED?
Using Form CT-6251, compute the tax in the following manner:
STEP 1: Calculate your adjusted federal alternative minimum taxable income by making certain Connecticut modifications to your federal alternative minimum taxable income (as reported on Line 21 of federal Form 6251). Use your adjusted federal alternative minimum taxable income to recalculate your allowable exemption and the tentative minimum tax. The result is your adjusted federal tentative minimum tax.
STEP 2: The Connecticut minimum tax is the lesser of:
1. 19% of the adjusted federal tentative minimum tax;
2. 5% of the adjusted federal alternative minimum taxable income.
STEP 3: Nonresidents and part-year residents will allocate the Connecticut minimum tax based upon the percentage of income from Connecticut sources.
STEP 4: Subtract your Connecticut income tax from the apportioned Connecticut minimum tax. The difference (if greater than zero) is your net Connecticut minimum tax.
STEP 5: Residents and part-year residents who paid minimum taxes to other jurisdictions will calculate their allowable credit and subtract it from the net Connecticut minimum tax. The result is the Connecticut alternative minimum tax.
NOTE: If you are subject to the Connecticut alternative minimum tax (as explained earlier in this publication), you must complete Form CT-6251 and attach it to your Form CT-1040 or Form CT-1040NR/PY even if your Connecticut alternative minimum tax is zero.
HOW IS THE CREDIT FOR MINIMUM TAXES PAID TO ANOTHER JURISDICTION CALCULATED?
Use Schedule A, Form CT-6251 to calculate your allowable credit for alternative minimum taxes paid to other jurisdictions. Connecticut residents and part-year residents are entitled to a credit on Form CT-6251 for alternative minimum taxes paid to qualifying jurisdictions on income taxed by the other jurisdiction. (Credit for regular income tax paid to qualifying jurisdictions may only be claimed on Form CT-1040 or Form CT-1040NR/PY.) A qualifying jurisdiction means another state of the United States or a political subdivision of a state, the District of Columbia, or a Canadian province. No credit is allowed for alternative minimum tax paid to the United States or any foreign country, including Canada.
DOES THE STATE ALLOW CREDIT FOR PRIOR YEAR MINIMUM TAX?
You may be able to take a credit against your regular Connecticut income tax for Connecticut alternative minimum tax paid in a prior year.
HOW IS THE CREDIT FOR PRIOR YEAR MINIMUM TAX CALCULATED?
Your credit is calculated by subtracting the tax attributable to adjustments and items of preference (i.e., exclusion items) specified in Internal Revenue Code § 53 (d) from your net Connecticut minimum tax calculated at 19%.
EXAMPLE: If your 1996 regular Connecticut income tax is $5,000 and your 1996 Connecticut minimum tax is $3,500, your allowable credit is limited to $1,500 ($5,000 - $3,500 = $1,500). If your credit for the prior year's alternative minimum tax is $2,000, you can only use $1,500 of that credit in 1996. ($500 is carried forward.)
WHAT HAPPENS TO THE UNUSED PORTION OF THE CREDIT?
Any unused portion of the credit can be carried forward to reduce your regular Connecticut income tax liability in future years. You can carry the credit forward until it is completely used. If you are entitled to any additional credit in subsequent years, you can add the credit to any balance being carried forward from earlier years.
EFFECT OF THIS DOCUMENT: An Informational Publication (IP) is a document that addresses frequently-asked questions about a current Department position, policy or practice, usually in a less technical, question-and-answer format.
EFFECT ON OTHER DOCUMENTS: IP 94(2.3) modifies and supersedes IP 94(2.2) which may no longer be relied upon on or after this date.
RELATED FORMS AND PUBLICATIONS:
Request the most current editions of the following forms and publications:
Form CT-6251, Connecticut Alternative Minimum Tax Return - Individuals
Form CT-1041, Connecticut Income Tax Return for Trusts and Estates
Form CT-8801, Credit for Prior Year's Connecticut Minimum Tax For Individuals, Trusts and Estates
IP 93(6.3), A Guide to Calculating Your Annualized Estimated Income Tax Installments and Worksheet CT-1040AES
FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24 hours a day by choosing Option 3 on your touch tone telephone.
Electronic Delivery Options: You can also obtain tax forms and publications 24 hours a day from our site on the World Wide Web at http://www.ct.gov/drs. Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.
Replaces IP 94(2.2), issued 12/11/95