Information for Corporations Who Own
or Owned Certain State or Municipal Obligations
PURPOSE: 1995 Conn. Pub. Acts 2 (An Act Concerning the Taxation of Certain Bonds of the State of Connecticut and Its Political Subdivisions) authorizes the State of Connecticut to remove, through its power of eminent domain, the corporation business tax exemption for interest received or accrued from certain Connecticut state and municipal bonds.
The eminent domain legislation removes the corporation business tax exemption for interest received or accrued on certain bonds retroactive to January 1, 1992 and prospectively for as long as the bonds remain outstanding.
Q. WHICH BONDS ARE AFFECTED?
The following is a list of affected Connecticut state and municipal bonds. Corporations that own or owned any of the following bonds on or after January 1, 1992 are responsible for including the interest received or accrued from such bonds in gross income for corporation business tax purposes.
Connecticut Higher Education Supplemental Loan Authority Bonds (CHELSA Bonds). Series:
1983A 1990B 1992A
1985A 1991A 1993A
1990A 1991B 1994A
State of Connecticut, Airport Revenue Bonds, Bradley International Airport. Series:
1982 and 1992
Municipal Resource Recovery Authority Bonds:
Issued prior to July 1, 1989
Municipal Housing Finance Assistance Bonds (including Town of West Hartford, Connecticut, Single-Family Mortgage Revenue Bonds, Multiple Originators and Servicers, Series 1980A):
Issued prior to July 1, 1989
State of Connecticut, Special Tax Obligation Bonds, Transportation Infrastructure Purposes. Series:
1984A 1988A 1989B 1991B 1993B
1985A 1988B 1989C 1992A 1993C
1986A 1988C 1990A 1992B 1994A
1987A 1989A 1991A 1993A
State of Connecticut, Second Lien Tax Obligation Bonds, Transportation Infrastructure Purposes (Variable Rate Demand). Series:
Any other Connecticut state or municipal obligation if the Official Statement pursuant to which such obligation was sold contained a statement or opinion that the interest thereon is excluded from (i) any state tax "on or measured by net income", (ii) any state excise or franchise tax, including the Corporation Business Tax, or contained words of similar import to any of the preceding; provided, however, that language excluding interest from "any taxes" or "all taxes" is not relevant for this purpose.
Q. WHAT IS THE PROPER COURSE OF ACTION IF A CORPORATION OWNS OR OWNED AFFECTED STATE OR MUNICIPAL OBLIGATIONS ON OR AFTER JANUARY 1, 1992?
A corporation who has previously filed or been required to file an annual corporation business tax return (For example: Form CT-1120 or Form CT-1120S) or whose annual corporation business tax return is due within 90 days after March 8, 1995 should file an original or amended corporation business tax return, as applicable, for each income year ending on or after January 1, 1992, including in its gross income the amount of interest received or accrued from the affected Connecticut state and municipal obligations.
If the additional tax is paid on or before June 6, 1995, no interest or penalties will accrue or be assessed. If the additional tax is paid after June 6, 1995, interest and penalties will accrue or be assessed.
The penalty is equal to 10% of the amount due and unpaid, or fifty dollars, whichever amount is greater. Interest is calculated at the rate of 1.25% per month or fraction thereof, from the due date of such tax until the date of payment. However, if the tax has not been paid on or before June 30, 1995, the interest rate on or after July 1, 1995 is 1% per month or fraction thereof.
Q. WHAT HAPPENS IF A CORPORATION DOES NOT FILE AMENDED RETURNS TO INCLUDE INTEREST ACCRUED FROM THE AFFECTED STATE AND MUNICIPAL BONDS?
The commissioner may adjust gross income to include the interest received or accrued on an affected Connecticut state or municipal obligations for income years ending on or after January 1, 1992.
Q. WILL INTEREST ON UNDERPAID ESTIMATED CORPORATION BUSINESS TAX BE ASSESSED ON ANY ADDITIONAL TAX DUE AS A RESULT OF THIS LEGISLATION?
No. The provisions of Conn. Gen. Stat. 12-242d (interest on underpaid installments) will not apply to any additional tax due as a consequence of the passage of 1995 Conn. Pub. Acts 2 for any income year commencing prior to March 8, 1995.
Q. HOW SHOULD A CORPORATION FILE PROSPECTIVELY?
Any corporation business tax return due after June 6, 1995, must include in gross income the interest received or accrued from the affected Connecticut state and municipal bonds as long as the bonds remain outstanding. Interest and penalties will accrue or be assessed if a corporation fails to pay the tax due on the interest received or accrued from such bonds.
EFFECT OF THIS DOCUMENT: An Informational Publication is a document that addresses issues frequently raised by taxpayers, usually in a question-and-answer format. It is less technical in nature than a Policy Statement, but may be referred to by individual taxpayers for guidance.
EFFECT ON OTHER DOCUMENTS: None affected.
For Further Information on Connecticut Taxes: Please call the Department of Revenue Services during business hours, Monday through Friday:
Forms and Publications: Forms and publications are available all day, seven days a week:
- Internet: preview and download forms and publications from the DRS Web site: http://www.ct.gov/drs; or
- Telephone: Call 1-800-382-9463 (toll-free from within Connecticut) or 860-297-5962 (anywhere) and select Option 2 from a touch-tone phone.
corporation business tax