Group Returns Under the Income Tax Act
PURPOSE: This Special Notice describes filing instructions for group returns and group declarations of estimated tax by partnerships, S corporations, trusts and estates on behalf of their nonresident partners, shareholders or beneficiaries, respectively.
EFFECTIVE DATE: Effective upon issuance and applicable to taxable years beginning on or after January 1, 1991, unless otherwise noted herein.
STATUTORY AUTHORITY: Sections 70 through 73, inclusive, of the Income Tax Act, and Rules 70-1, 70-2, 71 (a) -5, 71 (a) -6, and 74-2, which are adopted under Section 92 of the Income Tax Act. (As used herein, the "Income Tax Act" refers to §§51 through 93, inclusive, of 1991 Conn. Pub. Acts 3 (June Spec. Sess.).)
APPLICABILITY: This Special Notice also applies to S corporations with nonresident shareholders, and trusts and estates with nonresident beneficiaries, and wherever reference is made herein to partnerships and partners, such reference shall be construed to include S corporations and shareholders thereof, and trusts or estates and beneficiaries thereof, respectively, and any reference to Form CT-1065 shall be construed to include Form CT-1120SI or Form CT-1041, as the case may be.
WHO MAY FILE: A partnership doing business in Connecticut or having income derived from or connected with sources within Connecticut may file a group Connecticut nonresident income tax return on behalf of its qualified nonresident partners who elect to file such return. A group return may be filed only by a partnership with 20 or more qualified electing nonresident partners in a taxable year. All qualified electing nonresident partners must have the same taxable year.
A "qualified electing nonresident partner" is one who meets all of the following conditions:
- The partner was a nonresident individual for the entire taxable year;
- The partner did not maintain a permanent place of abode in Connecticut at any time during the taxable year;
The partner (or his or her spouse, if a joint federal income tax return is or will be made) did not have income derived from or connected with Connecticut sources other than the partner's distributive share of partnership income derived from or connected with sources within Connecticut;
The partner waives the right to claim any Connecticut personal exemption and any Connecticut personal credit; and
The partner elects to be included in a group nonresident return. (There is no special form that the partner must complete in order to make the election.)
WHO MAY BE INCLUDED: Only individuals may be included in the group return. They must be nonresidents who have no Connecticut income other than the income reported on the group return. All eligible members of the partnership need not be included. The decision of whether or not to include a member must be made by that member and the authorized agent. All members not included in the group return are required to meet their Connecticut obligations independently, or be included in a composite return.
Example: The ABC partnership consists of a general partner and 50 limited partners. The general partner is a corporation, and the limited partners are 26 nonresident individuals, 20 resident individuals, an S corporation, a partnership, a nonresident estate, and a nonresident trust. The 26 nonresident individuals may file a group return.
AFTER-DISCOVERED INCOME OF A PARTNER: If, after a final group return has been filed, a partner electing to be included in a group return discovers that such partner has income derived from or connected with Connecticut sources other than such partner's distributive share from the partnership, such partner shall:
- File a Form CT-1040 NR/PY on such partner's own behalf;
- Report all Connecticut-sourced income (including that reported on the group return) on the partner's own Form CT-1040 NR/PY;
- Report as tax paid by the partner on the partner's own Form CT-1040 NR/PY the tax paid on behalf of such partner with the group return;
- Attach a copy of page 1 of the group return.
EXTENSION: A group return may be extended for 6 months by filing an application on Form CT-1040EXT and paying the tax it expects to owe on or before the original due date of the group return. The form must show the partnership name, have "GROUP" written across the top thereof and be signed by a partner having authority to act as an agent for all participating partners. In addition, the partnership must attach a list to the application showing each participating partner's name, address and social security number.
FULL PAYMENT REQUIRED: The Department will treat a group return that is not accompanied by full payment of any amount reported to be due on Line 22 of the group's Form CT-1040 NR/PY as an incomplete return.
AMENDED RETURNS: The group CT-1040 NR/PY can also be used as an amended return. Print the word "Amended" on the top of the form, and continue with instructions as they are explained below.
MODIFICATION OF FORM CT-1040 NR/PY: A partnership filing a group nonresident income tax return on behalf of its qualified electing nonresident partners must file one return on Form CT-1040 NR/PY, modified as follows:
|Step 1:||Write "GROUP" across the top of the Form CT-1040 NR/PY, and enter the taxable year of the group return, if not the same as the calendar year.|
|Step 2:||Enter the exact name and address of the partnership as shown on its Form CT-1065. Enter the partnership's federal employer identification number in the box provided for the social security number, and enter the partnership's Connecticut tax registration number, if any, in the box provided for the spouse's social security number. Leave the Filing Status section and the Yes or No questions blank.|
|Step 3:||Complete Schedule G of this Special Notice (or a substitute schedule furnishing the same information) as follows:|
|Column A:||Enter the name of each partner electing to be included in the group return.|
|Column B:||Enter the address of each partner electing to be included in the group return.|
|Column C:||Enter the social security number or federal identification number of each partner electing to be included in the group return.|
|Column D:||Enter the distributive share of Connecticut-sourced income of each partner electing to be included in the group return. Enter the total of Column D on Line 1.|
|Column E:||Multiply the amount in Column D by 1.5%. Enter that amount in Column E.|
|Column F:||Enter the distributive share of capital gains from the sale or exchange of real property located in Connecticut. (This amount is included in both Column D and F because, for the taxable year beginning in 1991, it is subject to Connecticut income tax at 1.5% and Connecticut capital gains tax at the rate of 4.75%).|
|Column G:||Multiply the amount in Column F by 4.75% and enter the product in Column G.|
|Column H:||Add the amounts for each partner from Column E and G and enter the sum in Column H. Enter the total of Column H on Line 2.|
|Column I:||Enter the amount of estimated tax paid, if any, by each partner. Enter the total of Column I on Line 3.|
|Column J:||Add the amount of underpayment penalty and interest, if any, attributable to each partner. If a partner has not made the required estimated payments for the partnership's capital gains from the sale or exchange of real property located in Connecticut, or has filed the estimate late, penalties and interest will be assessed. A worksheet to calculate the penalty and interest (Form CT-2210) is available from the Department of Revenue Services. Enter the total on Line 4.|
Schedule G shall also be prepared for group returns for S corporation shareholders and trust or estate beneficiaries.
Schedule G must be attached to the CT-1040 NR/PY Group Return.
|Step 4:||Complete Lines 1, 12, 16 through 20, inclusive, and 22 through 25, inclusive, of the Form CT-1040 NR/PY as follows:|
Line 1 of the CT-1040 NR/PY: TOTAL CONNECTICUT SOURCED INCOME OF NONRESIDENT PARTNERS INCLUDED IN GROUP RETURN. Enter the total Connecticut sourced income of all nonresident partners for whom the partnership is filing the group income tax return. Enter on Line 1 the amount from Schedule G, Line 1 (total of Column D).
Only items of income are to be included on Line 1. Items of loss and deduction may only be taken if the partner files a nonresident return. Federal rules relating to separation of different types of income are applicable. E.g., passive loss and portfolio income: the portfolio income must be included in the partner's income but it may not be offset by the passive loss.
S corporations should only include income which represents the shareholders' pro rata share of separately stated items. The nonseparately stated items are taxed at the corporate level.
Lines 2 through 11, inclusive: Make no entries.
Line 12: TAX DUE Enter on Line 12 the amount from Schedule G, Line 2 (Total of Column H).
Line 13 through 15, inclusive: Make no entries.
Line 16: PAYMENTS OF ESTIMATED TAX Enter on Line 16 the amount from Schedule G, Line 3 (total of Column I).
Line 17: PAYMENT MADE WITH EXTENSION REQUEST If the partnership filed an Application for Extension of Time to File Connecticut Group Income Tax Return, Form CT-1040EXT, enter on line 17 the amount of tax paid with Form CT-1040EXT.
Line 18: TOTAL PAYMENTS Add lines 16 and 17. Enter total on Line 18.
Line 19: OVERPAYMENT If line 18 is more than line 12, subtract line 12 from line 18 and enter the resulting amount on line 19.
Line 20: AMOUNT OF LINE 19 TO BE APPLIED TO 1992 ESTIMATED TAX Enter the amount of the group's 1991 overpayment. This entire amount shall be credited to the group's 1992 Connecticut estimated tax.
Line 21: Make no entries.
Line 22: AMOUNT OF TAX OWED If line 12 is more than line 18 subtract line 18 from line 12, and enter the result on line 22. This is the amount of tax owed.
Line 23: LATE PAYMENT OR LATE FILING: PENALTY AND INTEREST The penalty for late payment or underpayment of the tax due is 10% of such amount due. If no tax is due, but the filing of a return is required, the penalty for late filing is $50. Interest will be charged at the rate of 1 1/4% per month or fraction thereof from the due date until payment is made if any tax due is not paid by the due date. Calculate the penalty and interest and enter these amounts in the spaces provided. Combine the penalty and interest amounts and enter the total on line 23.
Line 24: UNDERPAYMENT PENALTY AND INTEREST: Enter the total penalty and interest, if any, for underpaying estimated tax from Schedule G, Line 4 (total of Column J). If a partner has not made the required estimated payments for the partnership's capital gains from the sale or exchange of real property located in Connecticut, or has filed the estimate late, penalties and interest will be assessed. A worksheet to calculate the penalty and interest (Form CT-2210) is available from the Department.
Line 25: BALANCE DUE WITH THIS RETURN Add lines 22, 23 and 24. Enter the total on line 25. Pay the amount in full with the return.
Make check or money order payable to the Commissioner of Revenue Services and be sure to sign the check. Clip the check to the front of the return. Include the partnership's Federal Employer Identification Number and "1991 Form CT-1040 NR/PY GROUP" on the front of the check or money order in the lower left corner. DO NOT SEND CASH.
SIGNATURE: The group form must be signed by a partner having the authority to act as an agent for all participating partners. Also, anyone paid to prepare the return must sign it. A preparer who signs the return must sign it by hand in the space provided. The preparer's Sales Tax Registration number, Federal Employer Identification Number, firm name, and firm address must also be entered in the space provided.
Retain a copy of this return for the partnership's records. Attach to the return a copy of all applicable schedules and forms, including federal Form 1065 and federal Schedules K and K-1, for those partners included in this return.
SALES AND USE TAXES OF CHARGES FOR TAX PREPARATION SERVICES: If the partners or partnership paid anyone for advice or for preparation of this return, see SN 91 (17).
DUE DATE: Group returns are due the fifteenth day of the fourth month following the close of the qualified electing nonresident partners' taxable year. The return will be considered timely if the date shown by the U.S. Post Office cancellation mark is on or before the due date of the return.
SATISFACTION OF INDIVIDUAL RETURN REQUIREMENTS: The filing of a group return will be considered to be a group of separate returns which meet the individual filing requirements imposed by the Income Tax Act. The Department retains the right to require the filing of an individual Connecticut income tax return by any of the partners in the group return.
GROUP DECLARATIONS FOR NONRESIDENT PARTNERS: A partnership which has elected to file a group return as provided above must file a group Connecticut declaration of estimated tax on behalf of each of its qualified electing nonresident partners whose income derived from or connected with sources within this state can reasonably be expected to exceed $1,000.
Due dates of installments and the amount of required payments for calendar year taxpayers required to file estimated tax returns in 1992 are as follows:
April 15, 1992: at least equaling the lesser of 25% of each partner's tax due for the taxable year or 30% of each partner's 1991 income tax liability adjusted to reflect the 1992 rate (4.5%).
June 15, 1992: at least equaling the lesser of 50% of each partner's tax due for the taxable year or 55% of each partner's 1991 income tax liability, adjusted to reflect the 1992 rate (4.5%).
September 15, 1992: at least equaling the lesser of 75% of each partner's tax due for the taxable year or 80% of each partner's 1991 income tax liability adjusted to reflect the 1992 rate (4.5%).
January 15, 1993: at least equaling the lesser of 100% of each partner's tax due for the taxable year or 100% of each partner's 1991 income tax liability adjusted to reflect the 1992 rate (4.5%).
If the partner paid an installment of estimated tax in excess of the amount determined to be the correct amount due for such installment, the excess shall be credited against any unpaid installment or against tax due.
MODIFICATION OF FORM CT-1040ES: A partnership required to make a group declaration of estimated tax and to pay group estimated tax installments must file, with each installment, one Form CT-1040ES, modified as follows:
|Step 1:||Write "GROUP" across the top of the Voucher CT-1040ES, and write in the taxable year of the group return.|
|Step 2:||Enter the exact name and address of the partnership as shown on its Form CT-1065. Enter the partnership's federal employer identification number in the box provided for the social security number, and enter the partnership's Connecticut tax registration number, if any, in the box provided for the spouse's social security number.|
|Step 3:||Enter the combined total of the qualifying electing nonresident partners' Connecticut estimated tax payments on line 1.|
|Step 4:||The group declaration and each payment coupon must be signed by a partner having the authority to act as an agent for all participating partners, and written evidence of such authority must be maintained on file by the partnership and is subject to inspection by the Department.|
|Step 5:||Write the partnership's federal employer identification number and "CT-1040ES Group" on the lower left corner of each check.|
EFFECT ON OTHER DOCUMENTS: Temporary Rules 70-1, 70-2, 71 (a) -5, 71 (a) -6 and 74-2 are amplified.
PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.
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 Web home page at http://www.ct.gov/drs. Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.