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Unrelated Business Income Tax Information



What's New for 2023

Subtraction modification for taxpayers operating a business licensed under Chapter 420f or 420h of the Connecticut General Statutes

Legislation allows those taxpayers that are licensed under either Chapter 420f or 420h of the Connecticut General Statutes to deduct “ordinary and necessary” business expenses allowed under IRC § 162 in determining their Connecticut income tax liability.  The legislation is effective upon passage and is applicable to taxable years beginning on or after January 1, 2023.


Who Must Complete a Registration Application and File an Unrelated Business Income Tax Return

An organization that has unrelated business taxable income attributable to a trade or business carried on within Connecticut and meets all of the following conditions must complete a registration application and file Form CT‑990T, Connecticut Unrelated Business Income Tax Return:

  • Is subject to taxation on income from an unrelated trade or business under the provisions of the Internal Revenue Code;
  • Is exempt from taxation under the provisions of IRC § 501; and
  • Is an organization described in IRC § 511(a)(2)(A) or a trust described in IRC § 511(b)(2).

Register online through myconneCT. Go to myconneCT, under Business Registration click New Business/Need a CT Registration Number? There is no fee for registering for the Unrelated Business Income Tax.

Click here to File, Pay, or Register Now on myconneCT!

myconneCT is the Connecticut Department of Revenue Services’ (DRS) online portal to file tax returns, make payments, view your filing history, and communicate with the agency simply and more efficiently on virtually any mobile device, including laptops, tablets, and smartphones, 24 hours a day, 7 days a week.


When to File (Tax Due Dates and Extensions)

Form CT‑990T is due on the same due date as federal Form 990‑T. If the due date falls on a Saturday, Sunday, or legal holiday, the return will be considered timely if filed by the next business day.

To request additional time to file Form CT-990T, the organization must file Form CT990T EXT, Application for Extension of Time to File Unrelated Business Income Tax Return, no later than the due date of the return, with payment of the total tax due. Filing Form CT‑990T EXT automatically extends the due date for six months. For detailed information about extensions, see the instructions to Form CT-990T EXT.


Where to File

File Electronically

Form CT-990T must be filed electronically through myconneCT.

If Form CT-990T is filed late, see Interest and Penalties to determine if interest and penalty should be reported with this return.

Attachments

In myconneCT, you must attach a complete copy of federal Form 990-T as filed with the Internal Revenue Service (IRS), including all schedules and attachments used in arriving at federal unrelated business taxable income. Attach Form CT1120K, Business Tax Credit Summary, to Form CT‑990T if the organization is claiming the Electronic Data Processing Property tax credit, the Urban and Industrial Site Reinvestment tax credit, or a carryforward balance of either tax credit for the current income year. 


Electronic Payment Options 

DRS myconneCT

Visit myconneCT to make an electronic payment. After logging in to myconneCT, find your tax account on the Summary screen, select the Make a Payment link, and choose your payment method.

  • Pay by Direct Payment: Using this option authorizes DRS to electronically withdraw a payment from your bank account (checking or savings) on a date you select up to the due date.
  • Pay by Credit Card or Debit Card: You may elect to pay your tax liability using a credit card (American Express®, Discover®, Master Card®, Visa®) or comparable debit card. A convenience fee will be charged by the credit card service provider. You will be informed of the amount of the fee and may elect to cancel the transaction. Your payment will be effective on the date that you make the charge. 

At the end of the transaction, you will receive a confirmation number for your records. As a reminder, even if you pay electronically, you must still file your return by the due date. Tax not paid on or before the due date will be subject to penalty and interest.

ACH Credit

ACH credit method users should consult with their banking institution for guidelines to ensure that payment is received timely. (Taxpayers must pre‑register with the DRS Electronic Commerce Unit (ECU) prior to using this option). The taxpayer initiates an electronic payment through their banking institution. This payment must be sent in the ACH standard CCD+TXP format.


Estimated Tax Payments 

Every organization subject to the Connecticut Unrelated Business Income Tax whose tax for the current income year is more than $1,000 must make estimated tax payments. See General Instructions on Forms CT990T ESA, ESB, ESC, and ESD, Estimated Unrelated Business Income Tax Payment Coupons. Safe harbor provisions have been established for calculating the required estimated tax installment due.

To file and pay estimated taxes electronically, visit myconneCT.

Organizations Subject to Unrelated Business Income Tax

Organizations that are exempt from tax under IRC § 501 but that are subject to tax on unrelated business income are required to make estimated tax payments. Generally, the same rules for calculating installments of estimated tax apply to such organizations. Organizations that are exempt from tax under IRC § 501 and that are subject to tax on unrelated business income attributable to Connecticut must complete Forms CT-990T ESA, ESB, ESC, and ESD, and pay the tax due (including surtax).


Annualization

If the organization is annualizing its income, check the corresponding box and complete Form CT1120I, Computation of Interest Due on Underpayment of Estimated Tax.


Amended Returns and Federal Changes

Any organization that fails to include items of income or deduction or makes any other error on a return must file an amended Form CT‑990T and check the amended return box.

If an organization has filed an amended federal return with the Internal Revenue Service (IRS) making changes to its federal unrelated business taxable income, then within 90 days of the IRS final determination on that amended federal return the organization shall file an amended Form CT‑990T, checking the amended return box, and attach a copy of the amended federal return.

If the IRS has made corrections to an organization’s federal unrelated business taxable income, the organization shall report those changes within 90 days after the IRS final determination by filing an amended Form CT‑990T and checking the amended return box. If an extension of time is necessary to report changes, an extension request must be submitted in writing to the Commissioner of Revenue Services stating the reason the additional time is required. 


Interest and Penalties

In general, interest and penalty apply to any portion of the tax not paid on or before the original due date of the return.

Interest

If an organization does not pay the tax when due, it will owe interest at the rate of 1% per month or fraction of a month until the tax is paid in full. Interest due on the underpayment of estimated tax is computed using Form CT1120I, Computation of Interest Due on Underpayment of Estimated Tax. Interest on underpayment or late payment of tax cannot be waived.

Penalty for Failure to Remit Payments Electronically

The following graduated penalty amounts will apply if you fail to remit payments electronically:

  • First offense – 10% penalty on the amount of the tax payment, but not more than $2,500;
  • Second offense – 10% penalty, but not more than $10,000; and
  • Third and subsequent offenses – 10% penalty.

When initiating a payment through your financial institution’s online banking system you must verify that your financial institution is sending an EFT, not a check.

Penalty for Late Payment or Late Filing

The penalty for late payment or underpayment of tax is 10% of the tax due or $50, whichever is greater. If a request for a filing extension has been granted, an organization may avoid a penalty for failure to pay the full amount due by the original due date if it pays:

  • At least 90% of the tax shown to be due on the return on or before the original due date of the return; and
  • The balance due with the filing of Form CT-990T, on or before the extended due date.

If no tax is due, DRS may impose a $50 penalty for the late filing of any return or report required by law to be filed.

Penalty for Willful Failure to File or Pay

Anyone who willfully fails to pay the tax or file a return will be fined up to $1,000 or imprisoned up to one year, or both, in addition to any other penalty.

Penalty for Willful Filing of a Fraudulent or Materially False Return

If you willfully file a tax return you know to be fraudulent or false in any material matter, you may be fined up to $5,000 or imprisoned from one to five years, or both.

Penalty for Failure to Disclose Listed Transaction

A penalty of 75% of the amount of the deficiency may be imposed when it appears that any part of the deficiency is due to failure to disclose a listed transaction, as defined in IRC § 6707A.