Connecticut — Corporate Income / Franchise Tax

Connecticut imposes an annual Corporation Business Tax on every company that is carrying on, or has the right to carry on, business in the state. The tax applies to businesses filing as C corporations for federal income tax purposes, including dissolved corporations that continue to conduct business, mutual savings banks, and savings and loan associations doing business in Connecticut. The tax is characterized as an excise on the corporate franchise for the privilege of carrying on or doing business, owning or leasing property within the state in a corporate capacity, or maintaining an office within the state.

Certain entities are exempt from the tax, including companies exempt from federal corporation net income tax, domestic international sales corporations (DISCs) electing DISC treatment under the Internal Revenue Code, companies subject to gross earnings taxes under Chapter 210 of the Connecticut General Statutes, cooperative housing corporations as defined for federal tax purposes, and corporate limited partners in investment partnerships that are not otherwise doing business in Connecticut.

Source: Conn. Gen. Stat. § 12-214 | Connecticut DRS – Corporation Business Tax

Updated July 2026 to repair the dead statute URL by linking to the current Connecticut General Statutes supplement (2024). No change to any substantive or operative rule detected since last review; only the citation URL is repaired for reliability.

Connecticut’s 10% corporation surtax, imposed under Conn. Gen. Stat. § 12-219(b)(8), applies broadly to companies in a combined unitary group, but never to a member paying only the statutory $250 minimum tax, regardless of the combined group calculation or the group’s overall net income. This rule is categorical and arises both from statute and from Department of Revenue Services (DRS) instructions.

Statutory exemption for minimum-tax members Section 12-219(b)(8) and related combined reporting provisions (notably § 12-218e(k)(4)(A)) state that for any member whose calculated tax equals $250—the statutory minimum—"enter zero" for the surtax computation. This means that within a combined group, even if the group as a whole is otherwise subject to the 10% surtax, any included corporation whose own apportioned or allocated tax is $250 pays no surtax, and this exclusion applies per member.

DRS published guidance This exemption is reiterated in the official 2025 Form CT-1120CU instructions: "Surtax: Multiply each applicable tax amount on Line 6a or Line 6b by 10%. If the tax amount in any column is $250 or less, enter zero (‘0’)." This Form is required for all combined unitary filers, and the instructions govern how each entity’s liability—including minimum-tax-only filers—is calculated.

The 2026 Tax Expenditure Report from the Office of Fiscal Analysis likewise confirms: "No surcharge is imposed on minimum tax payers."

Summary As of July 2026, neither the statute, regulations, nor any official Form instructions impose the 10% corporate surtax on any member of a combined group whose Connecticut business tax obligation is the $250 minimum, regardless of the group’s total tax or apportionment outcome.

Source: Conn. Gen. Stat. § 12-219 Source: Conn. Gen. Stat. § 12-218e Source: 2025 Form CT-1120CU Instructions Source: 2026 Tax Expenditure Report Listing (OFA)

Updated July 2026 to repair primary authority links to Conn. Gen. Stat. §§ 12-219 and 12-218e, and to update the 2026 OFA Tax Expenditure Report citation after source URLs changed in the Connecticut General Assembly's online supplement. No change to any substantive surtax or minimum-members rule detected since the last update; only link and citation reliability is improved. If a direct CGA link to the full PDF is available, update the citation again accordingly.

Connecticut multistate corporations apportion net income using a single sales factor for tax years beginning on or after January 1, 2016. The apportionment percentage is calculated by dividing Connecticut receipts by total receipts from all states. Receipts are sourced to Connecticut based on market-based sourcing rules; for services, receipts are assigned to Connecticut if the service is used at a location in the state. One exception exists: taxpayers receiving at least 75% of income from sales of tangible personal property to the U.S. government may elect a three-factor formula with double-weighted sales factor.

Source: Conn. Gen. Stat. § 12-218(b)

Updated July 2026 to repair the source citation link to the 2026 Connecticut General Statutes supplement (Section 12-218) after statutory URLs were reorganized by the Connecticut General Assembly. No change to the operative apportionment formula rule was detected; only the URL is modified for authority chain reliability.

Connecticut imposes a minimum annual corporation business tax of $250 on every company subject to the tax. The minimum applies regardless of profitability or whether the net income tax calculation produces a lower amount. Each corporation included in a combined return must pay the $250 minimum. Tax credits allowed under the Corporation Business Tax cannot reduce a corporation's tax below $250.

Source: Conn. Gen. Stat. § 12-219 | Conn. Gen. Stat. § 12-223c

Connecticut's default apportionment method for multistate corporations is a single sales factor, effective for tax years beginning on or after January 1, 2016, under Conn. Gen. Stat. § 12-218(b). However, a narrow exception allows certain taxpayers selling tangible personal property to the federal government to elect an alternative three-factor apportionment formula.

75% threshold measurement

Under Conn. Gen. Stat. § 12-218(c)(3)(A), a taxpayer may elect the three-factor apportionment formula if "seventy-five per cent or more of [its] total gross receipts, as described in subsection (b) of this section, during the income year are from the sale of tangible personal property directly, or in the case of a subcontractor, indirectly, to the United States government." The threshold is measured against the taxpayer's total gross receipts from all sources during the income year—not Connecticut receipts or receipts from a specific line of business. Subsection (b) of § 12-218 defines gross receipts for apportionment purposes as receipts "from sales or other sources during the income year, computed according to the method of accounting used in the computation of [the taxpayer's] entire net income."

Scope of the election

The election applies only to sales of tangible personal property to the U.S. government. Services, intangible property, and sales to state or local governments do not qualify. The statute expressly covers both direct sales to the federal government and indirect sales through a subcontractor relationship where the tangible personal property is ultimately destined for the U.S. government.

Three-factor formula mechanics

A taxpayer that makes the election under § 12-218(c)(3)(A) apportions its net income using a three-factor formula under § 12-218(c)(3)(B). The formula is computed as the sum of (1) the property factor, (2) the payroll factor, and (3) a double-weighted sales factor, divided by four. This produces a formula in which sales counts twice and property and payroll each count once—often described as "property + payroll + (2 × sales) ÷ 4."

Election mechanics and duration

The taxpayer must make the election on or before the due date (or extended due date, if applicable) of its corporation business tax return for the income year. Once made, the election is irrevocable and applies for five successive income years under § 12-218(c)(3)(A). A taxpayer cannot revoke the election during the five-year period, even if its gross receipts profile changes and it no longer meets the 75% threshold in a subsequent year within the five-year window.

Strategic considerations

The three-factor election is beneficial to taxpayers with substantial property and payroll in Connecticut but significant out-of-state sales to the U.S. government. Under the default single sales factor, such taxpayers would apportion relatively little income to Connecticut if their sales are predominantly destined outside the state. The three-factor formula increases the Connecticut apportionment percentage by weighting in-state property and payroll. Conversely, taxpayers with minimal Connecticut property and payroll but high U.S. government sales delivered into Connecticut would see a lower apportionment percentage under the three-factor formula and should not elect it.

Effective date

The single sales factor default (and this three-factor exception) applies to income years commencing on or after January 1, 2016. For earlier income years, Connecticut used a different apportionment regime, and the three-factor government-contractor election operated under prior versions of the statute.

Source: Conn. Gen. Stat. § 12-218(b), (c)(3)

Connecticut imposes Corporation Business Tax on any company that derives income from sources within the state and has a substantial economic presence within Connecticut, evidenced by purposeful direction of business toward the state, without regard to physical presence. The Department of Revenue Services applies a bright-line threshold: a company has economic nexus when it has receipts from business activities attributable to Connecticut sources of $500,000 or more during a taxable year. The Department evaluates substantial economic presence based on the frequency, quantity, and systematic nature of a company's economic contacts with Connecticut. This rule applies to income years beginning on or after January 1, 2010. Public Law 86-272 may provide protection for certain companies engaged solely in the solicitation of sales of tangible personal property.

Source: Conn. Gen. Stat. § 12-216a | IP 2010(29.1), Q & A on Economic Nexus

Connecticut Corporation Business Tax returns are due on or before the fifteenth day of the month following the due date of the corporation's corresponding federal income tax return for the income year. For calendar-year corporations with a December 31 year-end, the due date is May 15. For corporations with a June 30 year-end, a special exception applies: the Connecticut return is due October 15. If the due date falls on a Saturday, Sunday, or legal holiday, the return is timely if filed on the next business day.

Extension of time to file

A corporation seeking additional time to file must submit Form CT-1120 EXT, Application for Extension of Time to File Connecticut Corporation Business Tax Return. Making an extension payment through myconneCT before the original due date does not by itself grant the extension; the taxpayer must timely file Form CT-1120 EXT to receive the extension. The extension provides additional time to file the return but does not extend the time to pay the tax — the tax payment remains due on the original return due date.

Electronic filing requirement

All Connecticut Corporation Business Tax returns, extensions, and estimated payments must be filed and paid electronically. Connecticut accepts electronic filing through myconneCT (the state's online tax portal) and through the IRS Modernized e-File (MeF) program for software providers. A corporation may request a waiver from the electronic filing and payment requirement by filing Form DRS-EWVR, Electronic Filing and Payment Waiver Request, no fewer than 30 days before the due date of its first electronic filing and payment, if the corporation can demonstrate that electronic filing and payment creates an undue hardship. The Commissioner of Revenue Services may grant a one-year waiver; paper returns may be filed only if such a waiver has been granted.

Source: Conn. Gen. Stat. § 12-222 | Connecticut DRS – Corporation Business Tax Information | Connecticut DRS – Corporation Business Tax FAQs | Connecticut DRS – Other Helpful Corporation Business Tax Information

Connecticut requires mandatory combined unitary reporting for groups of commonly owned corporations engaged in a unitary business, where at least one member is subject to the Corporation Business Tax. This requirement has applied to income years beginning on or after January 1, 2016. The combined reporting regime replaced Connecticut's prior elective combined filing system under Conn. Gen. Stat. § 12-223a.

Common ownership and unitary business test

A combined group consists of corporations that satisfy two tests: (1) common ownership, and (2) engagement in a unitary business. The Department of Revenue Services applies the unitary business definition articulated by the U.S. Supreme Court in Mobil Oil Corp. v. Vermont, 445 U.S. 425 (1980)—a unitary business is characterized by significant flows of value evidenced by functional integration, centralization of management, and economies of scale. Connecticut does not require substantial intercorporate transactions (the additional requirement that previously existed under the old elective combined-return statute); the unitary business test alone, based on Mobil Oil factors, determines whether corporations must combine.

Mandatory vs. elective filing

Combined unitary reporting is mandatory, not elective. If commonly owned corporations are engaged in a unitary business with a company subject to Connecticut's Corporation Business Tax, they must file Form CT-1120CU, Combined Unitary Corporation Business Tax Return. A company that is individually subject to the Corporation Business Tax but does not meet the criteria to file on a combined unitary basis files Form CT-1120, not the combined return.

Filing basis options: water's-edge, worldwide, and affiliated group

Combined groups may select among three filing bases, which determine which entities are included in or excluded from the combined group:

• Water's-edge (default): The combined group includes U.S. corporations and certain foreign corporations with substantial U.S. business activities; it generally excludes foreign corporations without such ties.
• Worldwide (elective): The group includes all members of the unitary business, including foreign corporations, regardless of their level of U.S. activity.
• Affiliated group (elective): The group is limited to members that would be included in a federal affiliated group under Internal Revenue Code § 1504(a), narrowing the group beyond what common ownership and unitary business alone would require.

The water's-edge basis applies unless the group affirmatively elects worldwide or affiliated group basis by checking the appropriate box on Form CT-1120CU.

Taxable and nontaxable members

Once the combined group is identified, members are divided into taxable members (those with Connecticut nexus) and nontaxable members (those without nexus). Both taxable and nontaxable members' income from the unitary business is included in calculating the combined group's net income under Conn. Gen. Stat. § 12-218e, but only taxable members have Connecticut tax liability.

Pass-through entities

The business conducted by a pass-through entity is treated as conducted by its members to the extent of each member's distributive share of the pass-through entity's income. A member's pro-rata share of a pass-through entity's income, capital, and apportionment factors derived from the unitary business is included in the combined group's tax calculation. Passive holding companies that directly or indirectly control one or more operating companies engaged in a unitary business are themselves deemed to be engaged in a unitary business with those companies.

Interaction with the 10% surtax

Connecticut imposes a 10% surtax on corporations with $100 million or more in total income and on any corporation filing as part of a combined unitary group, regardless of income level. All taxable members of a combined group pay the surtax, even if the combined group's total income is below $100 million. This surtax rule is codified at Conn. Gen. Stat. § 12-219(b)(8)(B) and effectively increases the combined rate from 7.5% to 8.25% (7.5% × 1.10) for all combined filers.

Designated taxable member

The combined group must select a designated taxable member to file the return, make payments, and perform other acts on behalf of the group. The designated taxable member must be a taxable member (i.e., have Connecticut nexus) and must have a Connecticut Tax Registration Number. If the common parent is a taxable member, it must serve as the designated taxable member; otherwise, any taxable member may be selected.

Source: Conn. Gen. Stat. Chapter 208 (2021), specifically § 12-218e, § 12-219, and § 12-223a et seq. | Connecticut DRS – Combined Unitary Frequently Asked Questions (OCG-3) | Connecticut DRS – Corporation Business Tax Information | Mobil Oil Corp. v. Vermont, 445 U.S. 425 (1980)

Connecticut historically imposed a capital base tax as an alternative minimum tax on corporations subject to the Corporation Business Tax. Under Conn. Gen. Stat. § 12-219, corporations paid the greater of (1) the tax on net income under § 12-214, or (2) a tax on the corporation's capital base. The capital base tax is calculated on "the amount derived . . . by adding (I) the average value of the issued and outstanding capital stock, including treasury stock at par or face value . . . and amounts received on subscriptions to capital stock in excess of par or face value and not included in capital stock or capital surplus, (II) paid-in or capital surplus, and (III) retained earnings . . . and by deducting from the sum so obtained the average value in accordance with subparagraph (B) of subdivision (1) of section 12-218 of stocks and bonds which, under the laws of the United States, are exempt from taxation," then apportioned to Connecticut under § 12-219a.

Phaseout schedule

Conn. Gen. Stat. § 12-219(a) enacts a multi-year phaseout of the capital base tax with rates declining to zero. The statutory schedule provides:

• Income years commencing prior to January 1, 2024: 3.1 mills per dollar (0.31%)
• Income year commencing on or after January 1, 2024, and prior to January 1, 2025: 2.6 mills per dollar (0.26%)
• Income year commencing on or after January 1, 2025, and prior to January 1, 2026: 2.1 mills per dollar (0.21%)
• Income year commencing on or after January 1, 2026, and prior to January 1, 2027: 1.6 mills per dollar (0.16%)
• Income year commencing on or after January 1, 2027, and prior to January 1, 2028: 1.1 mills per dollar (0.11%)
• Income years commencing on or after January 1, 2028: 0 mills per dollar — complete elimination

The capital base tax will be fully eliminated for income years commencing on or after January 1, 2028. The 2027 income year is the last year to which the capital base tax applies.

Greater-of calculation through 2027

For income years through 2027, corporations subject to the Corporation Business Tax must calculate both the net income tax under § 12-214 (including any applicable surtax under § 12-219(b)(8)) and the capital base tax under § 12-219(a) (also subject to the surtax), then pay the greater amount. Corporations with substantial allocated capital but low or negative Connecticut net income may owe tax based on their capital base rather than net income during these phaseout years. The $250 minimum tax under § 12-219 applies regardless of whether liability is determined under the net income base or the capital base; corporations paying only the $250 minimum are not separately subject to the capital base calculation.

Surtax application to capital base tax

The 10% surtax on Corporation Business Tax liability, codified at Conn. Gen. Stat. § 12-219(b)(8), applies to the tax calculated under both the net income base and the capital base. For income years through 2027, a corporation subject to the surtax (either because it has $100 million or more in federal gross income, or because it is a member of a combined unitary group) must apply the 10% surtax to whichever base — net income or capital — produces the greater pre-surtax liability. The Connecticut Department of Revenue Services confirmed that the capital base tax phaseout continued in income year 2025 with a reduction of the tax rate from 0.0026 to 0.0021, consistent with the statutory schedule.

Source: Conn. Gen. Stat. § 12-219 Source: Conn. Gen. Stat. § 12-214 Source: Conn. Gen. Stat. § 12-218 Source: Conn. Gen. Stat. § 12-219a Source: Connecticut DRS – Corporation Business Tax Information

Connecticut corporations subject to the Corporation Business Tax must make quarterly estimated tax payments if the current year tax exceeds $1,000 after applying corporation business tax credits. The requirement applies to the tax calculated under both the net income base and the capital base during years when the capital base tax remains in effect.

Threshold and installment schedule

The estimated tax requirement is triggered when the corporation's current year tax exceeds $1,000. Corporations meeting this threshold must make four required installments during the income year, due on the 15th day of the third, sixth, ninth, and twelfth months of the income year under Conn. Gen. Stat. § 12-242d(a). For a calendar-year corporation, the installment due dates are March 15, June 15, September 15, and December 15.

Required annual payment—safe harbors

Connecticut provides two alternative safe harbor methods for calculating the "required annual payment," which is the total amount that must be paid in estimated installments to avoid underpayment interest. The corporation's required annual payment is the lesser of:

1. 90% of the current year tax — ninety per cent of the tax shown on the return for the income year, or, if no return is filed, ninety per cent of the tax for such year; or

1. 100% of the prior year tax — if the preceding income year was an income year of twelve months and if the company filed a return for the preceding income year showing a liability for tax, one hundred per cent of the tax shown on the return for the next preceding income year without regard to any credit under Chapter 208.

These safe harbors are codified at Conn. Gen. Stat. § 12-242d(e). A corporation that pays estimated tax equal to the lesser of these two amounts, in the installment pattern described below, will not owe underpayment interest even if its actual tax liability for the year exceeds the estimated payments made. If the prior income year was less than twelve months, or if no return showing a liability for tax was filed for the preceding year, the second safe harbor is unavailable and the corporation must use the 90% current-year test.

Installment percentages

The four required installments are not equal. Under Conn. Gen. Stat. § 12-242d(b), the installments must be paid in the following proportions of the required annual payment:

• First installment (month 3): 30% of the required annual payment
• Second installment (month 6): 40% of the required annual payment
• Third installment (month 9): 10% of the required annual payment
• Fourth installment (month 12): 20% of the required annual payment

The front-loaded pattern (30% and 40% in the first and second installments, totaling 70% by mid-year) reflects Connecticut's accelerated estimated tax payment structure. These percentages are cumulative; each installment represents an additional payment, not a cumulative percentage of the total liability.

Annualized income installment method

Corporations that do not receive income evenly throughout the year may use the annualized income installment method to reduce one or more installments during periods of low income. Under Conn. Gen. Stat. § 12-242d(f)(1), "in the case of any required installment, if the company establishes that the annualized income installment is less than the amount determined under subsection (b) of this section, the amount of such required installment shall be the annualized income installment." Any reduction in a required installment resulting from the application of the annualized method is recaptured by increasing the amount of the next required installment by the amount of the reduction, and by increasing subsequent required installments as necessary. The Department of Revenue Services provides Worksheet CT-1120AE, Connecticut Corporation Business Tax Annualized Estimated Worksheet, for corporations electing this method.

Underpayment interest

Conn. Gen. Stat. § 12-242d(c) imposes interest on any underpayment of estimated tax at the rate of one per cent per month or fraction thereof, applied to the amount of the underpayment, for the period of the underpayment. The underpayment amount is "the excess of the required installment, over the amount, if any, of the installment paid on or before the due date for the installment" under § 12-242d(d). The interest period runs from the due date for the installment to whichever of the following dates is earlier: (1) the fifteenth day of the fifth month of the next succeeding income year (the normal return due date for calendar-year corporations), or (2) the date on which the underpayment is paid. Payments of estimated tax are credited against unpaid required installments in the order in which the installments are required to be paid. Interest on estimated tax underpayments is computed using Form CT-1120I, Computation of Interest Due on Underpayment of Estimated Tax, and cannot be waived.

Combined unitary groups

For corporations filing on a combined unitary basis, Conn. Gen. Stat. § 12-242d(g)(2) provides that "the designated taxable member of a combined group shall be responsible for paying estimated tax installments, at the times and in the amounts specified in this section, on behalf of the taxable members of the combined group and in the form and manner prescribed by the Commissioner of Revenue Services." Each taxable member remains jointly and severally liable for the tax under the combined reporting statute (Conn. Gen. Stat. § 12-218e), but the installment payments are made centrally by the designated taxable member.

Electronic filing requirement

All Corporation Business Tax estimated payments must be filed and paid electronically. Connecticut accepts electronic filing and payment through myconneCT (the Department of Revenue Services' online portal). A corporation may request a waiver from the electronic filing and payment requirement by filing Form DRS-EWVR, Electronic Filing and Payment Waiver Request, at least 30 days before the due date of its first electronic payment, if the corporation can demonstrate that electronic payment creates an undue hardship. The Commissioner of Revenue Services may grant a one-year waiver.

Source: Conn. Gen. Stat. § 12-242d | Connecticut DRS – Corporation Business Tax Information

Updated July 2026 to repair the dead statute URL by linking directly to § 12-242d subsection within the Connecticut General Statutes online. No material statutory, regulatory, or administrative change was detected since the prior update; only the URL is modified for source link reliability.

Connecticut allows a variety of corporation business tax credits, but imposes specific statutory and administrative rules on the amount, ordering, and carryforward of credits.

General usage limitation Most credits, in aggregate, cannot reduce the company’s pre-credit tax below 50.01%. The notable exception is the R&D tax credit: for income years beginning in 2022, the allowable R&D credit offset increased to 60%; for 2023 and later, it increased to 70%. These limits, and their corresponding years, are confirmed in the 2023 CT-1120 Instructions, pp. 17–18 and the Connecticut DRS Credit Guide – General Information (§ “Limitation on Amount of Credit Allowed”).

Ordering of credits Credits must be used in a specific order as prescribed by statute and the Form CT-1120K instructions—see the order of lines 1–24 and Schedule K, p. 1 of 2025 Form CT-1120K. Each credit is applied up to its limit before moving to the next. Selection among credits for carryforward purposes outside the prescribed order is not permitted. Taxpayers must exhaust credits with the shortest carryforward periods first (see DRS Credit Guide “Ordering of Credits” and CT-1120K, line-by-line instructions).

Carryforward and nonrefundable status All major Connecticut business tax credits are nonrefundable. Most have carryforward periods—5 years (e.g., fixed capital investment credit), 10 years (e.g., apprenticeship training), 20 years (e.g., R&D tax credit). The DRS Credit Guide and CT-1120K delineate the applicable period for each credit by type. Credits may not generally be carried back unless specifically allowed (DRS Credit Guide, “Carryback and Refundability of Credits”, p. 4). Once the period ends, unused carryforwards expire. Only certain credits, such as the film production or digital animation credits, are assignable—and only under explicit statutory procedures (see CT-1120K, Part II and Credit Guide “Assignment of Credits”).

Minimum tax and surtax offset rules Credits and their carryforwards cannot reduce the combined corporate tax below the $250 minimum (CT-1120 Instructions, p. 3; Conn. Gen. Stat. § 12-219(c)). Credits also cannot offset the 10% surtax; the surtax is computed after credits (CT-1120 Instructions, p. 17).

Authority and practical compliance The full credit schedule, ordering, and limits appear in the 2025 Form CT-1120K and the DRS Credit Guide. Practitioners should confirm credit expiration, assignability, and ordering for each year, as annual forms and DRS publications may supersede prior guidance.

Source: Connecticut DRS – General Information, Corporation Credit Guide Source: Connecticut DRS – Form CT-1120K (2025) Source: Connecticut DRS – 2023 CT-1120 General Instructions

Unable to confirm as of 2026-07-08.

Statutory test for substantial U.S. business activities

Under Connecticut’s default water’s-edge combined reporting regime (Conn. Gen. Stat. § 12-218e(b)), a foreign corporation is included in the Connecticut combined group only if it has 'substantial business activities' within the United States. Connecticut defines ‘substantial’ by a quantified test: the foreign affiliate’s property, payroll, and sales factors (measured per Conn. Gen. Stat. § 12-218) must be at least 20% located or assigned to the United States, excluding intercompany transactions. (See § 12-218e(b)(1)(B), and OCG-3 Q&A #17-20.)

Treatment of disregarded entities (DEs, e.g., SMLLCs)

As of July 2026, the Connecticut Department of Revenue Services (DRS) has not issued any published statute, regulation, or binding agency publication specifying whether, for purposes of the 20% "substantial U.S. activities" test, the attributes (property, payroll, sales) of disregarded entities (such as wholly owned SMLLCs or qualified subchapter S subsidiaries) must be included in the numerator or denominator for their owner’s U.S. apportionment factors. The statute and OCG-3 are silent on this point, and there is no additional interpretive guidance in Form CT-1120CU instructions, DRS rulings, or FAQ. As of this date, there is no published DRS position on whether DEs are disregarded for these purposes as they are for federal tax, or whether their apportionment factors should be aggregated with the owner for the threshold calculation.

Special rule for intangible/service income—statutory add-in

A foreign corporation (even if it does not meet the property/payroll/sales 20% hurdle) will be included in the water’s-edge group if it earns more than 20% of its gross income, directly or indirectly, from intangible property or service-related activities that generate deductible costs for other combined group members (see Conn. Gen. Stat. § 12-218e(b)(1)(B)(ii)). This is a statutory anti-base erosion provision, not a general rule for digital goods or all service income. OCG-3 and the statute do not provide technical sourcing rules for digital products, SaaS, or cross-border services beyond this anti-abuse test.

No non-statutory sourcing modifications for digital goods or services

Apart from the specific intangible/service anti-base erosion rule, there is no published Connecticut guidance adjusting the sourcing of receipts or apportionment factors for digital goods, electronic services, or cross-border intangibles when applying the 20% substantial U.S. activities threshold. Income and factors are sourced according to the default rules in Conn. Gen. Stat. § 12-218 and instructions to Form CT-1120CU, with no special allocation for digital or non-tangible property. This silence means practitioners should apply the statutory test as written, absent DRS clarification.

Source: Conn. Gen. Stat. § 12-218e(b) Source: Connecticut DRS – Combined Unitary Frequently Asked Questions (OCG-3) Source: Public Act 15-5, June Special Session, § 140

Not yet human confirmed. If DRS issues a formal ruling on disregarded entities under § 12-218e, this section should be updated.

Application of P.L. 86-272 to out-of-state corporations (including combined groups)

Connecticut honors federal P.L. 86-272, providing immunity from state income-based tax for out-of-state corporations whose only business in Connecticut is solicitation of sales of tangible personal property, with orders approved and shipped from outside the state. This immunity applies regardless of whether the corporation is part of a combined group, provided the member’s Connecticut activities do not exceed protected solicitation activities. The protection is limited to tax measured by net income, not to capital base or minimum taxes.

Combined reporting—treatment of immune members

Under SN 2016(1), the Department of Revenue Services (DRS) instructs that if the only member of a combined group subject to Connecticut tax is immune under P.L. 86-272, the group must file a combined return but is only subject to the capital base tax. If there are other Connecticut-taxable members, the P.L. 86-272-protected member is treated as nontaxable for net income/franchise tax purposes but remains liable for capital base tax. This approach is in line with the 'member-by-member' analysis of nexus and immunity—a protected member in a unitary group does not lose P.L. 86-272 protection due to the unprotected activities of affiliates, unless it independently exceeds the protected activities in Connecticut. DRS confirms that nontaxable group members are included in the combined return but apportioned income only applies to those with nexus not protected by P.L. 86-272.

Market-based sourcing context—lack of explicit guidance

Connecticut sources receipts from sales of tangible personal property to the location where the property is delivered (destination sourcing), consistent with market-based sourcing. However, as of June 2026, the Department has not issued explicit guidance explaining whether P.L. 86-272 protected sellers, under combined unitary reporting, face any unique risk or disqualification for market-based sourcing when affiliate group members conduct unprotected activities in Connecticut. There is no statute, regulation, or DRS publication that directly addresses the effect of market-based sourcing on the extent or loss of P.L. 86-272 protection within combined groups. Absent such authority, the protection continues to apply to group members otherwise qualifying under P.L. 86-272, and apportionment for those members is not required for the net income component.

Authority and references

• Special Notice 2016(1), Combined Unitary Legislation (see “Members subject to P.L. 86-272”)
• Informational Publication 2010(29.1), Q&A on Economic Nexus

Source: SN 2016(1) – Combined Unitary Legislation Source: IP 2010(29.1) – Q & A on Economic Nexus

Connecticut does not impose a recurring state-level franchise, privilege, or net worth tax on corporations beyond the Corporation Business Tax and a franchise tax on authorized shares that applies strictly to domestic (Connecticut-incorporated) corporations.

Franchise tax on authorized shares (applies to domestic corporations): Under Conn. Gen. Stat. § 33-618, any Connecticut (domestic) corporation must pay a franchise tax based on its number of authorized shares upon filing a certificate of incorporation, amendment that increases authorized shares, merger resulting in more authorized shares, or correction increasing shares. The tax rates are $0.01 per share for the first 10,000 shares, $0.005 for shares 10,001–100,000, $0.0025 for shares 100,001–1,000,000, and $0.002 per share for shares in excess of 1,000,000. The minimum franchise tax at incorporation is $150. This tax does not apply to foreign corporations merely qualified to do business in Connecticut. Source: Conn. Gen. Stat. § 33-618

Business Entity Tax (BET)—repealed: Connecticut previously imposed a biennial $250 Business Entity Tax on S corporations and certain other pass-through entities (not standard C corporations) under Conn. Gen. Stat. § 12-284b, but the BET was repealed for tax periods beginning on or after January 1, 2020 (Public Act 19-117). As of 2026, no return or payment is required for any entity. Source: Connecticut DRS – Business Entity Tax

No additional state or local franchise, privilege, or net worth tax: As of 2026-06-22, I am unable to locate any statute, regulation, or DRS guidance that imposes a recurring state or municipal franchise, privilege, or net worth tax on Connecticut corporations other than those described above. The typical recurring local business taxes are property taxes, which apply to the ownership of taxable property, not specifically to the corporate entity as a franchise or privilege tax.

Not yet human confirmed.