Connecticut: Mandatory unitary combined reporting, other tax measures

Connecticut: Mandatory unitary combined reporting

Connecticut lawmakers on June 3, 2015, approved a two-year, $40 billion budget (House Bill 7061) that includes tax changes affecting business taxpayers.


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Lawmakers approved the budget just 30 minutes before the statutorily required end of the session.

Amid reports that certain Connecticut-headquartered companies may leave the state due to the budget’s tax increases, there are some who believe that a special legislative session may be forthcoming.

Unitary combined reporting

The provisions in the budget bill (pending the governor’s signature) include rules for mandatory unitary combined reporting (MUCR) effective retroactively to income years beginning on or after January 1, 2015.

Among the MUCR provisions are measures listed briefly below (refer to the KPMG report below for more details):

  • The Connecticut combined group includes entities that are affiliated by greater than 50% common ownership and are engaged in a unitary business.
  • The Connecticut combined group includes not only all federal consolidated group members from one or multiple consolidated groups under common ownership, but also nonconsolidated domestic entities and certain foreign-incorporated entities that otherwise meet the definition of an includible member.
  • The default method of determining the Connecticut combined group is a water’s edge combination.
  • A combined group wishing to file on a worldwide basis may elect to do so on a timely filed, original return for the income year. Worldwide elections are binding for eleven years.
  • A taxpayer may elect to file a combined return on an “affiliated group” basis.
  • Each taxable member determines its apportionment percentage using its applicable apportionment methodology, including any special industry methods.
  • Within the Connecticut MUCR methodology, net operating losses (NOLs) are computed, deducted, and carried forward on a separate company basis. Separate company losses are shareable under certain circumstances.

Read a  June 2015 report [PDF 151 KB] prepared by KPMG LLP:  Connecticut Legislature Passes Budget Deal with Significant Tax Increases

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