Connecticut Corporate Tax Rate: Everything You Need to Know
The Connecticut corporate tax rate is levied against the gross taxable income of any business or corporation registered in or doing business within the state.3 min read
2. What Is the Business Entity Tax?
3. How Are Corporations Taxed?
4. What Forms Do You Need to File Corporation Business Taxes?
5. When Are State Corporation Business Taxes Due?
6. Does Your Business Qualify for Tax-Exempt Status?
The Connecticut corporate tax rate is levied against the gross taxable income of any business or corporation registered in or doing business within the state. Also known as a corporation business tax, this tax is similar to personal income taxes and must be filed annually.
About the Connecticut Corporate Tax Rate
Corporate income tax in the U.S. is usually a flat rate and averages from 4 to 10 percent of the business's income. At 9 percent, Connecticut currently has the sixth highest corporate income tax rate in the United States.
Even if your business makes no money, the state requires a minimum payment of $250 annually when filing the state business tax return.
What Is the Business Entity Tax?
Connecticut assesses a business entity tax (BET) on any limited liability company other than C corporations, including:
- Limited partnerships
- Limited liability partnerships
- Limited liability companies (LLCs)
- S corporations
This tax has a flat rate of $250 for each taxable year and is assessed every two years. The due date varies depending on the business's tax year.
How Are Corporations Taxed?
- Sole Proprietorship: Any business income is distributed to the sole proprietor, who then reports the federal and state taxes due on their personal tax return.
- Partnership: Any business income is distributed to the individual partners, who then report the federal and state taxes due on the amount they each receive on their personal tax return.
- Limited Liability Company: Any business income is distributed among LLC members, who then report the federal and state taxes due on the amount they each receive on their personal tax return. An LLC is not required to pay corporation business taxes but must pay the state BET every two years.
- S Corporation: Each shareholder must report the federal and state taxes due on their share of the company's income on their personal tax return. An S corporation is not required to pay corporation business taxes but must pay the state BET every two years.
- C Corporation: Each shareholder must report the federal and state taxes due on their share of any income they receive on their personal tax return. In addition, a C corporation must report federal and state taxes due on any revenue on their corporate tax return. This is known as double taxation.
What Forms Do You Need to File Corporation Business Taxes?
The following forms and instructions are available on the Connecticut Department of Revenue website:
- Sole Proprietorship (Individual): Form CT-1040
- Sole Proprietorship (Nonresident but doing business in Connecticut): CT-1040NR
- Partnership: Form CT-1065
- S Corporation: Form CT-1120SI
- C Corporation: Form CT-1120
Any business or corporation registered or doing business in Connecticut must file Form CT-1120 with the state Department of Revenue and a federal business tax return (Form 1120) with the IRS. However, if the business type is not subject to corporation business taxes, this can be an informational tax return.
Companies required to pay the biennial business entity tax must also submit Form OP-424, which can also be found on the state Department of Revenue website.
When Are State Corporation Business Taxes Due?
Connecticut requires that corporations file business tax returns on the 15th day of the first month after the business's federal tax return is due. If your corporation's tax year corresponds with the calendar year, your business tax return is due on May 15th.
Does Your Business Qualify for Tax-Exempt Status?
To gain tax-exempt status in Connecticut, a corporation must qualify as a 501(c) and get a nonprofit tax-exempt ID number from the IRS. The state might also require these companies to file additional paperwork with the Connecticut Department of Revenue to gain exemption from state corporate taxes.
The following types of organizations typically qualify for tax exemptions. These are covered under § 501(c)(3) of the Internal Revenue Code (IRC):
- Agricultural and horticultural organizations, such as forestry or livestock institutes and animal welfare organizations.
- Benevolence or charitable organizations.
- Fraternities, societies, and associations, as long as the group's primary purpose is not for profit.
- Nonprofit educational organizations, including nonprofit schools and colleges.
- Nonprofit scientific groups, including certain research institutions.
- Churches and religious institutions.
- Social welfare organizations.
- Trade associations, such as labor unions and worker's organizations.
- Veterans' organizations.
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