July 30, 1990
TO: ALL CONNECTICUT MEMBERS
TAX MEMBERS NO. 28-90
RE: CONNECTICUT CAPS MINIMUM CORPORATE BUSINESS TAX IMPOSED ON
RICs
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Connecticut imposes a corporation business tax on the
income of all corporations, including regulated investment
companies ("RICs"), doing business in the state. However,
because RICs receive a deduction for the dividends they
distribute to their shareholders, RICs generally do not pay any
income tax under this provision. Connecticut also imposes a
minimum tax on all corporations, including RICs, doing business
in the state. In the case of a RIC, the minimum tax is computed
based on the average value of the outstanding RIC shares, valued
at par or face value, and on the average value of the surplus or
undivided profits of the RIC for the taxable year. Because the
minimum tax is based primarily on the value of the RIC's stock,
and not on its taxable income, the minimum tax would be imposed
on a RIC whether or not it distributed all of its income each
year.
The attached statute, recently signed by the Governor, caps
the minimum tax payable by a RIC at $50,000, effective for
taxable years of the RIC beginning on or after January 1, 1991.
In addition, the statute caps the minimum tax payable by RICs for
taxable years of the RIC beginning on or after January 1, 1986,
but before January 1, 1991, at $500,000 per year. Any RIC which
paid more than $500,000 in any tax year beginning on or after
January 1, 1986, but before January 1, 1991, may request a refund
of the excess over $500,000, without interest, from the
Connecticut Commissioner of Revenue Services.
We will keep you informed of further developments.
David J. Mangefrida, Jr.
Assistant General Counsel
Attachment