Connecticut General Statutes 12-711 – Determination of income, gain, loss and deduction derived from or connected with sources within this state
(a) The income of a nonresident natural person derived from or connected with sources within this state shall be the sum of the net amount of items of income, gain, loss and deduction entering into his or her Connecticut adjusted gross income for the taxable year, derived from or connected with sources within this state, including: (1) His or her distributive share of partnership income, gain, loss and deduction, determined under section 12-712; (2) his or her pro rata share of S corporation income, gain, loss and deduction, determined under section 12-712; (3) his or her share of estate or trust income, gain, loss and deduction, determined under section 12-714; and (4) his or her compensation from nonqualified deferred compensation plans attributable to services performed within this state, including, but not limited to, compensation required to be included in federal gross income under Section 457A of the Internal Revenue Code.
Terms Used In Connecticut General Statutes 12-711
- Adjusted gross income: means the adjusted gross income of a natural person with respect to any taxable year, as determined for federal income tax purposes and as properly reported on such person's federal income tax return. See Connecticut General Statutes 12-701
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Commissioner: means the Commissioner of Revenue Services or his authorized agent. See Connecticut General Statutes 12-701
- company: means any person, partnership, association, company, limited liability company or corporation, except an incorporated municipality. See Connecticut General Statutes 12-1
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- federal: refer to the corresponding terms defined in the laws of the United States. See Connecticut General Statutes 12-701
- Intangible property: Property that has no intrinsic value, but is merely the evidence of value such as stock certificates, bonds, and promissory notes.
- Internal Revenue Code: means the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended. See Connecticut General Statutes 12-701
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Partnership: means a partnership as defined in Section 7701(a)(2) of the Internal Revenue Code and the regulations adopted thereunder, as from time to time amended, and any reference in this chapter or in regulations adopted under this chapter to a partnership shall include a limited liability company that is treated as a partnership for federal income tax purposes. See Connecticut General Statutes 12-701
- Person: means a person as defined in section 12-1, but shall not include any corporation or association which is taxable as a corporation for the purposes of chapter 208, provided, for purposes of sections 12-735, 12-736 and 12-737, the term "person" shall include an individual, corporation or partnership and any officer or employee of any corporation, including a dissolved corporation, and a member or employee of any partnership who, as such officer, employee or member, is under a duty to perform the act in respect of which the violation occurs. See Connecticut General Statutes 12-701
- Personal property: All property that is not real property.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- S corporation: means any corporation which is an S corporation for federal income tax purposes. See Connecticut General Statutes 12-701
- Taxable year: means taxable year as determined in accordance with section 12-708. See Connecticut General Statutes 12-701
- Taxpayer: means any person, trust or estate subject to the tax imposed under this chapter. See Connecticut General Statutes 12-701
(b) (1) Items of income, gain, loss and deduction derived from or connected with sources within this state shall be those items attributable to: (A) The ownership or disposition of any interest in real property in this state or tangible personal property in this state, as determined pursuant to subdivision (6) of this subsection; (B) a business, trade, profession or occupation carried on in this state; (C) in the case of a shareholder of an S corporation, the ownership of shares issued by such corporation, to the extent determined under section 12-712; or (D) winnings from a wager placed in a lottery conducted by the Connecticut Lottery Corporation, if the proceeds from such wager are required, under the Internal Revenue Code or regulations adopted thereunder, to be reported by the Connecticut Lottery Corporation to the Internal Revenue Service.
(2) (A) Before, on and after December 29, 2015, income from a business, trade, profession or occupation carried on in this state includes, but is not limited to, compensation paid to a nonresident natural person for rendering personal services as an employee in this state. For taxable years commencing on or after January 1, 2016, compensation for personal services rendered in this state by such nonresident employee who is present in this state for not more than fifteen days during a taxable year shall not constitute income derived from sources within this state. If a nonresident employee is present in this state for more than fifteen days during a taxable year, all compensation the employee receives for the rendering of all personal services in this state during the taxable year shall constitute income derived from sources within this state during the taxable year.
(B) For purposes of determining whether a nonresident employee is “present in this state” under subparagraph (A) of this subdivision, presence in this state for any part of a day constitutes being present in this state for that entire day unless such presence is solely for the purpose of transit through this state. The provisions of this subparagraph shall not apply to subsection (c) of this section or to any other provision of law unless expressly provided.
(C) For purposes of determining the compensation derived from or connected with sources within this state, a nonresident natural person shall include income from days worked outside this state for such person’s convenience if such person’s state of domicile uses a similar test.
(D) The provisions of this subdivision shall not apply to sources of income from a business, trade, profession, or occupation carried on in this state other than compensation for personal services rendered by a nonresident employee, and shall not apply to sources of income derived by an athlete, entertainer or performing artist, including, but not limited to, a member of an athletic team.
(3) Income from intangible personal property, including annuities, dividends, interest and gains from the disposition of intangible personal property, shall constitute income derived from sources within this state only to the extent that such income is from (A) property employed in a business, trade, profession or occupation carried on in this state, or (B) winnings from a wager placed in a lottery conducted by the Connecticut Lottery Corporation, if the proceeds from such wager are required, under the Internal Revenue Code or regulations adopted thereunder, to be reported by the Connecticut Lottery Corporation to the Internal Revenue Service.
(4) Deductions with respect to capital losses and net operating losses shall be based solely on income, gain, loss and deduction derived from or connected with sources within this state, under regulations adopted by the commissioner, but otherwise shall be determined in the same manner as the corresponding federal deductions.
(5) Income directly or indirectly derived by an athlete, entertainer or performing artist, including, but not limited to, a member of an athletic team, from closed-circuit and cable television transmissions of an event, other than events occurring on a regularly scheduled basis, taking place within this state as a result of the rendition of services by such athlete, entertainer or performing artist shall constitute income derived from or connected with sources within this state only to the extent that such transmissions were received or exhibited within this state.
(6) For purposes of subparagraph (A) of subdivision (1) of this subsection, “real property in this state” includes an interest in an entity, and “entity” means a partnership, limited liability company or S corporation that owns, directly or indirectly, real property that is located within this state and has a fair market value that equals or exceeds fifty per cent of all the assets of the entity on the date of sale or disposition by a nonresident natural person of such person’s interest in the entity. Only those assets that the entity owned, directly or indirectly, for at least two years prior to the date of the sale or disposition of the person’s interest in the entity shall be used in determining the fair market value of all the assets of the entity on the date of such sale or disposition. The gain or loss derived from Connecticut sources from such person’s sale or disposition of an interest in such entity is the total gain or loss for federal income tax purposes from such sale or disposition multiplied by a fraction, the numerator of which is the fair market value of all real property located in this state owned, directly or indirectly, by the entity on the date of such sale or disposition, and the denominator of which is the fair market value of all the assets of the entity on the date of such sale or disposition.
(c) (1) If a business, trade, profession or occupation is carried on partly within and partly without this state, as determined under rules or regulations of the commissioner, the items of income, gain, loss and deduction derived from or connected with sources within this state shall be determined by apportionment under such rules or regulations and the provisions of this subsection.
(2) The proportion of the net amount of the items of income, gain, loss and deduction attributable to the activities of the business, trade, profession or occupation carried on in this state shall be determined by multiplying the net amount of the items of income, gain, loss and deduction of the business, trade, profession or occupation by the gross income percentage. The gross income percentage shall be computed by dividing the gross receipts from sales earned within this state by the total gross receipts from sales, whether earned within or without this state. For the purposes of this subdivision:
(A) Gross receipts from sales of tangible personal property are considered to be earned within this state when the property is delivered or shipped to a purchaser within this state, regardless of the F.O.B. point or other conditions of the sale.
(B) Gross receipts from sales of services are considered to be earned within this state if the market for the services is in this state. The taxpayer‘s market for services is in this state if and to the extent the service is used at a location in this state.
(C) Gross receipts from the rental, lease or license of tangible personal property are considered to be earned within this state if and to the extent such property is situated in this state.
(D) Gross receipts from the rental, lease or license of intangible property are considered to be earned within this state if and to the extent such property is used in this state. Intangible property utilized in marketing a good or service to a consumer is used in this state if that good or service is purchased by a consumer in this state.
(E) Gross receipts from the sale or other disposition of tangible personal property or intangible property are excluded from the gross income percentage if such property is not held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer’s trade or business.
(F) Gross receipts from the sale, rental, lease or license of real property are excluded from the gross income percentage.
(G) Gross receipts, other than those receipts described in subparagraphs (A) to (F), inclusive, of this subdivision, are considered to be earned within this state to the extent the taxpayer’s market for the sales is in this state.
(H) If a taxpayer concludes that it cannot reasonably determine where its gross receipts are earned in accordance with subparagraphs (A) to (G), inclusive, of this subdivision, such taxpayer may petition the commissioner for approval to use a methodology that reasonably approximates the method for determining where such receipts are earned provided for in this subdivision. Any such petition shall be submitted not later than sixty days prior to the due date of the return for the first taxable year to which the petition applies, determined with regard to any extension of time for filing such return. The commissioner shall grant or deny such petition before such due date.
(d) Compensation paid by the United States for active service in the armed forces of the United States, performed by an individual not domiciled in this state, shall not constitute income derived from sources within this state.
(e) If a husband and wife determine their federal income tax on a joint return but are required to determine their Connecticut income taxes separately, they shall determine their incomes derived from or connected with sources within this state separately as if their federal adjusted gross incomes had been determined separately.
(f) Any nonresident, other than a dealer holding property primarily for sale to customers in the ordinary course of his trade or business, shall not be deemed to carry on a trade, business, profession or occupation in this state solely by reason of the purchase or sale of intangible property or the purchase, sale or writing of stock option contracts, or both, for his own account.