§ 12-711 — Determination of income, gain, loss and deduction derived from or connected with sources within this state.

Connecticut § 12-711

• Jurisdiction: Connecticut
• Title 12: Taxation
• Ch. 229: Income Tax

Text

(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. (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.

Legislative History

(June Sp. Sess. P.A. 91-3, S. 62, 168; May Sp. Sess. P.A. 92-5, S. 9, 37; May Sp. Sess. P.A. 92-17, S. 13, 59; P.A. 98-244, S. 29, 35; June Sp. Sess. P.A. 01-6, S. 37, 85; May 9 Sp. Sess. P.A. 02-1, S. 81; May 9 Sp. Sess. P.A. 02-4, S. 17; P.A. 14-155, S. 17, 18; Dec. Sp. Sess. 15-1, S. 26; May Sp. Sess. P.A. 16-3, S. 200; P.A. 17-147, S. 36; P.A. 18-49, S. 20; 18-169, S. 43.) History: June Sp. Sess. P.A. 91-3, S. 62, effective August 22, 1991, and applicable to taxable years of taxpayers commencing on or after January 1, 1991; May Sp. Sess. P.A. 92-5 amended Subsec. (a) to make a technical change, effective June 19, 1992, and applicable to taxable years of taxpayers commencing on or after January 1, 1992; May Sp. Sess. P.A. 92-17 added Subsec. (f), concerning the treatment of the trading of intangible property and stock option contracts, effective June 19, 1992, and applicable to taxable years of taxpayers commencing on or after January 1, 1992; P.A. 98-244 added Subsec. (b)(4) specifying that income derived directly or indirectly by an athlete, entertainer or performing artist from certain closed-circuit and cable television transmissions shall constitute income derived from or connected with sources within this state to the extent that such transmissions were received or exhibited within this state, effective June 8, 1998, and applicable to taxable years commencing on or after January 1, 1998; June Sp. Sess. P.A. 01-6 amended Subsec. (b)(1) and (2) to make technical changes and apply provisions to Connecticut lottery winnings in excess of $5,000, effective July 1, 2001, and applicable to taxable years commencing on or after January 1, 2001; May 9 Sp. Sess. P.A. 02-1 amended Subsec. (b) to include in income for nonresidents lottery winnings required to be reported to the Internal Revenue Service and winnings from any other wagering transaction or gambling activity in this state if such winnings are required to be reported to the Internal Revenue Service and to add definition of “in this state”, effective July 1, 2002, and applicable to taxable years commencing January 1, 2002; May 9 Sp. Sess. P.A. 02-4 amended Subsec. (b) to delete the inclusion of certain reportable winnings from wagers, other than state lottery wagers, placed in this state and to delete definition of “in this state”, effective July 1, 2002, and applicable to taxable years commencing on or after January 1, 2002; P.A. 14-155 amended Subsec. (a) by adding Subdiv. (4) re compensation from nonqualified deferred compensation plans and making technical changes, effective June 11, 2014, and amended Subsec. (b) by adding reference to real property in this state and reference to Subdiv. (5) determination in Subdiv. (1)(A) and by adding Subdiv. (5) re disposition of interest in an entity, and amended Subsec. (c) by designating existing provisions as Subdiv. (1) and adding “and the provisions of this subsection” therein and by adding Subdiv. (2) re determination of apportionment of items of income, gain, loss and deduction, effective June 11, 2014, and applicable to taxable years commencing on or after January 1, 2014; Dec. Sp. Sess. P.A. 15-1 amended Subsec. (b) by adding new Subdiv. (2) re compensation for personal services rendered by nonresident employee who is present in this state, redesignating existing Subdivs. (2) to (5) as Subdivs. (3) to (6), and adding “, including, but not limited to, a member of an athletic team,” in redesignated Subdiv. (5), and made technical and conforming changes, effective December 29, 2015, and applicable to taxable years commencing on or after January 1, 2016; May Sp. Sess. P.A. 16-3 amended Subsec. (c)(2) by replacing “average of the percentages of property, payroll and gross income in this state” with “gross income percentage”, deleting “of property or services”, designating existing provisions re gross receipts from sales of property as Subpara. (A) and amending same by replacing “property” with “tangible personal property”, designating existing provisions re gross receipts from sales of services as Subpara. (B) and substantially amending same, adding Subpara. (C) re gross receipts from rental, lease or license of tangible personal property, adding Subpara. (D) re gross receipts from rental, lease or license of intangible property, adding Subpara. (E) re gross receipts from sale or disposition of tangible personal property or intangible property excluded from gross income percentage, adding Subpara. (F) re gross receipts from sale, rental, lease or license of real property excluded from gross income percentage, adding Subpara. (G) re other gross receipts considered to be earned within state, adding Subpara. (H) re petitioning of commissioner when taxpayer cannot reasonably determine where gross receipts are earned, and making a conforming change, effective January 1, 2017, and applicable to income years commencing on or after January 1, 2017; P.A. 17-147 amended Subsec. (b)(6) by adding “, directly or indirectly” re ownership of real property located within this state, effective July 7, 2017; P.A. 18-49 amended Subsec. (b)(2) by redesignating existing Subpara. (C) re application of Subdiv. to certain sources of income as Subpara. (D) and adding new Subpara. (C) re inclusion of income from days worked outside this state for purposes of determining compensation derived from or connected with sources within this state, effective May 31, 2018, and applicable to taxable years commencing on or after January 1, 2019; P.A. 18-169 made identical changes as P.A. 18-49, effective June 14, 2018, and applicable to taxable years commencing on or after January 1, 2019.