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What are pass-through businesses? Most US businesses are not subject to the corporate income tax; rather, their profits flow through to owners or members and are taxed under the individual income tax. Pass-through businesses include sole proprietorships, partnerships, limited liability companies, and S-corporations.

Schedule CT K-1 Instructions A pass-through entity (PE) must furnish Schedule CT K-1, Member's Share of Certain Connecticut Items, to each corporate member, noncorporate member, and each member that is a PE.

Pass-through entity tax optional starting January 1, 2024 The legislation also makes the following changes to the pass-through entity tax: Eliminates the standard base method and instead requires all entities electing to pay the tax to use the alternative base method.

Taxpayers completing a paper Form CT-1065/ CT-1120SI, Connecticut Composite Income Tax Return, are required to attach a copy of completed federal Form 1065, U.S. Return of Partnership Income, or federal Form 1120S, U.S. Income Tax Return for an S Corporation.

The law imposes a 6.99 percent tax on partnerships, LLCs, and S corporations. The tax is imposed on either the entity's entire Connecticut-sourced taxable income or an alternative tax base, which reduces taxable income by the percentage of nonresident ownership.

Tax base calculation Income passed through to corporate members is included in the standard base. The alternative base equals: the sum of modified Connecticut source income and the resident portion of unsourced income. Income passed through to corporate members is excluded from the alternative base.

The pass-through entity will pay tax at a rate of 9.3% on the total of each consenting owner's pro-rata or distributive share of income subject to California personal income tax (beginning at RTC section 17001).

In June 2023, Connecticut Governor Ned Lamont signed into law HB 6941, which included numerous changes to the Connecticut Pass-Through Entity Tax (“CT PTET”) effective for tax years beginning in 2024. The highlights of those changes include: The CT PTET is effective for tax year 2024.