Recently, the Connecticut Department of Revenue Services issued Special Notice 2018(7) addressing the state treatment of global intangible low-taxed income or GILTI. The Notice observes that for federal purposes, GILTI is included in a corporation’s gross income and is generally treated in a manner similar to Subpart F income. Connecticut has historically treated Subpart F income as a dividend eligible for a 100 percent dividends-received deduction (DRD). Because GILTI is treated in a manner similar to Subpart F income for federal tax purposes, Connecticut will treat such income as dividend income and will extend the 100 percent DRD to GILTI. However, Connecticut requires taxpayers to add back expenses attributable to dividend income, defined to mean five percent of dividend income. Thus, the addback should equal five percent of the gross amount of GILTI prior to any corresponding federal deduction.
The Notice further explains because income previously taxed as GILTI is excluded from gross income for federal purposes, it is similarly excluded for Connecticut Corporation Business Tax purposes. Lastly, the Notice provides that GILTI is excluded from the apportionment factor calculation because, for purposes of the Corporation Business Tax, Connecticut does not include dividend income in the apportionment factor calculation. Please contact Steve Kralik at (860) 297-5431 with questions on the Special Notice.