CT-1120 PIC: Information Return for Passive Investment Companies (Revision 2018-12)

Who files this form

Use Form CT-1120 PIC to establish that a corporation qualifies as a passive investment company (PIC).

A PIC must be related to a financial service company or insurance company and must:

• Employ at least five full-time equivalent employees in Connecticut.
• Maintain an office in Connecticut.
• Limit its activities to buying, receiving, maintaining, managing, and selling its intangible investments, and collecting and distributing income from those investments.

Eligible intangible investments are limited to loans secured by real property, as defined in the cited Connecticut statute, and short-term investments of cash.

If the PIC’s parent company is subject to Connecticut corporation business tax, attach Form CT-1120 PIC to Form CT-1120. If the parent company is not subject to that tax, file Form CT-1120 PIC separately.

Do not file this return if the company does not have at least five full-time equivalent employees in Connecticut. The instructions state that the company does not qualify as a PIC and its income will be subject to tax.

When it's due

For tax years 2024, 2025, and 2026, if the PIC’s parent company is not subject to Connecticut corporation business tax, file by the fifteenth day of the month following the due date of the corporation’s corresponding federal income tax return for the income year. The printed instructions specify May 15 for calendar-year taxpayers.

If the parent company is subject to Connecticut corporation business tax, attach this form to Form CT-1120. The supplied text does not give a separate filing date for that situation.

What you'll need

Have these details and records ready:

• The PIC’s name, address, Connecticut Tax Registration Number, FEIN, and income-year beginning and ending dates.
• Dates commercial operations began overall and in Connecticut.
• The parent company’s name and Connecticut Tax Registration Number.
• The common paymaster’s name and Connecticut Tax Registration Number, if one is used.
• Employee counts and time or business records supporting the full-time equivalent employee calculation.
• Records supporting the selected expense and employee-cost allocation method. The IRC § 482 method requires adequate books and records.

Attach:

• Detailed schedules supporting the selected allocation method.
• A line 7 schedule showing expenses and employee costs, including wages, to be allocated; the allocation percentage calculation; and the resulting PIC expenses and employee costs.
• Detailed schedules for total gross receipts and total dividends issued.
• Completed Form CT-1120A-FS, using the PIC’s receipts and apportioning them as if the PIC were a financial service company.

How to file

1. Type or print the requested information. Use blue or black ink only.
2. Complete all applicable boxes, employee information, allocation methods, and amounts. Enter the apportionment fraction to six places.
3. Attach the required detailed schedules and Form CT-1120A-FS.
4. Have the corporate officer sign and date the return and provide the requested officer information. Complete the paid-preparer fields if applicable.
5. If the parent company is subject to Connecticut corporation business tax, attach this return to Form CT-1120. Otherwise, file it separately.

The printed mailing address is:

Department of Revenue Services

PO Box 2974

Hartford CT 06104-2974

Keep a copy of the return for your records. The supplied text does not provide e-filing instructions.

Common mistakes

• Filing without enough employees. Do not file this return if the company has fewer than five full-time equivalent employees in Connecticut.
• Counting too many employees toward the minimum. Time from no more than 25 employees may be allocated to reach the required five full-time equivalent employees.
• Including ineligible employees in the percentage-of-time ratio. Do not include an employee who spends less than 20% of their time on PIC business in the PIC employee count for that ratio.
• Mixing allocation methods. Apply the method selected for the year consistently to all expenses and employee costs on an all-or-nothing basis.
• Including excluded expenses on line 7. Exclude interest expenses on borrowings, deposits, and escrows; FDIC insurance premium expenses; and investment and banking fees relating to mergers, acquisitions, and other extraordinary transactions.
• Leaving out attachments or precision. Attach the required schedules and Form CT-1120A-FS, and carry the apportionment fraction to six places.
• Overlooking the safe harbor affirmation. The form affirms that the applicable period selected under the line 5 or line 6 safe harbor methods is representative of, or generally no less than, the level of employment for the entire year.

Questions people ask

What counts as a full-time employee?

A full-time employee must work at least 35 hours per week.

Can part-time employees or employees shared with the parent company count?

Yes. A dual employee works for both the PIC and its parent company. Part-time and dual employees may count toward the five full-time equivalent employees based on time spent on PIC-related matters. Time from no more than 25 employees may be used to reach that minimum.

Is there a safe harbor for measuring full-time equivalent employees?

Yes. Instead of actual time records maintained throughout the year, the annual safe harbor test may use employee time records for either the first 30 days of the taxable year or an average of the first three months of that year.

When can the percentage-of-loans allocation method be used?

This method may be used by an entity with at least five full-time employees working on PIC business that does not need to allocate employee time to qualify as a PIC. It allocates expenses and employee costs using the ratio of PIC loans to all loans serviced by the PIC and its related financial service company.

Official sources

• https://portal.ct.gov/-/media/drs/forms/1-2018/corporation/ct-1120-pic_1218.pdf