CT-1120AB: Add Back and Exceptions to Add Back of Interest and Intangible Expenses (Revision 2016-12)
Connecticut · Connecticut DRS · Used for tax years 2024
Form CT-1120AB reports a corporation’s required add backs of interest and intangible expenses involving related members, along with any claimed exceptions. It summarizes amounts reported on Form CT-1120, Corporation Business Tax Return.
Who files this form
Each corporation that paid, accrued, or incurred any of the following to a related member must complete Form CT-1120AB:
- Interest expenses.
- Intangible expenses and costs.
- Interest expenses and costs related to intangibles.
To claim an exception to the add back and a corresponding deduction from net income, the corporation must complete this form and attach it to Form CT-1120, Corporation Business Tax Return.
What you'll need
Have the corporation’s name, Connecticut Tax Registration Number, income-year beginning and ending dates, and expense amounts ready.
Supporting information depends on the exception claimed:
- Similar-rate interest exception: Attach the pertinent parts of the written loan contract. Provide the related member’s name, FEIN, fiscal period, contract date, tax jurisdiction, and the income and tax figures requested in Part III, Schedule A.
- Unreasonable add back exceptions: If you have written confirmation from the Commissioner, provide the letter date. If instead you claim you can establish that the add back is unreasonable, complete Questions C through H and provide the requested loan or intangible-property details.
- Insurance-company interest exception: Provide the related member’s name, FEIN, contract date, state where taxes were paid, and amount deducted.
- Tax-treaty interest exception: Provide the related member’s name, foreign nation, treaty description, and amount deducted.
- Intangible expenses paid through to an unrelated third party: Provide documentation supporting payment to the unrelated third party during the same income year, along with the names and amounts requested.
Attach all supporting documentation for the exceptions you claim.
How to file
- Complete Form CT-1120AB in blue or black ink only.
- Report the required add backs in Part I. Complete the applicable exception schedules in Parts III and IV and report the exception amounts in Part II.
- Transfer the amounts to Form CT-1120, Schedule D, on the lines identified on Form CT-1120AB.
- To claim an exception, attach the completed form and all supporting documentation to Form CT-1120.
The supplied form does not give a mailing address or e-filing instructions.
Common mistakes
- Leaving out the form or supporting documents. Failure to complete Form CT-1120AB and attach all supporting documentation will result in disallowance of the exceptions.
- Putting intangible-related interest in Part I A. That line specifically excludes interest expenses and costs related to intangibles. Those amounts belong in Part I B, Line 2.
- Omitting information for the similar-rate interest exception. The form warns that failure to provide the requested information will result in denial.
- Leaving required questions unanswered for an unreasonable add back exception. When relying on evidence that the add back is unreasonable, complete Questions C through H in full and provide the requested information.
- Skipping the intangible exception schedules. Failure to complete Part IV, Schedule A or Schedule B will result in denial of the intangible expense exception.
Questions people ask
Do I have to add back expenses even if I qualify for an exception?
Yes. The form says all interest expenses and intangible expenses and costs paid, accrued, or incurred to a related member must be added back to income. They may be subtracted if one or more statutory exceptions are met.
What rate test appears in the similar-rate interest exception?
Part III, Schedule A directs you to divide Line 4, the related member’s tax paid, by Line 3, its taxable income before apportionment and net operating losses. If the result is at least 4.5% (.045), Line 6 uses the amount from Line 1. Otherwise, enter zero. The schedule’s other eligibility and documentation requirements also apply.
What if I claim the similar-rate exception for more than one related member?
Complete Part III, Schedule A separately for each related member. Enter the total for all related members on Part II A, Line 1.
Can an intangible expense payment passed on to an unrelated third party qualify for an exception?
Part IV, Schedule A asks whether the related member directly or indirectly paid the deducted amount to an unrelated third party during the same income year. It also requires the corporation to establish by a preponderance of evidence that avoiding Corporation Business Tax was not a principal purpose of the transaction. Both answers must be yes, and documentation supporting the third-party payment is required.