CT-1120AB: Add Back and Exceptions to Add Back of Interest and Intangible Expenses (Revision 2025-12)
Connecticut · Connecticut DRS · Used for tax years 2025
Form CT-1120AB reports a corporation's required add backs of interest expenses, intangible expenses and costs, and interest costs related to intangibles paid, accrued, or incurred to a related member. It also reports claimed exceptions that allow these expenses to be deducted fro
Who files this form
Each corporation must complete Form CT-1120AB if it paid, accrued, or incurred any of the following to a related member:
- Interest expenses.
- Intangible expenses and costs, or 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 or Form CT-1120CU.
What you'll need
Have the corporation’s name, Connecticut Tax Registration Number, income-year beginning and ending dates, and amounts of related-member expenses ready.
Supporting information depends on the exception you claim:
- Similar-rate interest exception: Pertinent parts of the written loan contract; the related member’s name, FEIN, fiscal period, and tax jurisdiction; the contract date; and the income and tax amounts requested in Part III, Schedule A.
- Unreasonable add back exception: The Commissioner’s written confirmation date, if received. If instead you claim that you can establish unreasonableness by clear and convincing evidence, provide the descriptions and answers required by Questions C through H of the applicable Schedule B. These include contract or loan terms, payment dates, business purpose or use, and related-member tax jurisdictions.
- Insurance-company interest exception: Related-member names, FEINs, contract dates, states where taxes were paid, and amounts deducted.
- Tax-treaty interest exception: Related-member names, foreign nations, treaty descriptions, and amounts deducted.
- Intangible expenses paid to an unrelated third party: Documentation supporting the related member’s payment to the unrelated third party during the same income year, along with names and amounts deducted.
Attach all supporting documentation for the exceptions claimed.
How to file
Complete Form CT-1120AB in blue or black ink only.
To claim an exception, attach the completed form and all supporting documentation to Form CT-1120, Corporation Business Tax Return, or Form CT-1120CU, Combined Unitary Corporation Business Tax Return.
The form directs you to carry required add backs and exception amounts to the specified lines of Form CT-1120, Schedule D. It does not provide a mailing address or e-filing directions.
Common mistakes
- Leaving the form or supporting documents incomplete. Failure to complete Form CT-1120AB and attach all supporting documentation will result in disallowance of the exceptions.
- Including intangible-related interest in Part I A. That line specifically excludes interest expenses and costs related to intangibles. Report those in Part I B.
- Omitting requested similar-rate exception information. Part III, Schedule A warns that missing information will result in denial. Complete a separate schedule for each related member when claiming this exception for more than one.
- Including excluded taxes in the similar-rate calculation. Part III, Schedule A, Line 4 says not to include tax paid in a unitary state or a state where a combined return is filed.
- Skipping required unreasonable-exception questions. When answering Yes to Question B of either Schedule B, complete Questions C through H in full and provide the requested information.
- Claiming an intangible-expense exception without completing its schedule. Failure to complete Part IV, Schedule A or Schedule B will result in denial of the exception.
Questions people ask
Must expenses be added back even if an exception may apply?
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 is used for the similar-rate interest exception?
Part III, Schedule A directs you to divide Line 4 by Line 3. If the result is at least 4.5% (.045), enter the Line 1 amount as the exception. Otherwise, enter zero. The schedule’s other eligibility and documentation requirements also apply.
Can I claim the insurance-company interest exception if one eligibility answer is No?
No. Part III, Schedule C says the taxpayer does not qualify if the answer to Question A, B, or C is No.
When can intangible expenses paid through a related member qualify for the unrelated-third-party exception?
Part IV, Schedule A requires the related member to have paid the deducted amount, directly or indirectly, to an unrelated third party during the same income year. The corporation must also establish by a preponderance of evidence that avoiding Corporation Business Tax was not a principal purpose of the transaction. Both eligibility answers must be Yes, and supporting documentation is required.
What happens if I leave out supporting documentation?
The form warns that failure to complete Form CT-1120AB and attach all supporting documentation will result in disallowance of the exceptions.