CT-3.2: Subtraction Modification for Qualified Banks (2025)
New York · NY DTF · Used for tax years 2025
Form CT-3.2 calculates the subtraction modification for qualified banks and is filed with Form CT-3 or CT-3-A. It includes calculations for captive real estate investment trusts (REITs), qualified residential loan portfolios, and community banks and small thrifts.
Who files this form
You must file Form CT-3.2 with Form CT-3 or CT-3-A if you have an entry on Part 3, line 6 of either return.
The form calculates subtraction modifications for qualified banks, including modifications for a captive real estate investment trust (REIT), qualified residential loan portfolios, and community banks and small thrifts.
What you'll need
Have Form CT-3 or CT-3-A available, along with your corporation’s legal name and employer identification number (EIN).
Depending on the schedule you complete, you will also need:
- Schedule B: The captive REIT’s identity and EIN, and the amount of dividends paid deductions allowed to it.
- Schedule C: Qualified residential loan portfolio assets, total assets, entire net income from Form CT-3 or CT-3-A, Part 3, line 5, and the specified federal deductions and loan recovery amounts. Combined filers also need the asset figures requested for group members.
- Schedules D and E: Gross interest income from loans and qualifying loans, gross interest expense, average loan values, average total assets, and the qualifying entity’s EIN.
Form CT-3-A filers must calculate Schedule E separately for each combined entity.
How to file
File Form CT-3.2 with Form CT-3 or CT-3-A. The supplied form does not give a mailing address or e-file directions.
All filers must complete Schedule B. If it does not apply, enter 0 on line 3 and continue with the rest of the form.
Use only one modification in Schedule A. Enter the amount from line 3 on line 1. If line 3 is zero, enter the applicable amount from line 14 or line 16 instead. Do not enter less than zero.
If you use Schedule D, complete Schedule E to calculate net interest income from qualifying loans. Form CT-3-A filers must calculate Schedule E separately for each combined entity, total the line 11 amounts on Schedule D, line 15, and report the number of Schedules E submitted.
Common mistakes
- Leaving out Form CT-3.2: It must accompany Form CT-3 or CT-3-A when Part 3, line 6 has an entry.
- Skipping Schedule B: All filers must complete it. If it does not apply, enter 0 on line 3.
- Using more than one modification: Schedule A says to use only one.
- Entering a negative amount where zero is required: Do not enter less than zero on Schedule A, line 1. If Schedule C, line 14 is zero or less, enter 0. If Schedule E, line 7 is less than zero, enter 0 on both lines 7 and 11.
- Missing separate Schedule E calculations for a combined group: Form CT-3-A filers must calculate separately for each combined entity and total the line 11 amounts on Schedule D, line 15.
Questions people ask
Do I complete Schedule B if I do not have an applicable captive REIT modification?
Yes. All filers must complete Schedule B. If it does not apply, skip to line 3, enter 0, and continue with the rest of the form.
Can I use more than one subtraction modification?
No. Schedule A says to use only one. Use line 3, or, if line 3 is zero, the applicable amount from line 14 or line 16.
How is the captive REIT modification calculated?
Multiply the dividends paid deductions on Schedule B, line 2 by 160% (1.6). Enter the result on line 3 and Schedule A, line 1.
How is the community bank and small thrift modification calculated?
Multiply total net interest income from qualifying loans on Schedule D, line 15 by 50% (0.5). Enter the result on line 16 and, if applicable, Schedule A, line 1.
How do combined filers handle Schedule E?
Form CT-3-A filers calculate Schedule E separately for each combined entity. Add the line 11 amounts for all combined entities and enter the total on Schedule D, line 15. Also enter the total number of Schedules E submitted.