Connecticut Corporation Business Tax and the 10% Surtax
Connecticut Corporation Business Tax and the 10% Surtax
If you form a corporation in Connecticut, or an LLC that is taxed as a corporation, you will deal with the Corporation Business Tax (CBT). Most people searching for the Connecticut corporate income tax or the Connecticut franchise tax want to answer two questions: how much the state will take from the business each year, and whether the 10% surtax applies. This guide covers the base tax, the capital base tax that runs alongside it, the surtax, and what to confirm with the state before you file.
Informational only. This article is general information, not legal or tax advice. Your tax treatment depends on your entity type, your income, and where you do business. Talk with a qualified CPA or tax attorney before you file, especially if your company belongs to a combined group or operates in more than one state.
Which businesses pay the Corporation Business Tax
The CBT applies to corporations and to LLCs that are treated as corporations for tax purposes. It does not apply to LLCs taxed as partnerships or S corporations. Connecticut has no franchise tax or annual privilege tax on LLCs.
An LLC taxed as a partnership or an S corporation may elect the optional Pass-Through Entity Tax with the Connecticut Department of Revenue Services (DRS). The election is annual and irrevocable for that year, so confirm the election timing and details with DRS and your CPA. You can find DRS guidance at portal.ct.gov/drs.
The base rate: 7.5% of apportioned net income
The CBT is 7.5% of apportioned net income under CGS 12-214. Apportioned means that only the share of your net income attributable to Connecticut is taxed. A company that does all of its business in Connecticut will apportion nearly all of its income to the state. A company with most of its customers in other states will apportion much less. The apportionment rules are technical, so have your preparer run the numbers rather than estimating them yourself.
The tax carries a $250 minimum. If 7.5% of your apportioned net income comes to less than $250, you still owe $250. For example, a corporation with $2,000,000 of apportioned net income owes 7.5% of that amount, or $150,000, before the capital base comparison and any surtax.
The capital base tax: the alternative that applies when it is larger
The capital base tax is measured on the company's capital base rather than its income. It applies instead of the income-based tax when it produces the larger amount, so you need to calculate both every year. The maximum capital base tax is $1 million.
Connecticut is phasing the capital base tax out under CGS 12-219. The rates are:
| Income year | Capital base tax rate |
|---|---|
| 2025 | 0.21% |
| 2026 | 0.16% |
| 2027 | 0.11% |
| 2028 and later | 0% |
Because the rate falls each year, the comparison can change over time. A company that pays the capital base tax today may find it has no capital base tax at all from 2028 on, leaving only the income-based calculation.
The 10% surtax
A 10% surtax is added to the tax for two groups of companies:
- Companies with $100 million or more in total income. Connecticut measures this on federal Form 1120, line 11.
- Taxable members of a combined unitary group, regardless of their individual size.
The surtax has three limits that matter in practice:
- The $250 minimum is excluded. The surtax does not apply where the tax is the $250 minimum.
- Credits do not reduce it. Credits that lower the CBT cannot be used to lower the surtax.
- It has an end date that depends on legislation. HB 7287, signed June 30, 2025, extended the surtax to income years beginning before January 1, 2028, according to tax reporting from KPMG and Orbitax. Confirm the final scope for your income year with DRS.
The $100 million test uses total income, not taxable profit. A company with large revenue and thin margins can reach the threshold even if its taxable income is modest. Confirm how your figure maps to your return with DRS or your CPA.
Here is an illustration only. Suppose a company owes $150,000 of CBT and has $120 million of total income. The 10% surtax adds $15,000, for a total of $165,000. If the same company owed only the $250 minimum, no surtax would apply.
Is the Connecticut franchise tax the same thing?
People often use the phrase franchise tax to mean the Corporation Business Tax. The distinction matters for LLCs, which do not pay a franchise tax or annual privilege tax in Connecticut. For corporations, the CBT includes the capital base tax, which is measured on capital, so the name is not a complete guide to what you will owe.
Do not confuse the tax with the state filing fees. Forming a stock corporation costs $250 for the Certificate of Incorporation. The Organization and First Report costs $150, and the Annual Report costs $150 each year. These fees are paid to the Connecticut Secretary of the State through the Business Services Division, not to DRS, and they are separate from the CBT. Filing fees and tax payments are both required, so budget for each. Current filing forms are at business.ct.gov, and the Business Services Division is at portal.ct.gov/sots/business-services/bsd.
What to confirm with the state
Some details change from year to year or depend on your specific facts. Confirm these with the named agency before you rely on them:
- Filing deadlines, estimated payments and extensions: confirm with DRS at portal.ct.gov/drs.
- Whether the surtax applies to your income year: confirm the scope of HB 7287 with DRS.
- Your apportionment percentage and capital base: confirm the method with your CPA and DRS guidance.
- Your annual Pass-Through Entity Tax election: confirm the election window and effect with DRS and your CPA.
A practical checklist for your next filing
- Confirm how your LLC or corporation is classified for federal tax purposes. Only corporate-taxed entities pay the CBT.
- Estimate your apportioned net income and calculate 7.5% of it, with the $250 minimum as a floor.
- Calculate the capital base tax for the year and use the larger of the two figures, up to the $1 million maximum for the capital base tax.
- Compare your total income with the $100 million surtax threshold, and check whether you file as part of a combined unitary group.
- If the surtax applies, add 10% of the tax. Remember that credits do not reduce the surtax.
- Have a CPA review the apportionment, the surtax position and the due dates before you file.
Key takeaways
- LLCs taxed as partnerships or S corporations do not pay the Corporation Business Tax, though they may elect the Pass-Through Entity Tax.
- The base rate is 7.5% of apportioned net income, with a $250 minimum.
- The capital base tax applies when it is larger, falls each year, and reaches zero from 2028.
- The 10% surtax applies to companies with $100 million or more in total income and to taxable members of a combined unitary group, except where the tax is the $250 minimum. Credits cannot reduce it.
- HB 7287 extended the surtax to income years beginning before January 1, 2028. Confirm your year's treatment with DRS.
For official forms, rates and filing rules, start with the Connecticut Department of Revenue Services at portal.ct.gov/drs. For formation and annual report questions, use the Secretary of the State's Business Services Division.