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Substitute House Bill No. 5615

PUBLIC ACT NO. 96-197

AN ACT CONCERNING THE CORPORATION BUSINESS TAX.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Subsection (a) of section 12-7b of the general statutes is repealed and the following is substituted in lieu thereof:

(a) The Commissioner of Revenue Services shall, annually on or before the thirty-first day of December, submit to the legislative Office of Fiscal Analysis a report concerning certain state tax data, applicable with respect to the state fiscal year ending on the thirtieth day of June immediately preceding, as follows: (a) Sales and use tax data, including (1) gross receipts subject to sales tax, stated separately in relation to sales of (A) any tangible personal property, (B) the leasing or rental of tangible personal property and (C) the rendering of any services subject to said tax, (2) total revenue loss related to each of the separate provisions for exemption under chapter 219 and (3) total amount of tax collected with respect to each of the industrial classifications included in the Standard Industrial Classification Code in current use for purposes of certain statistical data by the Commissioner of Revenue Services; (b) corporation business tax data, including (1) total net income and total net income apportioned to Connecticut for the most current income years with respect to which final data is available at the time of each such report, (2) amount of depreciation not allowed as a deduction in determining net income for purposes of said tax, (3) operating loss carry-overs, (4) credits and refunds, separately stated, for overpayments of taxes due in prior years and to be applicable to the most current income years with respect to which final data is available at the time of each such report, (5) number of accounts and total corporation tax attributable to determination in accordance with (A) net income tax base, (B) the [additional] MINIMUM tax base provisions under section 12-219, AS AMENDED BY SECTION 6 OF THIS ACT AND (C) [the minimum tax and (D) subchapter] S corporation filings and (6) total corporation tax attributable to each of the industrial classifications included in the Standard Industrial Classification Code in current use for purposes of certain statistical data by the Commissioner of Revenue Services; (c) succession and transfer tax data, including (1) total taxes collected and the number of taxpayers under each of the classes of beneficiaries as described in section 12-344 AS AMENDED and (2) the total value of the net taxable estates with respect to each of said classes of beneficiaries; (d) personal income tax data, including (1) all components of and adjustments to federal gross income, federal adjusted gross income and federal taxable income, separately stated, of Connecticut taxpayers, sorted into ten-thousand-dollar increments of federal adjusted gross income up to and including one hundred thousand dollars, into twenty-five-thousand-dollar increments of federal adjusted gross income from over one hundred thousand dollars up to and including two hundred thousand dollars and into one increment over two hundred thousand dollars of federal adjusted gross income, as derived from federal income tax returns and (2) all components of and adjustments to Connecticut adjusted gross income and Connecticut taxable income, separately stated, of Connecticut taxpayers, sorted into ten-thousand-dollar increments of Connecticut adjusted gross income up to and including one hundred thousand dollars, into twenty-five-thousand-dollar increments of Connecticut adjusted gross income from over one hundred thousand dollars up to and including two hundred thousand dollars and into one increment over two hundred thousand dollars of Connecticut adjusted gross income, as derived from state personal income tax returns; (e) admissions, cabaret and dues tax data, including the number of taxpayers and the total amount of tax collected, stated separately with respect to each of the taxes imposed under chapter 225; (f) real estate conveyance tax data, including (1) the number of taxable transfers and the total amount of revenue and (2) the amount of revenue attributable to categories of purchase price for such transfers of real estate, as follows: (A) Under thirty thousand dollars, (B) brackets of ten thousand dollars each from thirty thousand dollars up to two hundred thousand dollars and (C) two hundred thousand dollars and over; (g) data applicable to any state tax not included in subdivisions (a) to (f), inclusive, of this section, including totals applicable to each such tax for (1) number of taxpayers, (2) payments in accordance with applicable penalty provisions for delinquency and (3) taxes collected which became due in the preceding fiscal year.

Sec. 2. Section 12-213 of the general statutes, as amended by section 3 of public act 95-2, is repealed and the following is substituted in lieu thereof:

(a) When used in this part, unless the context otherwise requires [,] (1) ["taxpayer"] "TAXPAYER" and "company" mean any corporation, foreign municipal electric utility, as defined in section 12-59, joint stock company or association or any fiduciary thereof but not a municipal utility as defined in chapter 212 and chapter 212a, and any dissolved corporation which continues to conduct business; (2) ["dissolved] "DISSOLVED corporation" means any company which has terminated its corporate existence by resolution, expiration, decree or forfeiture; (3) "Commissioner of Revenue Services" or "commissioner" means the Commissioner of Revenue Services; (4) ["tax] "TAX year" means the calendar year in which the tax is payable; (5) ["income] "INCOME year" means the calendar year upon the basis of which net income is computed under this part, unless a fiscal year other than the calendar year has been established for [the purpose of the] federal [corporation net] income tax PURPOSES, in which case it means the fiscal year so established or a period of less than twelve months ending as of the date on which liability under this chapter ceases to accrue by reason of dissolution, forfeiture, withdrawal, merger or consolidation; (6) ["fiscal] "FISCAL year" means the income year ending on the last day of any month other than December or an annual period which varies from fifty-two to fifty-three weeks elected by the taxpayer in accordance with the provisions of the Internal Revenue Code; (7) ["paid"] "PAID" means "paid or accrued" or "paid or incurred", construed according to the method of accounting upon the basis of which net income is computed under this part; (8) ["received"] "RECEIVED" means "received" or "accrued", construed according to the method of accounting upon the basis of which net income is computed under this part; (9) (A) ["gross] "GROSS income" means gross income as defined in the [federal corporation net income tax law in force on the last day of the income year] INTERNAL REVENUE CODE and, in addition, means any interest or exempt interest dividends as defined in Section 852(b)(5) of the Internal Revenue Code [of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended,] received or interest paid by the taxpayer or losses of other calendar or fiscal years, retroactive to include all calendar or fiscal years beginning after January 1, 1935, incurred by the taxpayer which are excluded from gross income for purposes of assessing the federal corporation net income tax, and in addition, notwithstanding any other provision of law, means interest or exempt interest dividends as defined in said Section 852(b)(5) of the Internal Revenue Code [of 1986,] accrued on or after the application date, with respect to any obligation issued by or on behalf of the state, its agencies, authorities, commissions and other instrumentalities, or by or on behalf of its political subdivisions and their agencies, authorities, commissions and other instrumentalities; [but] (B) ["gross] "GROSS income" shall not include [(1)] the amount which for federal income tax purposes is treated as a dividend received by a domestic United States corporation from a foreign corporation on account of foreign taxes deemed paid by such domestic corporation, when such domestic corporation elects the foreign tax credit for federal income tax purposes and [(2)] the amount of net gain to any taxpayer, engaged in the business of farming in Connecticut, from the sale or exchange of any cattle raised from birth on a farm in this state operated by such taxpayer, provided not less than seventy-five per cent of such taxpayer's gross income is derived from farming; (10) ["net] "NET income" means net earnings received during the income year and available for contributors of capital, whether they are creditors or stockholders, computed by subtracting from gross income the deductions allowed by the terms of section 12-217, AS AMENDED BY SECTION 4 OF THIS ACT except that in the case of a domestic insurance company which is a life insurance company "net income" means life insurance company taxable income (a) increased by any amount or amounts which have been deducted in the computation of gain or loss from operations in respect of (1) the life insurance company's share of tax-exempt interest, (2) operations loss carry-backs and capital loss carry-backs and (3) operations loss carry-overs and capital loss carry-overs arising in any taxable year commencing prior to January 1, 1973, and (b) reduced by any amount or amounts which have been deducted as operations loss carry-backs or capital loss carry-backs in the computation of gain or loss from operations for any taxable year commencing on or after January 1, 1973, but only to the extent that such amount or amounts, would, for federal tax purposes, have been deductible in the taxable year as operations loss carry-overs or capital loss carry-overs if they had not been deducted in a previous taxable year as carry-backs; [for purposes of the preceding exception the terms "life insurance company", "life insurance company taxable income", "life insurance company's share", "operations loss carry-back", "capital loss carry-back", "operations loss carry-over", "capital loss carry-over" and "gain or loss from operations" have the same meaning as they have in the federal corporation income tax law effective and in force on the last day of the income year] (11)m "LIFE INSURANCE COMPANY" HAS THE SAME MEANING AS IT HAS UNDER THE INTERNAL REVENUE CODE; (12) "LIFE INSURANCE COMPANY TAXABLE INCOME" HAS THE SAME MEANING AS IT HAS UNDER THE INTERNAL REVENUE CODE; (13) "LIFE INSURANCE COMPANY'S SHARE" HAS THE SAME MEANING AS IT HAS UNDER THE INTERNAL REVENUE CODE; (14) "OPERATIONS LOSS CARRY-OVER", WITH RESPECT TO A LIFE INSURANCE COMPANY, HAS THE SAME MEANING AS IT HAS UNDER THE INTERNAL REVENUE CODE; (15) "OPERATIONS LOSS CARRY-BACK", WITH RESPECT TO A LIFE INSURANCE COMPANY, HAS THE SAME MEANING AS IT HAS UNDER THE INTERNAL REVENUE CODE; (16) "CAPITAL LOSS CARRY-OVER", WITH RESPECT TO A LIFE INSURANCE COMPANY, HAS THE SAME MEANING AS IT HAS UNDER THE INTERNAL REVENUE CODE; (17) "CAPITAL LOSS CARRY-BACK", WITH RESPECT TO A LIFE INSURANCE COMPANY, HAS THE SAME MEANING AS IT HAS UNDER THE INTERNAL REVENUE CODE; (18) "GAIN OR LOSS FROM OPERATIONS", WITH RESPECT TO A LIFE INSURANCE COMPANY, HAS THE SAME MEANINGS AS IT HAS UNDER THE INTERNAL REVENUE CODE; (19) ["fiduciary"] "FIDUCIARY" means any receiver, liquidator, referee, trustee, assignee or other fiduciary or officer or agent appointed by any court or by any other authority, except the Commissioner of Banking acting as receiver or liquidator under the authority of the provisions of sections 36a-210 AS AMENDED and 36a-218 to 36a-239, inclusive [4m, [0m AS AMENDED; (20) ["carrying] "CARRYING on or doing business" means and includes each and every act, power or privilege exercised or enjoyed in this state, as an incident to, or by virtue of, the powers and privileges acquired by the nature of any organization whether the form of existence is corporate, associate, joint stock company or fiduciary; (21) ["interest] "INTEREST paid" means and includes, in the case of state banks and trust companies, national banks, mutual savings banks, cooperative banks, savings and loan associations, amounts paid to, or credited to the accounts of, depositors or holders of accounts as dividends on their deposits or withdrawable accounts, if such amounts paid or credited are withdrawable on demand subject only to customary notice of intention to withdraw; (22) ["alternative] "ALTERNATIVE energy system" means design systems, equipment or materials which utilize as their energy source: [(1)] Solar, [(2)] wind, [(3)] water or [(4)] biomass energy in providing space heating or cooling, water heating or generation of electricity, but shall not include wood-burning stoves; (23) "S corporation" means any corporation which is an S corporation for federal income tax purposes (24) "INTERNAL REVENUE CODE" MEANS THE INTERNAL REVENUE CODE OF 1986, OR ANY SUBSEQUENT INTERNAL REVENUE CODE OF THE UNITED STATES, AS FROM TIME TO TIME AMENDED, EFFECTIVE AND IN FORCE ON THE LAST DAY OF THE INCOME YEAR; (25) "PARTNERSHIP" MEANS A PARTNERSHIP, AS DEFINED IN THE INTERNAL REVENUE CODE, AND INCLUDES A LIMITED LIABILITY COMPANY THAT IS TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES; (26) "PARTNER" MEANS A PARTNER, AS DEFINED IN THE INTERNAL REVENUE CODE, AND INCLUDES A MEMBER OF A LIMITED LIABILITY COMPANY THAT IS TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES; (27) "INVESTMENT PARTNERSHIP" MEANS A LIMITED PARTNERSHIP THAT MEETS THE GROSS INCOME REQUIREMENT OF SECTION 851(b)(2) OF THE INTERNAL REVENUE CODE, EXCEPT THAT INCOME AND GAINS FROM COMMODITIES THAT ARE NOT DESCRIBED IN SECTION 1221(1) OF THE INTERNAL REVENUE CODE OR FROM FUTURES, FORWARDS AND OPTIONS WITH RESPECT TO SUCH COMMODITIES SHALL BE INCLUDED IN INCOME WHICH QUALIFIES TO MEET SUCH GROSS INCOME REQUIREMENT, PROVIDED SUCH COMMODITIES ARE OF A KIND CUSTOMARILY DEALT WITH IN AN ORGANIZED COMMODITY EXCHANGE AND THE TRANSACTION IS OF A KIND CUSTOMARILY CONSUMMATED AT SUCH PLACE, AS REQUIRED BY SECTION 864(b)(2)(B)(iii) OF THE INTERNAL REVENUE CODE. TO THE EXTENT THAT SUCH A PARTNERSHIP HAS INCOME AND GAINS FROM COMMODITIES THAT ARE NOT DESCRIBED IN SECTION 1221(1) OF THE INTERNAL REVENUE CODE OR FROM FUTURES, FORWARDS AND OPTIONS WITH RESPECT TO SUCH COMMODITIES, SUCH INCOME AND GAINS MUST BE DERIVED BY A PARTNERSHIP WHICH IS NOT A DEALER IN COMMODITIES AND IS TRADING FOR ITS OWN ACCOUNT AS DESCRIBED IN SECTION 864(b)(2)(B)(ii) OF THE INTERNAL REVENUE CODE. THE TERM "INVESTMENT PARTNERSHIP" DOES NOT INCLUDE A DEALER, WITHIN THE MEANING OF SECTION 1236 OF THE INTERNAL REVENUE CODE, IN STOCKS OR SECURITIES.

(b) AS USED IN SECTIONS 12-214, AS AMENDED BY SECTION 4 OF THIS ACT, 12-218, AS AMENDED BY SECTION 5 OF THIS ACT, AND 12-219a, AS AMENDED BY SECTION 7 OF THIS ACT: (1) "LIMITED PARTNER" MEANS A LIMITED PARTNER OF A LIMITED PARTNERSHIP THAT IS TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES AND INCLUDES A MEMBER OF A LIMITED LIABILITY COMPANY THAT IS TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES AND THAT IS MANAGED BY MANAGERS, IF SUCH MEMBER IS NOT A MEMBER-MANAGER OF SUCH COMPANY; (2) "GENERAL PARTNER" MEANS A PARTNER OF A GENERAL PARTNERSHIP, A GENERAL PARTNER OF A LIMITED PARTNERSHIP THAT IS TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES AND A PARTNER OF A LIMITED LIABILITY PARTNERSHIP AND INCLUDES A MEMBER OF A LIMITED LIABILITY COMPANY THAT IS TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES IF SUCH COMPANY IS MANAGED BY MANAGERS AND SUCH MEMBER IS A MEMBER-MANAGER OF SUCH COMPANY, OR IF SUCH COMPANY IS NOT MANAGED BY MANAGERS; (3) "MEMBER-MANAGER" MEANS A MEMBER OF A LIMITED LIABILITY COMPANY THAT IS TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES, WHICH MEMBER IS, ALONE OR TOGETHER WITH OTHERS, VESTED WITH THE MANAGEMENT OF THE BUSINESS, PROPERTY AND AFFAIRS OF THE LIMITED LIABILITY COMPANY; (4) "PROPORTIONATE PART" MEANS, WITH RESPECT TO A PARTNER OF A PARTNERSHIP, THE PERCENTAGE THAT THE PARTNERSHIP USED TO DETERMINE SUCH PARTNER'S DISTRIBUTIVE SHARE OF THE ORDINARY INCOME OR LOSS OF THE PARTNERSHIP IN AN INCOME YEAR; (5) "DERIVED FROM OR CONNECTED WITH SOURCES WITHIN THIS STATE" HAS THE SAME MEANING AS IT HAS UNDER CHAPTER 229 AND THE REGULATIONS ADOPTED THEREUNDER; (6) "DISTRIBUTIVE SHARE" MEANS, WITH RESPECT TO A PARTNER OF A PARTNERSHIP, SUCH PARTNER'S DISTRIBUTIVE SHARE OF ORDINARY INCOME OR LOSS AS DETERMINED FOR FEDERAL INCOME TAX PURPOSES IN AN INCOME YEAR.

Sec. 3. Subsection (a) of section 12-214 of the general statutes, as amended by section 32 of public act 95-160, is repealed and the following is substituted in lieu thereof:

(a) (1) Every mutual savings bank, savings and loan association and every company engaged in the business of carrying passengers for hire over the highways of this state in common carrier motor vehicles doing business in this state, and every other company carrying on, or having the right to carry on, business in this state, including a dissolved corporation which continues to conduct business, except [(1) as to income years beginning prior to January 1, 1973, insurance companies, and as to income years beginning on or after January 1, 1973, insurance companies incorporated or organized under the laws of any other state or foreign government, (2) companies exempt by the federal corporation net income tax law, and any company which qualifies as a Domestic International Sales Corporation (DISC) as defined in Section 992 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, and as to which a valid election under Subsection (b) of said Section 992 to be treated as a DISC is effective, but excluding companies, other than any company which so qualifies as, and so elects to be treated as, a DISC, which elect not to be subject to such tax under any provision of said Internal Revenue Code other than said Subsection (b) of said Section 992, (3) companies subject to gross earnings taxes under chapter 210, (4) companies all of whose properties in this state are operated by companies subject to gross earnings taxes under chapter 210, (5) cooperative housing corporations, as defined for federal income tax purposes, (6) any organization or association of two or more persons established and operated for the exclusive purpose of promoting the success or defeat of any candidate for public office or of any political party or question or constitutional amendment to be voted upon at any state or national election or for any other political purpose, (7) any company which is not owned or controlled, directly or indirectly, by any other company, the gross annual revenues of which in the most recently completed year did not exceed one hundred million dollars and which engaged in the research, design, manufacture, sale or installation of alternative energy systems or motor vehicles powered in whole or in part by electricity, natural gas or solar energy including their parts and components, provided at least seventy-five per cent of the gross annual revenues of such company are derived from such research, design, manufacture, sale or installation and (8) any company which engages in the research, design, manufacture or sale in Connecticut of aero-derived gas turbine systems in advanced industrial applications, which applications are developed after October 1, 1992, which are limited to simple-cycle systems, humid air, steam or water injection, recuperation or intercooling technologies, including their parts and components, to the extent that such company's net income is directly attributable to such purposes] THOSE COMPANIES DESCRIBED IN SUBDIVISION (2) OF THIS SUBSECTION, shall pay, annually, a tax or excise upon its franchise for the privilege of carrying on or doing business, owning or leasing property within the state in a corporate capacity or as an unincorporated association taxable as a corporation for federal income tax purposes or maintaining an office within the state, such tax to be measured by the entire net income as herein defined received by such corporation or association from business transacted within the state during the income year and to be assessed for each income year commencing prior to January 1, 1995, at the rate of eleven and one-half per cent, for income years commencing on or after January 1, 1995, and prior to January 1, 1996, at the rate of eleven and one-quarter per cent, for income years commencing on or after January 1, 1996, and prior to January 1, 1997, at the rate of ten and three-fourths per cent, for income years commencing on or after January 1, 1997, and prior to January 1, 1998, at the rate of ten and one-half per cent, for income years commencing on or after January 1, 1998, and prior to January 1, 1999, at the rate of nine [per cent] and one-half per cent, for income years commencing on or after January 1, 1999, and prior to January 1, 2000, at the rate of eight and one-half per cent, and for income years commencing on or after January 1, 2000, at the rate of seven and one-half per cent. The exemption of companies [included in ubdivisions (7) and (8) of this section] DESCRIBED IN SUBPARAGRAPHS (G) AND (H) OF SUBDIVISION (2) OF THIS SUBSECTION shall not be allowed with respect to any income year of any such company commencing on or after January 1, 1998, and any such company claiming such exemption for any income years commencing on or after January 1, 1985, but prior to January 1, 1998, shall be required to file a corporation business tax return in accordance with section 12-222 for each such income year. (2) THE FOLLOWING COMPANIES SHALL BE EXEMPT FROM THE TAX IMPOSED UNDER THIS CHAPTER: (A) INSURANCE COMPANIES INCORPORATED OR ORGANIZED UNDER THE LAWS OF ANY OTHER STATE OR FOREIGN GOVERNMENT, (B) COMPANIES EXEMPT BY THE FEDERAL CORPORATION NET INCOME TAX LAW, AND ANY COMPANY WHICH QUALIFIES AS A DOMESTIC INTERNATIONAL SALES CORPORATION (DISC), AS DEFINED IN SECTION 992 OF THE INTERNAL REVENUE CODE OF 1986, OR ANY SUBSEQUENT CORRESPONDING INTERNAL REVENUE CODE OF THE UNITED STATES, AS FROM TIME TO TIME AMENDED, AND AS TO WHICH A VALID ELECTION UNDER SUBSECTION (b) OF SAID SECTION 992 TO BE TREATED AS A DISC IS EFFECTIVE, BUT EXCLUDING COMPANIES, OTHER THAN ANY COMPANY WHICH SO QUALIFIES AS, AND SO ELECTS TO BE TREATED AS, A DISC, WHICH ELECT NOT TO BE SUBJECT TO SUCH TAX UNDER ANY PROVISION OF SAID INTERNAL REVENUE CODE OTHER THAN SAID SUBSECTION (b) OF SECTION 992; (C) COMPANIES SUBJECT TO GROSS EARNINGS TAXES UNDER CHAPTER 210; (D) COMPANIES ALL OF WHOSE PROPERTIES IN THIS STATE ARE OPERATED BY COMPANIES SUBJECT TO GROSS EARNINGS TAXES UNDER CHAPTER 210; (E) COOPERATIVE HOUSING CORPORATIONS, AS DEFINED FOR FEDERAL INCOME TAX PURPOSES; (F) ANY ORGANIZATION OR ASSOCIATION OF TWO OR MORE PERSONS ESTABLISHED AND OPERATED FOR THE EXCLUSIVE PURPOSE OF PROMOTING THE SUCCESS OR DEFEAT OF ANY CANDIDATE FOR PUBLIC OFFICE OR OF ANY POLITICAL PARTY OR QUESTION OR CONSTITUTIONAL AMENDMENT TO BE VOTED UPON AT ANY STATE OR NATIONAL ELECTION OR FOR ANY OTHER POLITICAL PURPOSE; (G) ANY COMPANY WHICH IS NOT OWNED OR CONTROLLED, DIRECTLY OR INDIRECTLY, BY ANY OTHER COMPANY, THE GROSS ANNUAL REVENUES OF WHICH IN THE MOST RECENTLY COMPLETED YEAR DID NOT EXCEED ONE HUNDRED MILLION DOLLARS AND WHICH ENGAGED IN THE RESEARCH, DESIGN, MANUFACTURE, SALE OR INSTALLATION OF ALTERNATIVE ENERGY SYSTEMS OR MOTOR VEHICLES POWERED IN WHOLE OR IN PART BY ELECTRICITY, NATURAL GAS OR SOLAR ENERGY INCLUDING THEIR PARTS AND COMPONENTS, PROVIDED AT LEAST SEVENTY-FIVE PER CENT OF THE GROSS ANNUAL REVENUES OF SUCH COMPANY ARE DERIVED FROM SUCH RESEARCH, DESIGN, MANUFACTURE, SALE OR INSTALLATION; AND (H) ANY COMPANY WHICH ENGAGES IN THE RESEARCH, DESIGN, MANUFACTURE OR SALE IN CONNECTICUT OF AERO-DERIVED GAS TURBINE SYSTEMS IN ADVANCED INDUSTRIAL APPLICATIONS, WHICH APPLICATIONS ARE DEVELOPED AFTER OCTOBER 1, 1992, WHICH ARE LIMITED TO SIMPLY-CYCLE SYSTEMS, HUMID AIR, STEAM OR WATER INJECTION, RECUPERATION OR INTERCOOLING TECHNOLOGIES, INCLUDING THEIR PARTS AND COMPONENTS, TO THE EXTENT THAT SUCH COMPANY'S NET INCOME IS DIRECTLY ATTRIBUTABLE TO SUCH PURPOSES. (3) (A) A COMPANY IS CARRYING ON OR DOING BUSINESS IN THIS STATE IF IT IS A GENERAL PARTNER OF A PARTNERSHIP THAT DOES BUSINESS, OWNS OR LEASES PROPERTY OR MAINTAINS AN OFFICE IN THIS STATE. (B) A COMPANY IS CARRYING ON OR DOING BUSINESS IN THIS STATE IF IT IS A LIMITED PARTNER OF A LIMITED PARTNERSHIP, OTHER THAN AN INVESTMENT PARTNERSHIP, THAT DOES BUSINESS, OWNS OR LEASES PROPERTY OR MAINTAINS AN OFFICE IN THIS STATE. (C) A COMPANY THAT IS NOT OTHERWISE CARRYING ON OR DOING BUSINESS IN THIS STATE, EITHER DIRECTLY OR BY VIRTUE OF BEING A PARTNER IN A PARTNERSHIP DESCRIBED IN SUBPARAGRAPH (A) OR (B) OF THIS SUBDIVISION IS NOT CARRYING ON OR DOING BUSINESS IN THIS STATE SOLELY BY VIRTUE OF BEING A LIMITED PARTNER OF ONE OR MORE INVESTMENT PARTNERSHIPS.

Sec. 4. Section 12-217 of the general statutes is amended by adding subsection (d) as follows:

(NEW) (d) The commissioner may adopt regulations in accordance with chapter 54, relating to mergers or consolidations of corporations providing for the deduction, by the surviving or new corporation provided for in the plan of consolidation, of operating losses that were incurred by a merging or consolidating corporation, respectively, before the merger or consolidation, respectively. Such regulations may follow the provisions of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, or the regulations thereunder.

Sec. 5. Section 12-218 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) Any taxpayer which is taxable both within and without this state shall apportion its net income as provided in this section. For purposes of apportionment of income under this section, a taxpayer is taxable in another state if in such state such taxpayer conducts business and is subject to a net income tax, a franchise tax for the privilege of doing business, or a corporate stock tax, or if such state has jurisdiction to subject such taxpayer to such a tax, regardless of whether such state does, in fact, impose such a tax.

(b) The net income of the taxpayer, when derived from business other than the manufacture, sale or use of tangible personal or real property, shall be apportioned within and without the state by means of an apportionment fraction, the numerator of which shall represent the gross receipts from business carried on within Connecticut and the denominator shall represent the gross receipts from business carried on everywhere, except that any gross receipts attributable to an international banking facility, as defined in section 12-217, AS AMENDED BY SECTION 4 OF THIS ACT shall not be included in the numerator or the denominator. Gross receipts as used in this subsection shall have the same meaning as used in subdivision (3) of subsection (c) of this section.

(c) The net income of the taxpayer when derived from the manufacture, sale or use of tangible personal or real property, shall be apportioned within and without the state by means of an apportionment fraction, to be computed as the sum of the property factor, the payroll factor and twice the receipts factor, divided by four. (1) The first of these fractions, the property factor, shall represent that part of the average monthly net book value of the total tangible property held and owned by the taxpayer during the income year which is held within the state, without deduction on account of any encumbrance thereon, and the value of tangible property rented to the taxpayer computed by multiplying the gross rents payable during the income year or period by eight. For the purpose of this section, gross rents shall be the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer or for its benefit for the use or possession of the property, excluding royalties, but including interest, taxes, insurance, repairs or any other amount required to be paid by the terms of a lease or other arrangement and a proportionate part of the cost of any improvement to the real property made by or on behalf of the taxpayer which reverts to the owner or lessor upon termination of a lease or other arrangement, based on the unexpired term of the lease commencing with the date the improvement is completed, provided, where a building is erected on leased land by or on behalf of the taxpayer, the value of the land is determined by multiplying the gross rent by eight, and the value of the building is determined in the same manner as if owned by the taxpayer. (2) The second fraction, the payroll factor, shall represent the part of the total wages, salaries and other compensation to employees paid by the taxpayer during the income year which was paid in this state, excluding any such wages, salaries or other compensation attributable to the production of gross income of an international banking facility as defined in section 12-217 AS AMENDED BY SECTION 4 OF THIS ACT. Compensation is paid in this state if (A) the individual's service is performed entirely within the state; or (B) the individual's service is performed both within and without the state, but the service performed without the state is incidental to the individual's service within the state; or (C) some of the service is performed in the state and (i) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the state, or (ii) the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual's residence is in this state. (3) The third fraction, the receipts factor, shall represent the part of the taxpayer's gross receipts from sales or other sources during the income year, computed according to the method of accounting used in the computation of its entire net income, which is assignable to the state, and excluding any gross receipts attributable to an international banking facility as defined in section 12-217, AS AMENDED BY SECTION 4 OF THIS ACT but including receipts from sales of tangible property if the property is delivered or shipped to a purchaser within this state, other than a company which qualifies as a Domestic International Sales Corporation (DISC) as defined in Section 992 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, and as to which a valid election under Subsection (b) of said Section 992 to be treated as a DISC is effective, regardless of the f.o.b. point or other conditions of the sale, receipts from services performed within the state, rentals and royalties from properties situated within the state, royalties from the use of patents or copyrights within the state, interest managed or controlled within the state, net gains from the sale or other disposition of intangible assets managed or controlled within the state, net gains from the sale or other disposition of tangible assets situated within the state and all other receipts earned within the state.

(d) Any motor bus company which is taxable both within and without this state shall apportion its net income derived from carrying of passengers for hire by means of an apportionment fraction, the numerator of which shall represent the total number of miles operated within this state and the denominator of which shall represent the total number of miles operated everywhere, but income derived by motor bus companies from sources other than the carrying of passengers for hire shall be apportioned as herein otherwise provided.

(e) (1) ANY COMPANY THAT IS (A) A LIMITED PARTNER IN A PARTNERSHIP, OTHER THAN AN INVESTMENT PARTNERSHIP, THAT DOES BUSINESS, OWNS OR LEASES PROPERTY OR MAINTAINS AN OFFICE WITHIN THIS STATE AND (B) NOT OTHERWISE CARRYING ON OR DOING BUSINESS IN THIS STATE SHALL NOT APPORTION ITS NET INCOME WITHIN AND WITHOUT THE STATE UNDER THE PROVISIONS OF SUBSECTION (b) OR (c) OF THIS SECTION, AS THE CASE MAY BE, BUT SHALL, IN LIEU OF SUCH APPORTIONMENT, PAY THE TAX IMPOSED UNDER SECTION 12-214, AS AMENDED BY SECTION 3 OF THIS ACT, SOLELY ON ITS DISTRIBUTIVE SHARE AS A PARTNER OF THE INCOME OR LOSS OF SUCH PARTNERSHIP TO THE EXTENT SUCH INCOME OR LOSS IS DERIVED FROM OR CONNECTED WITH SOURCES WITHIN THIS STATE, EXCEPT THAT, IF THE COMMISSIONER DETERMINES THAT THE COMPANY AND THE PARTNERSHIP ARE, IN SUBSTANCE, PARTS OF A UNITARY BUSINESS ENGAGED IN A SINGLE BUSINESS ENTERPRISE, THE COMPANY SHALL BE TAXED IN ACCORDANCE WITH THE PROVISIONS OF SUBDIVISION (3) OF THIS SUBSECTION AND NOT IN ACCORDANCE WITH THE PROVISIONS OF THIS SUBDIVISION. (2) ANY COMPANY THAT IS (A) A LIMITED PARTNER (i) IN AN INVESTMENT PARTNERSHIP OR (ii) IN A LIMITED PARTNERSHIP, OTHER THAN AN INVESTMENT PARTNERSHIP, THAT DOES BUSINESS, OWNS OR LEASES PROPERTY OR MAINTAINS AN OFFICE WITHIN THIS STATE AND (B) OTHERWISE CARRYING ON OR DOING BUSINESS IN THIS STATE SHALL APPORTION ITS NET INCOME, INCLUDING ITS DISTRIBUTIVE SHARE AS A PARTNER OF SUCH PARTNERSHIP INCOME OR LOSS, WITHIN AND WITHOUT THE STATE UNDER THE PROVISIONS OF SUBSECTION (b) OR (c) OF THIS SECTION, AS THE CASE MAY BE, EXCEPT THAT THE NUMERATOR AND THE DENOMINATOR OF ITS PAYROLL FACTOR, PROPERTY FACTOR, AND RECEIPTS FACTOR SHALL INCLUDE ITS PROPORTIONATE PART, AS A PARTNER, OF THE NUMERATOR AND THE DENOMINATOR OF SUCH PARTNERSHIP'S PAYROLL FACTOR, PROPERTY FACTOR AND RECEIPTS FACTOR, RESPECTIVELY. FOR PURPOSES OF THIS SECTION, SUCH PARTNERSHIP SHALL COMPUTE ITS APPORTIONMENT FRACTION AND THE NUMERATOR AND THE DENOMINATOR OF ITS PAYROLL FACTOR, PROPERTY FACTOR AND RECEIPTS FACTOR, AS IF IT WERE A COMPANY TAXABLE BOTH WITHIN AND WITHOUT THIS STATE. (3) ANY COMPANY THAT IS A GENERAL PARTNER IN A PARTNERSHIP THAT DOES BUSINESS, OWNS OR LEASES PROPERTY OR MAINTAINS AN OFFICE WITHIN THIS STATE SHALL, WHETHER OR NOT IT IS OTHERWISE CARRYING ON OR DOING BUSINESS IN THIS STATE, APPORTION ITS NET INCOME, INCLUDING ITS DISTRIBUTIVE SHARE AS A PARTNER OF SUCH PARTNERSHIP INCOME OR LOSS, WITHIN AND WITHOUT THE STATE UNDER THE PROVISIONS OF SUBSECTION (b) OR (c) OF THIS SECTION, AS THE CASE MAY BE, EXCEPT THAT THE NUMERATOR AND THE DENOMINATOR OF ITS PAYROLL FACTOR, PROPERTY FACTOR AND RECEIPTS FACTOR SHALL INCLUDE ITS PROPORTIONATE PART, AS A PARTNER, OF THE NUMERATOR AND THE DENOMINATOR OF SUCH PARTNERSHIP'S PAYROLL FACTOR, PROPERTY FACTOR AND RECEIPTS FACTOR, RESPECTIVELY. FOR PURPOSES OF THIS SECTION, SUCH PARTNERSHIP SHALL COMPUTE ITS APPORTIONMENT FRACTION AND THE NUMERATOR AND THE DENOMINATOR OF ITS PAYROLL FACTOR, PROPERTY FACTOR AND RECEIPTS FACTOR, AS IF IT WERE A COMPANY TAXABLE BOTH WITHIN AND WITHOUT THIS STATE.

[(e)] (f) The provisions of this section shall not apply to insurance companies.

Sec. 6. Subsections (a) and (b) of section 12-219 of the general statutes are repealed and the following is substituted in lieu thereof:

(a) [For each income year for which the tax calculated under this subsection exceeds the tax imposed by section 12-214, each] EACH company subject to the provisions of this part, except savings banks, Morris plan companies, corporations qualified under the laws of the United States as small business investment companies and state banks and trust companies incorporated under the laws of this state and production credit associations and savings and loan associations and banks incorporated under the laws of the federal government and The Connecticut Development Credit Corporation, shall pay for the privilege of carrying on or doing business within the state, [in addition to the tax imposed by said section 12-214, an additional tax of the amount by which] THE LARGER OF THE TAX, IF ANY, IMPOSED BY SECTION 12-214, AS AMENDED BY SECTION 3 OF THIS ACT, AND the tax calculated under this subsection [for such income year exceeds the tax imposed by said section 12-214.] (1) In the case of a company other than a regulated investment company or real estate investment trust, the tax calculated under this section shall be: A tax of three and one-tenth mills per dollar for each income year of the amount derived (A) by adding (i) the average value of the issued and outstanding capital stock, including treasury stock at par or face value, fractional shares, scrip certificates convertible into shares of stock and amounts received on subscriptions to capital stock, computed on the balances at the beginning and end of the taxable year or period, the average value of surplus and undivided profit computed on the balances at the beginning and end of the taxable year or period, and (ii) the average value of all surplus reserves computed on the balances at the beginning and end of the taxable year or period, (B) by subtracting from the sum so calculated (i) the average value of any deficit carried on the balance sheet computed on the balances at the beginning and end of the taxable year or period, and (ii) the average value of any holdings of stock of private corporations including treasury stock shown on the balance sheet computed on the balances at the beginning and end of the taxable year or period, and (C) by apportioning the remainder so derived between this and other states under the provisions of section 12-219a, AS AMENDED BY SECTION 7 OF THIS ACT, provided in no event shall the tax so calculated exceed one million dollars or be less than two hundred fifty dollars. (2) For purposes of this subsection, in the case of a new domestic company, the balances at the beginning of its first fiscal year or period shall be the balances immediately after its organization or immediately after it commences business operations, whichever is earlier; and in the case of a foreign company, the balances at the beginning of its first fiscal year or period in which it becomes liable for the filing of a return in this state shall be the balances as established at the beginning of the fiscal year or period for tax purposes. In the case of a domestic company dissolving or limiting its existence, the balances at the end of the fiscal year or period shall be the balances immediately prior to the final distribution of all its assets; and in the case of a foreign company filing a certificate of withdrawal, the balances at the end of the fiscal year or period shall be the balances immediately prior to the withdrawal of all of its assets. When a taxpayer has carried on or had the right to carry on business within the state for eleven months or less of the income year, the tax calculated under this subsection shall be reduced in proportion to the fractional part of the year during which business was carried on by such taxpayer. The tax calculated under this subsection shall, in no case, be less than two hundred fifty dollars for each income year. The taxpayer shall report the items set forth in this subsection at the amounts at which such items appear upon its books; provided, when, in the opinion of the Commissioner of Revenue Services, the books of the taxpayer do not disclose a reasonable valuation of such items, the commissioner may require any additional information which may be necessary for a reasonable determination of the tax calculated under this subsection and shall, on the basis of the best information available, calculate such tax and notify the taxpayer thereof.

[(b) Banking and other financial corporations exempted from the tax imposed by subsection (a) of this section shall pay in each tax year in which the tax calculated under this subsection exceeds the tax imposed by section 12-214, in addition to the tax imposed by section 12-214, an additional tax of the amount by which the tax calculated under this subsection exceeds the tax imposed by section 12-214.]

(b) (1) EACH SAVINGS BANK, MORRIS PLAN COMPANY, CORPORATION QUALIFIED UNDER THE LAWS OF THE UNITED STATES AS A SMALL BUSINESS INVESTMENT COMPANY, STATE BANK AND TRUST COMPANY INCORPORATED UNDER THE LAWS OF THIS STATE, PRODUCTION CREDIT ASSOCIATION, SAVINGS AND LOAN ASSOCIATION, BANK INCORPORATED UNDER THE LAWS OF THE FEDERAL GOVERNMENT AND THE CONNECTICUT DEVELOPMENT CREDIT CORPORATION SHALL PAY FOR THE PRIVILEGE OF CARRYING ON OR DOING BUSINESS WITHIN THE STATE THE LARGER OF THE TAX, IF ANY, IMPOSED BY SECTION 12-214, AS AMENDED BY SECTION 3 OF THIS ACT, AND THE TAX CALCULATED UNDER THIS SUBSECTION [(1)] (2) For such banking and other financial institutions other than state banks and trust companies, national banks, mutual savings banks, and savings and loan associations, the tax calculated under this subsection shall be two hundred fifty dollars for each income year. [(2)] (3) For state banks and trust companies, national banks, mutual savings banks, and savings and loan associations the tax calculated under this subsection shall be an amount equal to four per cent for each income year of the amount of interest or dividends credited by them on savings accounts of depositors or account holders during the taxable year preceding that in which such tax became due, provided, in determining such amount, each interest or dividend credit to the savings account of a depositor or account holder shall be deemed to be the interest or dividend actually credited or the interest or dividend which would have been credited if it had been computed and credited at the rate of one-eighth of one per cent per annum, whichever is less.

Sec. 7. Section 12-219a of the general statutes is repealed and the following is substituted in lieu thereof:

(a) If a taxpayer is taxable both within and without the state, a tax shall be imposed on the base as provided in section 12-219, AS AMENDED BY SECTION 6 OF THIS ACT, apportioned on the following basis: (1) The average monthly value of all investments other than stock of private corporations, and all cash, credits and other intangible assets of the taxpayer shall be divided between [(a)] (A) those having a tax situs within the state and [(b)] (B) those having a tax situs without the state; (2) the average monthly net book value of the tangible property held and owned by the taxpayer during the income year shall be divided between [(c)] (A) that held within the state and [(d)] (B) that held without the state; the numerator of the allocation fraction shall consist of the sum of [(a) and (c)] SUBPARAGRAPH (A) OF SUBDIVISION (1) OF THIS SUBSECTION AND SUBPARAGRAPH (A) OF SUBDIVISION (2) OF THIS SUBSECTION, and the denominator shall consist of the sum of SUBDIVISIONS (1) and (2) OF THIS SUBSECTION; which allocation fraction shall be multiplied by the amount of the unallocated tax base as computed under the terms of SAID section 12-219 to obtain the tax base for such taxpayer. For the purposes of this section, the intangible assets of a company having its principal place of business within the state shall be deemed to have a tax situs within the state unless it can be clearly established that some or all of such assets are held in connection with business conducted during the income year without the state, and a similar rule shall apply to intangible assets of a company having its principal place of business without the state. Such assets shall be reported by the taxpayer at the valuations at which they appear upon its books, provided the Commissioner of Revenue Services shall exercise the powers with respect to such valuations granted him under the terms of SAID section 12-219. For the purpose of apportionment of the base as provided in SAID section 12-219, a taxpayer is taxable in another state if in such state such taxpayer conducts business and is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax, or if such state has jurisdiction to subject such taxpayer to such a tax, regardless of whether such state does, in fact, impose such a tax.

(b) (1) ANY COMPANY THAT IS (A) A LIMITED PARTNER IN A PARTNERSHIP, OTHER THAN AN INVESTMENT PARTNERSHIP, THAT DOES BUSINESS, OWNS OR LEASES PROPERTY OR MAINTAINS AN OFFICE WITHIN THIS STATE AND (B) NOT OTHERWISE CARRYING ON OR DOING BUSINESS IN THIS STATE SHALL APPORTION THE AVERAGE VALUE OF ITS PARTNERSHIP INTEREST WITHIN AND WITHOUT THIS STATE UNDER THE PROVISIONS OF SUBSECTION (a) OF THIS SECTION, EXCEPT THAT THE NUMERATOR AND THE DENOMINATOR OF ITS APPORTIONMENT FRACTION SHALL BE ITS PROPORTIONATE PART OF THE PARTNERSHIP'S APPORTIONMENT FACTORS. FOR PURPOSES OF THIS SECTION, THE PARTNERSHIP SHALL COMPUTE ITS APPORTIONMENT FRACTION AND THE NUMERATOR AND THE DENOMINATOR OF ITS APPORTIONMENT FACTORS AS IF IT WERE A COMPANY TAXABLE BOTH WITHIN AND WITHOUT THIS STATE. HOWEVER, IF THE COMMISSIONER DETERMINES THAT THE COMPANY AND THE PARTNERSHIP ARE, IN SUBSTANCE, PARTS OF A UNITARY BUSINESS ENGAGED IN A SINGLE BUSINESS ENTERPRISE, THE COMPANY SHALL BE TAXED IN ACCORDANCE WITH THE PROVISIONS OF SUBDIVISION (3) OF THIS SUBSECTION AND NOT IN ACCORDANCE WITH THE PROVISIONS OF THIS SUBDIVISION. (2) ANY COMPANY THAT IS (A) A LIMITED PARTNER (i) IN AN INVESTMENT PARTNERSHIP OR (ii) IN A LIMITED PARTNERSHIP, OTHER THAN AN INVESTMENT PARTNERSHIP, THAT DOES BUSINESS, OWNS OR LEASES PROPERTY OR MAINTAINS AN OFFICE WITHIN THIS STATE AND (B) OTHERWISE CARRYING ON OR DOING BUSINESS IN THIS STATE SHALL APPORTION ITS ADDITIONAL TAX BASE, INCLUDING THE AVERAGE VALUE OF ITS PARTNERSHIP INTEREST, WITHIN AND WITHOUT THE STATE UNDER THE PROVISIONS OF SUBSECTION (a) OF THIS SECTION, EXCEPT THAT THE NUMERATOR AND THE DENOMINATOR OF ITS APPORTIONMENT FACTORS SHALL INCLUDE ITS PROPORTIONATE PART OF THE NUMERATOR AND THE DENOMINATOR OF THE PARTNERSHIP'S APPORTIONMENT FACTORS. FOR PURPOSES OF THIS SECTION, THE PARTNERSHIP SHALL COMPUTE ITS APPORTIONMENT FRACTION AND THE NUMERATOR AND THE DENOMINATOR OF ITS APPORTIONMENT FACTORS, AS IF IT WERE A COMPANY TAXABLE BOTH WITHIN AND WITHOUT THIS STATE. (3) ANY COMPANY THAT IS A GENERAL PARTNER IN A PARTNERSHIP THAT DOES BUSINESS, OWNS OR LEASES PROPERTY OR MAINTAINS AN OFFICE WITHIN THIS STATE SHALL, WHETHER OR NOT IT IS OTHERWISE CARRYING ON OR DOING BUSINESS IN THIS STATE, APPORTION ITS ADDITIONAL TAX BASE, INCLUDING THE AVERAGE VALUE OF ITS PARTNERSHIP INTEREST, WITHIN AND WITHOUT THE STATE UNDER THE PROVISIONS OF SUBSECTION (a) OF THIS SECTION, EXCEPT THAT THE NUMERATOR AND THE DENOMINATOR OF ITS APPORTIONMENT FACTORS SHALL INCLUDE ITS PROPORTIONATE PART OF THE NUMERATOR AND THE DENOMINATOR OF THE PARTNERSHIP'S APPORTIONMENT FACTORS. FOR PURPOSES OF THIS SECTION, THE PARTNERSHIP SHALL COMPUTE ITS APPORTIONMENT FRACTION AND THE NUMERATOR AND THE DENOMINATOR OF ITS APPORTIONMENT FACTORS, AS IF IT WERE A COMPANY TAXABLE BOTH WITHIN AND WITHOUT THIS STATE.

(c) This section shall not apply to insurance companies.

Sec. 8. (NEW) (a) With respect to the taxation under chapter 208 of the general statutes in income years commencing on or after January 1, 1996, of a company's distributive share as a partner of partnership income or loss in all partnerships in which it is or may become a partner, a company may, on or before the due date, or, if applicable, the extended due date, of its corporation business tax return for its income year beginning during 1996, make an election, on its corporation business tax return for such income year, not to have the provisions of subsection (e) of section 12-218 of the general statutes, as amended by section 5 of this act and subsection (b) of section 12-219a of the general statutes, as amended by section 7 of this act apply. Except as otherwise provided by subsection (b) of this section, the election shall be irrevocable.

(b) If a company makes the election as provided in subsection (a) of this section, such company may revoke such election, on its corporation business tax return and such revocation shall not be effective for any income year beginning before January 1, 2001. The revocation, if any, of such election shall be irrevocable.

Sec. 9. Section 12-221a of the general statutes is repealed and the following is substituted in lieu thereof:

(a) If the method of apportionment prescribed in sections 12-218, AS AMENDED BY SECTION 5 OF THIS ACT 12-218a and 12-219a, AS AMENDED BY SECTION 7 OF THIS ACT as administered by the Commissioner of Revenue Services and applied to the business of any company, unfairly attributes to this state an undue proportion of its net income or [additional] MINIMUM tax base, such company may petition for an alternate method of apportionment by filing with its return to the commissioner a statement of its objections and of such other proposed method of apportionment as it believes proper and equitable under the circumstances, accompanied by supporting details and proofs. The commissioner, within a reasonable time thereafter, shall notify the company whether the proposed method is accepted as reasonable and equitable and, if so accepted, shall adjust the return and tax accordingly.

(b) With respect to any company subject to the tax imposed under this chapter, the commissioner, at any time within three years after the due date for the filing of such return, or in the case of a completed return filed after such due date, within three years after the date on which such return was received by the commissioner, which return is based on the method of apportionment provided for in said sections 12-218, AS AMENDED BY SECTION 5 OF THIS ACT 12-218a and 12-219a, AS AMENDED BY SECTION 7 OF THIS ACT may change such method if, in his opinion, such method has operated or will operate so as to subject the company to taxation on a lesser portion of its net income or [additional] MINIMUM tax base than is equitably attributable to this state and shall thereupon proceed to assess and collect taxes in accordance with such method as so changed by him. On and after January 1, 1995, the commissioner may change such method only in accordance with regulations establishing standards for such action, which the commissioner may adopt in accordance with the provisions of chapter 54.

Sec. 10. Subsection (3) of section 12-223a of the general statutes is repealed and the following is substituted in lieu thereof: (3) In the case of a combined return, the tax shall be measured by the sum of the separate net income or loss of each corporation included or the [additional] MINIMUM tax base of the included corporations but only to the extent that said income, loss or [additional] MINIMUM tax base of any included corporation is separately apportioned to Connecticut in accordance with the provisions of section 12-218, AS AMENDED BY SECTION 5 OF THIS ACT 12-219a AS AMENDED BY SECTION 7 OF THIS ACT or 12-244, whichever is applicable. In computing said net income or loss, intercorporate dividends shall be eliminated, and in computing the combined additional tax base, intercorporate stockholdings shall be eliminated. If the method of determining the combined measure of such tax in accordance with this subsection for two or more affiliated companies validly electing to file a combined return under the provisions of subsection (1) of this section is deemed by such companies to unfairly attribute an undue proportion of their total income or [additional] MINIMUM tax base to this state, said companies may submit a petition in writing to the Commissioner of Revenue Services for approval of an alternate method of determining the combined measure of their tax not later than sixty days prior to the due date of the combined return to which the petition applies and said commissioner shall grant or deny such approval before said due date. In deciding whether or not the companies included in such combined return should be granted approval to employ the alternate method proposed in such petition, the Commissioner of Revenue Services shall consider approval only in the event that the petitioners have clearly established to the satisfaction of said commissioner that all the companies included in such combined return are, in substance, parts of a unitary business engaged in a single business enterprise and further that there are substantial intercorporate business transactions among such included companies. Upon the filing of a combined return under subsections (1) and (2) of this section, combined returns shall be filed for all succeeding income years or periods for those corporations reporting therein, provided such corporations are included in a federal consolidated corporation income tax return filed for the succeeding income years and, in the case of a corporation filing under subsection (2), the aforesaid ownership or control continues in full force and effect and is not extended to other corporations, and further, provided no substantial change is made in the nature or locations of the operations of such corporations.

Sec. 11. This act shall take effect from its passage and shall be applicable to income years commencing on and after January 1, 1996.

Approved June 3, 1996. Effective June 3, 1996, and applicable as provided in section 11.

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