State and Local Tax Alert - June 2017

June 2017

Connecticut Combined Filers Net Deferred Tax Liability Deduction Deadline is set for July 3rd  


Summary

Connecticut combined filers have a right to claim and deduct a net deferred tax liability, but must first file a Statement of Net Deferred Tax Liability Deduction with the Connecticut Department of Revenue Services by July 3, 2017, or they will lose the right to claim the deduction.  No extensions will be granted to file the statement. 


Details 

Connecticut enacted legislation in 2015 (H.B. 7061 and S.B. 1502) requiring companies to calculate their Corporation Business Tax on a unitary combined reporting basis, effective for tax years beginning on or after January 1, 2016, as well as adopting a provision allowing for the deduction for a net deferred tax liability (Conn. Gen. Stat. §§12-218e and 12-218f).  The deduction is claimed by filing a Statement of Net Deferred Tax Liability Deduction with the Department of Revenue Services.  The deadline for claiming the deduction is currently set for July 3, 2017.  The Department of Revenue Services is not granting extensions to the deadline. 
 
As a result of enacting a unitary combined reporting requirement, certain taxpayers may have been required to adjust their deferred tax assets and/or liabilities on financial statements as a result of the legislation.  In order to offset any negative effect that the legislation may have imposed on combined unitary taxpayers’ financial statements, a deduction is permitted.  The deduction is allowed if Connecticut’s adoption of unitary combined reporting results in: 
 
1) An increase to a taxpayer’s net deferred tax liability (DTL);
2) A decrease to a taxpayer’s net deferred tax asset (DTA); or
3) Causes a net DTA to become a net DTL. 
 
The amount of the Net Deferred Tax Liability Deduction is equal to the amount necessary to offset the balance sheet impact of such changes and may be taken in seven equal installments over a seven year period beginning with income year 2018.  Special Notice 2016(1)  and OCG-2 were issued and provide additional details and examples for computing the deduction. 


BDO Insights

  • Statements must be filed with the Commissioner of Revenue Services on or before July 3, 2017.  No extensions of time will be granted.  A completed Statement of Net Deferred Tax Liability Deduction must be completed and mailed, with all supporting documentation, to the Department of Revenue Services on or before July 3, 2017.
  • Taxpayers affected by the July 3, 2017 deadline to claim the Connecticut Net Deferred Tax Liability Deduction should consult with their financial statement auditor and tax advisor to evaluate and determine the potential financial statement implications under ASC 740, including the impact on current and deferred taxes, uncertain tax benefits, and disclosures.
 


For more information, please contact one of the following regional practice leaders:
 

West:   Atlantic:
Rocky Cummings
Tax Partner

 
  Jeremy Migliara
Tax Managing Director

 
Paul McGovern
Tax Managing Director
  Jonathan Liss
Tax Managing Director

 
Northeast:   Central:
Janet Bernier 
Tax Partner

 
  Angela Acosta
Tax Managing Director

 
Matthew Dyment
Tax Principal

 
  Nick Boegel
Tax Managing Director

 


Southeast:
  Joe Carr
Tax Partner

 
Scott Smith
Tax Managing Director
 
  Mariano Sori
Tax Partner

 
Tony Manners
Tax Managing Director
 
  Richard Spengler
Tax Managing Director

 







 
 

Southwest:
Gene Heatly
Tax Managing Director

Tom Smith
Tax Partner