If it appears to the Commissioner of Revenue Services that any agreement, understanding or arrangement exists between the taxpayer and any other corporation or any person or firm, whereby the activity, business, income or capital of the taxpayer within the state is improperly or inaccurately reflected, the Commissioner of Revenue Services is authorized and empowered, in his or her discretion, provided such discretion is not arbitrarily, capriciously or unreasonably exercised, and in such manner as he or she may determine, to adjust items of income, deductions and capital, and to eliminate assets in computing any apportionment percentage under this chapter, provided any income directly traceable thereto shall also be excluded from entire net income, so as equitably to determine the tax. Where (1) any taxpayer conducts its activity or business under any agreement, arrangement or understanding in such manner as either directly or indirectly to benefit its members or stockholders, or any of them, or any person or persons directly or indirectly interested in such activity or business, by entering into any transaction at more or less than a fair price which, but for such agreement, arrangement or understanding, might have been paid or received therefor, or (2) any taxpayer, a substantial portion of whose capital stock is owned either directly or indirectly by another corporation, enters into any transaction with such other corporation on such terms as to create an improper loss or to reflect inaccurate net income, the Commissioner of Revenue Services may include in the entire net income of the taxpayer the fair profits, which, but for such agreement, arrangement or understanding, the taxpayer might have derived from such transaction. Not later than January 1, 1995, the commissioner shall adopt regulations, in accordance with the provisions of chapter 54, setting forth standards for taking the actions authorized under this section.
(P.A. 73-350, S. 20, 27; P.A. 77-614, S. 139, 610; P.A. 81-411, S. 6, 42; May Sp. Sess. P.A. 94-4, S. 9, 85; P.A. 95-160, S. 64, 69; May 9 Sp. Sess. P.A. 02-1, S. 61.)
History: P.A. 73-350, effective May 9, 1973, and applicable to income years beginning on or after January 1, 1973; P.A. 77-614 substituted commissioner of revenue services for tax commissioner, effective July 1, 1979; P.A. 81-411 deleted reference to allocation, substituting apportionment, effective June 18, 1981, and applicable to income years commencing on or after December 28, 1980; May Sp. Sess. P.A. 94-4 required commissioner to adopt regulations setting forth standards for making any adjustments to income, deductions or capital, effective June 9, 1994; P.A. 95-160 revised effective date of May Sp. Sess. P.A. 94-4 but without affecting this section; May 9 Sp. Sess. P.A. 02-1 added qualification that the commissioner's discretion not be arbitrarily, capriciously or unreasonably exercised and made technical changes, effective July 1, 2002, and applicable to income years commencing on or after January 1, 2002.
Cited. 236 C. 156.
Cited. 43 CS 314. Commissioner of Revenue Services does not have unfettered discretionary powers and when the issue is a question of law, no deference is given to commissioner's actions. 47 CS 122.
Structure Connecticut General Statutes
Chapter 208 - Corporation Business Tax
Section 12-213. - Definitions.
Section 12-214. - Imposition of tax. Surcharge.
Section 12-216. - Payment of tax by out-of-state corporations.
Section 12-217aa. - Order of credits.
Section 12-217aaa. - Accumulated research and development tax credits.
Section 12-217bb. - Tax credit for electric suppliers hiring displaced workers.
Section 12-217dd. - Tax credit for donation of land for open space or educational use.
Section 12-217ee. - Refund of unused credits under sections 12-217j and 12-217n.
Section 12-217gg. - Tax credit for employment expansion project.
Section 12-217hh. - Tax credit for hiring displaced worker.
Section 12-217j. - Tax credit for research and experimental expenditures.
Section 12-217jj. - Film production tax credit. Regulations.
Section 12-217k. - Tax credit for employee training.
Section 12-217ll. - Tax credit for digital animation production companies. Regulations.
Section 12-217m. - Tax credit for taxpayers occupying new facilities and creating new jobs.
Section 12-217n. - Rolling tax credit for research and development expenses. Carryforward limit.
Section 12-217o. - Tax credit for machinery and equipment expenditures.
Section 12-217p. - Tax credits for taxpayer providing housing for low and moderate income employees.
Section 12-217qq. - Tax credit for employers making certain student loan payments.
Section 12-217s. - Tax credit for expenditures related to traffic reduction programs.
Section 12-217v. - Tax credit for qualifying corporations in enterprise zones.
Section 12-217w. - Tax credit for investment in fixed capital.
Section 12-217x. - Tax credit for human capital investment.
Section 12-217z. - Business Tax Credit and Tax Policy Review Committee.
Section 12-217zz. - Limit on credits under this chapter.
Section 12-218. - Apportionment of net income.
Section 12-218a. - Apportionment of tax on insurance company.
Section 12-218b. - Apportionment of net income of financial service companies.
Section 12-218g. - Net deferred tax liability and assets. Deductions.
Section 12-219. - Capital base tax. Phase-out. Surcharge.
Section 12-219a. - Apportionment of tax base in and out of state. Insurance companies excepted.
Section 12-219b. - Election with respect to apportionment of net income.
Section 12-221a. - Petition for alternative method of apportionment. Regulations.
Section 12-222. - Annual return. Designated taxable member of combined group. Duties.
Section 12-223. - Returns of affiliated corporations.
Section 12-223a. - Combined corporation business tax return.
Section 12-223b. - Intercompany rents and business receipts.
Section 12-223c. - Minimum tax in combined return.
Section 12-223d. - Assessments against one or more taxpayers in combined return.
Section 12-223e. - Readjustment of taxes on revision of combined return.
Section 12-223f. - Preference tax due from corporations filing a combined return.
Section 12-224. - Return of fiduciary.
Section 12-225. - Supplemental and amended returns. Refund claim.
Section 12-226. - Correction of returns; additional tax; refunds.
Section 12-226a. - Adjustments by the commissioner. Regulations.
Section 12-227. - Interest on refunds.
Section 12-228. - Refunds to be made from General Fund.
Section 12-229. - Failure to pay tax or make return. Penalty. Waiver of penalty authorized.
Section 12-230. - Forfeiture of corporate rights for failure to make returns.
Section 12-231a. - Formation of insurance company affiliate of holding company to evade tax.
Section 12-232. - Authority to take testimony under oath; subpoenas.
Section 12-234. - Settlement with Treasurer.
Section 12-235. - Delinquent taxes; interest; collection.
Section 12-235a. - Disallowance of credits if taxes due and unpaid.
Section 12-236. - Hearing by commissioner.
Section 12-238. - Abatement of taxes.
Section 12-239. - Abatement of taxes on motor bus company in receivership.
Section 12-240. - Publication and disclosure of information.
Section 12-241. - Tax to be in lieu of other taxes.
Section 12-241a. - Definition.
Section 12-242. - Regulations.
Section 12-242d. - Installment payment of estimated tax. Interest on under payments.
Section 12-242e. - Disposition of installments.
Section 12-242f. - Obligations of fiduciary.
Section 12-242g. - Overpayments.