FML State and Local Tax (SALT) UPDATE

By Bill Claffey, Esq., Partner, Tax & Advisory Services
Jan 16, 2019

The State of Connecticut’s Department of Revenue Services (DRS) has issued notices informing many taxpayers that their elections to re-characterize personal estimated tax payments as payments against the pass-through entity tax for 2018 have been rejected. The notice requests a response within 14 days.


  • Connecticut began imposing an entity level tax on any partnership, LLCs treated as partnerships, or any S corporation “Pass-through Entity or PTE” effective for tax years beginning January 1, 2018 and forward.
  • For 2018, estimated payments made by individual’s members of PTEs for individual estimated tax related to PTE income can either be refunded to individual members when they file their 2018 Connecticut income tax return or individual members may elect to have all or a portion of their payments re-characterized so that payments are applied to their PTE’s estimated payment requirements.
    • The re-characterization is elected by the shareholder or partner/member preparing and submitting Form CT-1065/1120SA RR and Form CT-1065/CT-1120SI RRS in December 2018.

Rejection Notices

  • If you have received a rejection notice from the state, the original election may have been missing information or CT DRS records do not correspond to the election.
  • Connecticut should provide the basis for the rejection and the requirements to address the error.
  • A corrected re-characterization form (CT-1065/1120SA RR and Form CT-1065/CT-1120SI RRS) must be completed and returned to the CT DRS within 14 days of the date of the rejection notice to resolve the outstanding issues.
  • The response may be sent to:

State of Connecticut
Tax Corrections Examiner
Department of Revenue Services
450 Columbus Boulevard, Suite 1
Hartford, CT 06103-1837

  • Failing to respond in a timely manner could result in income tax payments due in excess of what was expected to be paid with the Pass Through Entity returns.

If you have received a notice and have not yet responded or have any questions on how to respond, please contact FML.