(a)(1) If an item of income was included in the Connecticut adjusted gross income of an individual for a preceding taxable year or years because it appeared that the individual had an unrestricted right to such item, and, based on the repayment of such item by such individual during the taxable year, such individual properly determines his or her federal income tax liability for the taxable year under Section 1341(a)(4) or (5) of the Internal Revenue Code, then the tax imposed by this chapter for the taxable year on such individual shall be an amount equal to (A) the tax for the taxable year computed without regard to this section, minus (B) the decrease in tax under this chapter for the preceding taxable year or years which would result solely from the exclusion of such item or portion thereof from the Connecticut adjusted gross income of such individual for such preceding taxable year or years. This section shall not apply if such repayment is properly deductible in determining the individual's federal adjusted gross income for the taxable year, and such individual properly determines his or her federal income tax liability for the taxable year under Section 1341(a)(4) of the Internal Revenue Code by deducting such repayment.

(2) In determining the decrease in tax under this chapter for the preceding taxable year or years which would result solely from the exclusion of such item or portion thereof from the Connecticut adjusted gross income of such individual for such preceding taxable year or years, any item excluded from the Connecticut adjusted gross income of an individual for a preceding year or years in which such individual was a nonresident individual or part-year resident individual, shall, to the extent that such item is derived from or connected with sources within this state, be excluded from Connecticut adjusted gross income derived from or connected with sources within this state for such preceding year or years.

(3) If the decrease in tax under this chapter for the preceding taxable year or years which would result solely from the exclusion of such item or portion thereof from the Connecticut adjusted gross income of such individual for such preceding taxable year or years exceeds the tax for the taxable year computed without regard to this section, such excess shall be considered to be a payment of tax on the last day prescribed under this chapter for the payment of tax for the taxable year, and, subject to the provisions of sections 12-35f, 12-739 and 12-742, shall be refunded or credited in the same manner as if it were an overpayment for such taxable year.

(b) If an individual properly determines his or her liability for the tax imposed by this chapter for the taxable year under subsection (a) of this section, and properly determines his or her federal income tax liability for the taxable year under Section 1341(a)(4) of the Internal Revenue Code, then, in any case where the deduction under Section 1341(a)(4) of the Internal Revenue Code results in a net operating loss for federal income tax purposes, no claim for refund shall be allowable by the commissioner for an overpayment of the tax imposed by this chapter for a preceding taxable year or years to the extent attributable to such loss being carried back to such year or years.

(P.A. 00-174, S. 46, 83.)

History: P.A. 00-174 effective May 26, 2000, and applicable to taxable years commencing on or after January 1, 1999, except that no interest shall be allowed or paid on any overpayment resulting from the application of this section to the taxable year commencing January 1, 1999.