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Reasonable compensation memorandumTY 2026

The shareholder’s time was allocated across four distinct functions, each mapped to its Standard Occupational Classification code and priced at the selected wage percentile for the Hartford–East Hartford, CT metropolitan area…

Reasonable compensation determined$154,128

Source: U.S. Bureau of Labor Statistics, OEWS, May 2025 · bls.gov/oes

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Reasonable compensation

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The shareholder’s role is split into real functions — each mapped to a SOC occupation code with a stated share of time.

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Each duty is priced from BLS OEWS percentile wages at the metro level, with the survey vintage cited on the memo.

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1 of 3
Should my client's S-corp make the Connecticut PTE tax election this year, and how does the owner credit work now?
Sources scoped: Federal + CT (portal.ct.gov)
Verdict. Depends on whether the S-corp has Connecticut-sourced income (or "substantial economic presence") and whether its owners receive meaningful federal SALT-cap relief. If both conditions are met, election is nearly always beneficial because the credit percentage remains 87.5%.

Making the election. Connecticut's pass-through entity (PE) tax is optional; entities that elect must do so annually, and the election is irrevocable. 1 For taxable years commencing on or after January 1, 2024, an entity electing the PE tax must provide written notice to the Commissioner no later than the due date (or extended due date) of the return; checking the box on a timely filed Form CT-1065/CT-1120SI electing to file a pass-through entity tax return constitutes written notice. 2

Computing the tax. For taxable years beginning on or after January 1, 2024, Connecticut eliminated the option to use the standard base or alternative base method; all entities now calculate PE income similar to the alternative base method from prior years. 2 The tax rate is 6.99% applied to the entity's income. 3

Cited sources2 of 5 shown
  1. 1
    Conn. DRS, Pass-Through Entity Tax Informationverified ✓
    “The Pass-Through Entity (PE) Tax is optional. Entities that elect to pay the PE Tax must do so annually, and the election is irrevocable.”
    portal.ct.gov
  2. 2
    Conn. DRS, Form CT-PET Instructions (2024)verified ✓
    “Starting with taxable years commencing on and after January 1, 2024, any entity that elects to pay such tax must give the Commissioner written notice no later than the due date for filing the return.”
    portal.ct.gov

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