How Connecticut’s Controlling Interest Transfer Tax Works

The Connecticut controlling interest transfer tax is a 1.11% state tax paid by the seller whenever someone transfers more than 50% of an entity that owns Connecticut real property. It is calculated on the fair market value of the Connecticut real property the entity holds, not on the price paid for the ownership shares. The tax exists so that selling a company that owns land is not a way around the standard real estate conveyance tax on deed transfers. Property valued below $2,000 does not trigger the obligation, but that floor is low enough to catch essentially any real interest.

What Counts as a Controlling Interest

For a corporation, a controlling interest is more than 50% of the total combined voting power across all classes of stock. For partnerships, LLCs, trusts, and other non-corporate entities, it is more than 50% of the capital, profits, or beneficial interest.¹

The transfer does not have to happen in one transaction. A taxable transfer can occur through a single sale or a series of smaller ones, and transactions within six months of each other are presumed to be part of the same series unless the parties prove otherwise. That rule stops buyers from breaking a deal into sub-50% pieces to stay below the threshold.¹

When sellers are related by blood or marriage, the state presumes they are acting in concert, so their individual transfers get combined for the 50% test. Related sellers who genuinely acted independently can rebut the presumption, but the burden is on them.¹

Which Entities and Properties Are Covered

Any type of entity that holds an interest in Connecticut real property is within reach, whether corporation, partnership, LLC, trust, or other organization. The entity’s state of formation does not matter; what matters is that it owns real property in Connecticut.²

“Real property” here means a legal or equitable interest in Connecticut land that endures for an indefinite period, such as a fee simple or a life estate. The definition tracks what would count as a conveyance under Connecticut’s real estate conveyance tax statutes, and fixed-term leaseholds do not automatically qualify even if the term is long.²

Indirect ownership is covered too. If an LLC owns a subsidiary that owns Connecticut land, transferring a controlling interest in the parent LLC can still trigger the tax. That reach is what makes the statute effective against transactions structured through layered entities.

How the Tax Is Calculated

The rate is 1.11% of the present true and actual value of the Connecticut real property the entity holds. The tax is based on the value of the real property, not the price paid for the ownership interest, and those two figures can diverge sharply when the entity carries debt or holds assets besides real estate.¹

Value means current fair market value, not assessed value or original purchase price. The Department of Revenue Services can challenge a number that looks low, so accuracy matters. For significant commercial properties, a professional appraisal is the safest approach, though the statute does not require one.¹

Here is what that looks like in practice. If an LLC owns Connecticut property worth $2,000,000 and someone acquires a 55% controlling interest, the tax is calculated on the full $2,000,000, producing a tax of $22,200. The statute bases the tax on the value of the real property “possessed, directly or indirectly, by such entity,” not on the proportional share transferred.

Exemptions and What Is Not Exempt

Only two statutory exemptions apply, and both live in subsection (b) of the statute rather than in the broader conveyance tax exemption list.

Enterprise Zone Property

The tax does not apply to the extent the entity’s property sits within a designated enterprise zone. If the entity owns property both inside and outside a zone, only the value outside the zone is taxable. It reduces the tax base rather than eliminating the tax when the portfolio is mixed.¹

Mere Change of Identity or Form

The tax also does not apply when the transfer changes the entity’s legal form without changing who beneficially owns the property. Converting a partnership into an LLC, or reorganizing a corporation into a holding company where the same people retain the same beneficial ownership, falls within this exemption. The test is whether beneficial ownership is the same before and after.¹

Family Transfers Are Not Automatically Exempt

Section 12-638n lists a longer set of exemptions for transfers between spouses, mortgage deeds, eminent domain, and transfers at death. Those exemptions apply only to the real estate conveyance tax under § 12-638l, not to the controlling interest transfer tax under § 12-638b. Transferring a controlling interest to a spouse or child is not automatically exempt the way a direct deed transfer between family members would be.³

Filing Form AU-330 and Paying

The seller files Form AU-330, the Controlling Interest Transfer Tax Return, with the Department of Revenue Services. The return requires detailed information about the entity, the property, and the valuation used.²

The deadline is the last day of the month following the month of transfer. A transfer that closes in March means the return and full payment are due by April 30. Payment must accompany the return; there is no option to file first and pay later.¹

Filing and payment can be done electronically through the state’s myconneCT portal, or by mailing a paper return with a check to the Department of Revenue Services.²

Penalties for Late or Underpaid Tax

Missing the deadline triggers a penalty of 10% of the unpaid tax or $50, whichever is greater, plus interest at 1% per month from the due date. Interest accrues on any fraction of a month, so being a few days late still costs a full month of interest.⁴

If an audit turns up an underpayment, the penalty depends on the reason. A deficiency attributed to negligence carries a 10% penalty or $50, whichever is greater, on the deficiency amount. A deficiency attributed to fraud or intentional evasion carries a 25% penalty. Both penalties cannot be imposed for the same tax period.¹

The Commissioner of Revenue Services can waive penalties when the taxpayer shows the failure was due to reasonable cause and was not intentional or the result of neglect.¹

What to Keep

Keep the filed return, supporting worksheets, valuation documentation, and records of the ownership transfer for at least three years after the return was due or filed, whichever is later. That window is the general statute of limitations for assessment, and the Department of Revenue Services can audit at any point within it. Valuation is the most common point of dispute, so the appraisal report or comparable sales data behind your number is the piece worth guarding.⁵

1
Connecticut General Assembly. Connecticut Code Chapter 228b – Controlling Interest Transfer Tax
2
Department of Revenue Services. Connecticut Controlling Interest Transfer Tax Return Instructions
3
Justia. Connecticut Code 12-638n – Transfers Not Subject to the Tax Under Section 12-638l
4
Justia. Connecticut Code 12-638c – Filing Return and Payment of Tax, Penalty and Waiver Provisions, Regulations
5
Connecticut State Department of Revenue Services. Other Helpful Information