1. (a) An S corporation as such is not subject to the income tax. Individuals who are shareholders of an S corporation are liable for the income tax in their individual capacities on their respective pro rata shares of S corporation income, whether or not such shares are actually distributed to them.
2. (b) Subject to the modifications described in § 12-715(a)-2 and § 12-715(b)-2 of Part VII, a resident shareholder's pro rata share of an S corporation's— (1) separately computed income or loss is included in such shareholder's federal adjusted gross income and, therefore, is included in such shareholder's Connecticut adjusted gross income; and (2) nonseparately computed income or loss is included in such shareholder's federal adjusted gross income and, therefore, is included in such shareholder's Connecticut adjusted gross income.
3. (c) While this section pertains to Section 12-701(a)(20) of the general statutes, for purposes of supplementary interpretation, as the phrase is used in Section 12-2 of the general statutes, the adoption of this section is authorized by Section 12-740(a) of the general statutes.

(Effective November 18, 1994; Amended March 8, 2006)