Recent Developments In The State Taxation Of Pass-Through Entities

Bruce P. Ely, William T. Thistle, II and J. Sims Rhyne,III  for Bradley Arant Boult Cummings LLP write: In the complex and evolving world of state and local taxation, it is vitally important for the owners of pass-through entities to continually monitor changes in the law. These changes can become a trap for the unwary and expose pass-through entities and their owners to unnecessary liability. When pass-through entities operate in multiple states and their owners reside in various other states, the complexities in this area of the law are compounded.

There have been some significant developments over the past 12 months related to the state taxation of pass-through entities and their owners. This newsletter highlights selected developments in the areas of nonresident owner nexus, apportionment of multistate income, nonresident owner withholding, composite returns, entity-level taxes, issues unique to S corporations, and other miscellaneous items. We chose to focus on PTEs used as business entities.

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Recent Developments in the State Taxation of Pass-Through Entities 

Table of Contents

• Nonresident Owner Nexus: P. 1-8 

• Apportionment of Multistate Income: P. 8-10 

• Entity-Level Income Tax Withholding: P. 10-15 

• Composite Returns: P. 15-16 

• Entity-Level Taxes P. 16-17 

• Issues Unique to S Corporations: P. 17-19 

• Miscellaneous Issues: P. 19-23