Knowledge Center

Tuesday, March 10, 2015

State Tax Developments for Pass-Through Entities and their Owners: Apportionment of Income for Corporate Partners

IPT Insider, March 2015

by Jennifer A. Zimmerman and JoAnna Fu Simek


This is the third in a series of articles that will address some of the many challenging state and local tax issues faced by pass-through entities, including tiered groups of such entities. This article, which focuses on apportionment of income for corporate partners, discusses the issues surrounding the business/nonbusiness determination, highlights the state's various characterizations of partnership interests, and reviews the methods prescribed by the states to apportion what it deems to be business income of pass through entities.

The article also underscores the complexities involved in apportionment for pass-through entity owners when states' methods vary depending on whether there is a unitary relationship between the flow-through entity and the owner, or on the type of interest held by the owner.

Download and read the full article beginning on page 11.

Jennifer A. Zimmerman is a partner in Horwood Marcus & Berk's SALT Group. JoAnna Fu Simek is an accountant working for BKD, LLP.

The Institute for Professionals in Taxation, founded in 1976, is a 501(c)(3) non-profit educational association serving over 4400 members representing approximately 1450 corporations, firms, or taxpayers throughout the United States and Canada. It is the only professional organization that educates, certifies and establishes strict codes of conduct for state and local income, property and sales & use tax professionals who represent taxpayers (government officials or organizations do not qualify for membership). The Institute also provides excellent educational programs in Value Added Tax (VAT) and Credits & Incentives. IPT members represent the spectrum of business and industry sectors of all sizes - from small firms to most Fortune 500 companies. What they share is a dedication to excellence and a desire to further professionalism and cooperation within the tax profession.

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