Knowledge Center

Tuesday, November 04, 2014

State Tax Developments for Pass-Through Entities: Nexus over Nonresident Owners

IPT Tax Report, November 2014

by Jennifer A. Zimmerman and JoAnna Fu Simek

This is the first 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 income-tax nexus over nonresident owners, discusses the constitutional nexus requirements and how they relate to different types of ownership interests. The article also highlights a number of the theories that States have advanced for asserting nexus over these interests and points out the flaws and weaknesses in these arguments.

Pass-through entities and their owners face complex challenges as state departments of revenue become progressively more aggressive when asserting their jurisdiction to tax the income of nonresident owners. The challenges of this area are compounded when a pass-through entity operates in multiple states and their owners reside in various other states...

To read the full article, click HERE. You can also view the complete IPT November 2014 Tax Report.

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

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