Knowledge Center

Friday, January 09, 2015

State Tax Developments for Pass-Through Entities: Withholding Requirements for Non-Resident Entity Owners

IPT Tax Report, January 2015

by Jennifer A. Zimmerman and JoAnna Fu Simek

This is the second 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 withholding requirements for non-resident entity owners, discusses the compliance environment once nexus has been established. It offers insights into the challenges of complying with state laws and tips for tax planning.

Most pass-through entities ("PTEs") are usually aware that tax is due on the income earned in the state by the ultimate owner of the entity. PTEs owned by other PTEs or corporations (entities) pose an interesting challenge because the requirement for tax compliance for entities varies greatly from individual non-resident owners. Entity owners may be treated as non-residents by definition, even if the entity does business in the state in another capacity. Businesses should not assume that tax treatment is equal regardless of ownership...

To read the full article, click HERE

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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