Multistate Tax Treatment of Multi-Tier Partnerships: State Tax Issues for Nonresident Tiered Pass-Through Entities

A significant challenge for tax counsel, advisers, and compliance professionals advising tiered partnerships is determining various states' tax treatment of tiered entities, mainly when a lower-tier partnership is located in a state different from the upper-tier owner. Because of the inconsistency in various state treatments, complex and conflicting rules in determining how the upper-tier entity resident state will treat pass-through items of income and loss from lower-tier entities creates potential compliance pitfalls for taxpayers.

Counsel and advisers to upper-tier partnerships must determine how the resident state treats the entity's lower-tier pass-through items. Ascertaining whether the lower-tier partnership's apportionment factors flow through to the upper-tier entity materially affects the income/loss calculations of the partnership.

Likewise, navigating states' withholding requirements and determining when a lower-tier's resident state allows, or mandates, composite filings is also crucial. Identifying the factors that determine the state tax treatment of multi-tier partnerships (when the lower-tier partnership is non-resident) is critical to establishing tax treatment.

Listen as our experienced panel offers a practical guide to navigating multistate complexities and approaches to taxing tiered partnerships with nonresident lower-tiers.

1. Identifying multi-tier partnerships with multistate filing requirements
2. Determining whether lower-tier apportionment factors flow through to an upper-tier partner
3. Withholding requirements
4. Composite return rules and exceptions for multi-tier partnerships

The panel will review these and other vital questions:

• State rules allowing lower-tier partnership's apportionment factors to flow through to the upper-tier partner
• The impact of tiered partnerships on withholding requirements for nonresident partners
• The impact of a partnership's status as a tiered entity on composite return requirements
• States allowing tax attributes to flow through to the upper-tier partnership

Learning Objectives

After completing this course, you will be able to:

• Determine the circumstances and procedure in which filing a composite return may be advantageous to a pass-through entity and its partners
• Identify alternatives for withholding taxes of nonresident partners
• Ascertain whether a corporate partner of a pass-through entity operating in a foreign state will be considered to have nexus along with the pass-through entity
• Recognize state requirements for filing composite returns
• Verify whether a state taxes pass-through entity owners or both pass-through entity owners and the pass-through entity

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Specific knowledge and understanding of partnership tax rules, corporate structure, and state audit and tax regulations.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).