RE: Aggregate Composite Personal Income Tax Return
October 1, 2007
Dear Applicant:
This is a letter ruling issued by the Director of Revenue pursuant to Section 536.021.10, RSMo 2000, and Administrative Regulation 12 CSR 10-1.020, in response to your letter dated August 1, 2007.
Applicant seeks a Letter Ruling that it may file a composite personal income tax return for Missouri.
The facts as you presented them in your letter are summarized as follows:
Applicant is registered to conduct business and has a tax filing obligation in all fifty states. Applicant is headquartered in another state and maintains property and employees in various states.
As the result of reorganization, on January 1, 2007, Applicant became owned by a multi-tiered partnership structure. The company is treated as a partnership for federal income tax purposes (FEIN: ________) Applicant is owned by five tiers of owners, as detailed below. The individual and corporate owners of Applicant are nonresidents of Missouri. In addition, the flow-through entities in the ownership structure are not legally or commercially domiciled in Missouri. Operations are only conducted at the Applicant level.
The following identifies the tiered structure and its respective owners:
TIER I – _______, LLC
Individual A
Individual B
L.P. One (“_______ L.P.” FEIN: ____)
TIER II – L.P. One
Single Member Limited Liability Companies (“SMLLC”):
LLC One (FEIN: _____)
LLC Two (FEIN: _____)
Individuals:
Individual C
Individual D
Individual E
Individual F
Individual G
Limited Partnerships:
L.P. Two (FEIN: _____)
L.P. Three (FEIN: _____)
L.P. Four (FEIN: _____)
L.P. Five (FEIN: _____)
L.P. Six (FEIN: _____)
C Corporations:
Corp. One (FEIN: _____)
Corp. Two (FEIN: _____)
Corp. Three (FEIN: _____)
Corp. Four (FEIN: _____)
TIERS III – V – Upper Tier Partners
L.P. One and each tier beyond the L.P. One level exists primarily for investment purposes and only contains individuals, trusts, and other flow-through entities. These entities’ distributive share of state taxable income is expected to be minimal.
Applicant anticipates filing an aggregate personal income tax composite return for the 2007 tax year due April 15, 2008. Applicant’s composite return will include its nonresident direct nonresident owners and nonresident indirect (upper tier) individuals, flow-through entity, and nonresident trust owners. However, the composite will exclude the four C Corporations, as they will file separate corporate income tax returns on their own behalf. All nonresident individual and corporate partners included in the composite filing do not have other source income taxable in the state.
Whether Applicant is permitted to file one Missouri aggregate composite personal income tax return on behalf of all of its nonresident partners, including other flow-through entities (e.g. partnerships, limited liability companies, trusts, etc.) and upper tier individual partners.
Based on these facts, Applicant should file one aggregate composite income tax return with the state of Missouri on behalf of all of its non-resident owners, including other flow through entities. The 4 C Corporations filing separate corporation income tax returns are properly excluded from the Applicant’s composite return. Statutory authority for resident partner modifications, nonresident partners, composite returns, and the withholding that is required is provided for in Section 143.411. RSMo. Specifically, Section 143.411.4 provides:
The director of revenue shall permit partnerships to file composite returns and to make composite payments of tax on behalf of its nonresident partners not otherwise required to file a return. If the nonresident partner's filing requirements result solely from one or more interests in any other partnerships or subchapter S corporations, that nonresident partner may be included in the composite return.
A composite return is allowed by the department for any partnership, S corporation, limited liability partnership or limited liability company (treated as a partnership for tax purposes) with nonresident partners or S corporation shareholders not otherwise required to file a Missouri individual income tax return. Nonresident individuals, partnerships, S corporations, regular corporations, estates (filing a Federal Form 1041) and trusts can be included on the composite income tax form. So long as all of Applicant’s nonresident partners, including other flow-through entities (e.g. partnerships, limited liability companies, trusts, etc.) and upper tier individual partners are not otherwise required to file a Missouri state income tax return, they may be included in one aggregate composite return filed by the Applicant. Applicant’s composite returns must be filed on the individual income tax long form (Form MO-1040).
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Melissa Morgan, Office of General Counsel, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.
Sincerely,
Trish Vincent