Section 9.11. Taxation of partnerships, associations and Pennsylvania (PA) S Corporations having nonresident partners, members or shareholders

(a) General.

(1) For taxable years beginning on or after January 1, 1992, partnerships, associations and PA S corporations with taxable income from sources within this Commonwealth are:

(i) Liable jointly with their nonresident partners, members or shareholders for payment of tax on the income to the extent allocable to the nonresident partners, members or shareholders.

(ii) Authorized and required to withhold the tax from nonresident partners, members or shareholders.

(iii) Required to remit the tax to the Department.

(2) The imposition of the withholding requirement against the partnership, association or PA S corporation does not change the filing requirements nor the tax liability of its nonresident partners, members or shareholders. Nonresident partners, members or shareholders may take credit on their annual returns for their share of the withholding tax paid by the partnership, association or PA S corporation. Estimated tax paid by a nonresident partner, member or shareholder may not be deducted from the tax imposed on the partnership, association or PA S corporation.

(b) Partnership or association. A partnership or association includes not only a common law partnership, but also a syndicate, group, pool or other incorporated organization which:

(1) Carries on business, investment or financial operation.

(2) Is not a corporation or real estate investment trust for Federal Income Tax purposes, business trust, charitable trust or registered investment company.

(c) Nonresident partner, member or shareholder.

(1) The terms ‘‘nonresident partner,’’ ‘‘nonresident member’’ and ‘‘nonresident PA S corporation shareholder’’ mean partners, members or shareholders who or that are nonresident individuals, nonresident inter vivos or testamentary trusts or nonresident decedents’ estates. For the definition of nonresident individual, refer to the PA-40 Instruction Book. For the definition of nonresident estate or trust, refer to the PA-41 Instruction Book. For ordering information regarding PA-40 or PA-41, refer to subsection (k)(3).

(2) A partnership, association or PA S corporation is not required to withhold or collect tax from a partner, member or shareholder if the nonresident partner, member or shareholder gives the entity a signed REV-291, Nonwithholding of PA Income Tax Application, certifying that it is:

(i) A PA S corporation or other corporation.

(ii) A pension, profit-sharing or charitable trust, a business trust, a partnership or other unincorporated enterprise.

(iii) A resident individual, estate or trust.

(iv) A clearing agency, or its nominee, or a broker or financial institution, or its nominee, that holds an interest in a partnership, association or PA S corporation as a nominee on behalf of a person listed in subparagraphs (i)—(iii).

(3) A partnership, association or PA S corporation may rely on its business records in determining the identity, the place of residence and distributive share of the partner, member or shareholder, unless a notice is furnished under Federal temporary regulations § 1.6031(e)-lt or REV-291, Nonwithholding of PA Income Tax Application, is received by the Department.

(d) Payment of tentative/estimated withholding tax.

(1) Partnerships, associations and PA S corporations shall collect and remit Tentative/Estimated Withholding Tax on the nonresident partners’, members’ or shareholders’ distributive shares of the smaller of one of the following:

(i) The estimated amount of taxable PA source income received by the entity in 1992.

(ii) The actual amount of taxable PA source income received by the entity in 1991.

(2) Complete the REV-414(P/S) Worksheet to compute the correct amount of 1992 Tentative/Estimated Withholding Tax to collect and remit to the Department. If the 1992 Tentative/Estimated Withholding tax will be less than $500, it is payable within 30 days of the close of the taxable year.

(3) If the 1992 Tentative/Estimated Withholding Tax will be $500 or more, the taxpayer may pay all of the estimated withholding tax with the first payment or pay in installments when due. Use the ‘‘Installment Payment Table’’ to determine the amount and due date of each installment. When due dates fall on a Saturday, Sunday or holiday, the declaration and payment are filed timely if they are postmarked the next business day.

(4) Interest on underpayments of Tentative/Estimated Withholding Tax will be calculated from the due date to the 30th day following the close of the entity’s taxable year.

(e) ‘‘Final payment’’ of tentative/estimated withholding tax. In addition to providing for Tentative/Estimated Withholding Tax payments, the law requires that the entire tax liability be remitted within 30 days of the close of the taxable year. If the tentative tax withheld and paid is less than the actual tax liability of the nonresident partners, members or shareholders, a ‘‘final’’ payment is required. The ‘‘final payment’’ shall be paid within 30 days of the close of the taxable year. Interest on the ‘‘final payment’’ will be calculated from the 31st day following the close of the taxable year to the date of ‘‘final payment.’’

(f) Collection of tax. If the partnership, association or PA S corporation maintains a drawing account for, or makes distributions or guaranteed payments to a nonresident partner, member or shareholder, the entity shall be authorized and required to deduct the tax from the account or the payments when credited. Otherwise, the time and manner of collection of the tax shall be a matter of settlement between the partnership, association or PA S corporation and its partners, members or shareholders.

(g) Statement of withholding tax. Each partnership, association or PA S corporation receiving income from sources within this Commonwealth shall provide each of its nonresidents partners, members or shareholders with a PA NRK-1 showing the amount of tax paid on the partner’s, member’s or shareholder’s behalf.

(h) Declaration and payment of tentative/estimated withholding tax PA-40ES(P/S). For taxable years beginning on or after January 1, 1992, partnerships, associations and PA S corporations shall use PA-40ES(P/S), or form PA-40ESR, Declaration of Estimated Withholding Tax, to declare and remit Tentative/Estimated Withholding Tax.

(i) Specific instructions REV-413(P/S). Use the REV-413(P/S) Instructions and REV-414(P/S), Partnership, Association and PA S Corporation Estimated Withholding Tax Worksheet to compute the amount of 1992 Tentative/Estimated Withholding Tax.

(j) Tentative/estimated withholding tax worksheet REV-414(P/S). Complete Part A to compute the correct amount of 1992 Tentative/Estimated Withholding Tax. Use Part B if the amount of Tentative/Estimated Withholding Tax changes during the year. In Part C, record the payments made and the amount of the remaining payments. Use Part D to compute the correct amount of ‘‘FINAL PAYMENT.’’ Use the appropriate preprinted PA-40ES(P/S), Declaration of Estimated Withholding Tax, to remit payment and credit the account properly.

(k) Amending tentative/estimated withholding tax payments.

(1) The partnership, association or PA S Corporation may have a change in income or credits during the year that would require it to change or amend its tentative payments. To change or amend tentative payments, use the worksheet (Part B) to refigure the tentative tax, and subtract any Tentative/Estimated Withholding Tax payments made to date. Use the ‘‘Installment Payment Table for Tentative/Estimated Withholding Tax’’ to calculate the amount and due dates of the remaining payments.

(2) A separate PA-40ES(P/S) coupon is provided for each installment. Complete and mail a PA-40ES(P/S) coupon only if a payment is due. Partnerships, associations and PA S Corporations filing a Declaration of Estimated Withholding Tax should use only the preprinted coupons (PA-40ES(P/S)) and envelopes furnished to them by the Department.

(i) The PA-40ES(P/S) coupons are preprinted only for that taxpayer’s use. Do not make corrections on the PA-40ES(P/S) coupon. If the preprinted information is incorrect, complete a name, address, taxpayer identification number change form (REV-459 (P/S)) and mail it to the PA Department of Revenue, Bureau of Individual Taxes, Document Control Division, Dept. 280510, Harrisburg, Pa. 17128-0510.

(ii) These coupons are processed on automated equipment. Photocopies and other facsimiles are not acceptable. Do not staple, fold or attach documents. Please use only the correct preprinted coupons for each installment payment period. Make a check or money order payable to ‘‘PA Department of Revenue.’’ Print the taxpayer identification number and ‘‘Tentative/Estimated Withholding Tax’’ on your check or money order. Do not staple or attach the payment to the PA-40ES(P/S) coupon. Mail the declaration and check in the envelope enclosed.

(3) If preprinted coupons have not been received or are lost or damaged, order a replacement form PA-40ESR. The taxpayer may order any Pennsylvania tax form or schedule by calling the special 24-hour answering service numbers for forms ordering: In this Commonwealth, 1 [phone], outside of this Commonwealth and within the local Harrisburg area [phone]. Address written requests to: PA Department of Revenue, Tax Forms Service Unit, 2850 Turnpike Industrial Drive, Middletown, Pennsylvania 17057-5492. The taxpayer also may contact a Department district office listed on the reverse side of the worksheet.

(4) If the preprinted PA-40ES(P/S) coupons are not received or if they are lost or damaged, the taxpayer may use a PA-40ESR and write to the PA Department of Revenue, Bureau of Individual Taxes, Document Control Division, Dept. 280510, Harrisburg, Pennsylvania 17128-0510 to request another set of preprinted PA-40ES(P/S) coupons.

The provisions of this § 9.11 adopted March 27, 1992, effective upon publication, but applies retroactively for tax years beginning on or after January 1, 1992, 22 Pa.B. 1477.