PHFA Releases Draft of 2010 Low-Income Housing Tax Credit Allocation Plan
2009 Year-End Audit and Tax Planning Tips for LIHTC Partnerships

Why Am I Getting This Notice From PA?

Tax Many Pennsylvania partnerships have received notices from the Pennsylvania Department of Revenue (PA DOR) during the past week. These notices are from the PA DOR’s Pass Through Business Office and are notifying partnerships of their obligation to withhold corporate net income tax on their non-filing corporate partners. This obligation was created when the 2003 Pennsylvania legislature passed Act 46 of 2003 and basically requires a Pennsylvania partnership to make estimated corporate net income tax payments on behalf of their corporate partners unless specific conditions are present. There was never much enforcement activity on this requirement until last year. In November 2008 we saw the first round of notices, and now this November we are seeing a second instance of notices.

So, you might be asking yourself: How does the partnership know whether its corporate partners are filing or not? The PA DOR has some guidelines for partnerships: there are three instances when you do not have to withhold on corporate partners: 1) if the corporation provides a PA corporate account number, this means they are on the rolls of PA DOR and presumably filing; 2) if the corporation is a bank, they are not subject to corporate income tax and therefore you are not required to withhold this tax; and 3) if the corporation is an eligible exempt organization, it is not subject to corporate income tax and therefore you are not required to withhold this tax.

While these guidelines were issued for PA partnerships, this second series of notices seems to possibly be disregarding the reportings that were made with the 2008 PA partnership returns that were filed during 2009. Partnerships can note on their returns whether the corporate partner: 1) has a PA corporate account number, 2) whether the corporation is a bank, or 3) whether the corporation is an exempt organization. We have seen several instances where partnerships have provided this information on their 2008 returns and are still receiving these notices.

For assistance with reviewing these notices and to determine the best course of action to resolve them, please contact us at affordablehousing@macpas.com.

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