Iowa Administrative Code › Agency 701 - Revenue Department › Title V - Pass-through Entity Income Tax › Chapter 404 - Composite Returns for Tax Years Beginning Prior to January 1, 2022 › Rule 701-404.3 - Filing Requirements

Current through Register Vol. 47, No. 3, July 24, 2024
A composite return may be allowed or required to be filed
				  based upon the following:
1. The
				composite return must include all nonresident partners, shareholders,
				employees, or beneficiaries unless the taxpayer can demonstrate which
				nonresident partners, shareholders, employees, or beneficiaries are filing
				separate income tax returns because the partner, shareholder, employee or
				beneficiary has Iowa source income other than that which may be reported on a
				separate composite return, or has elected to file an Iowa individual income tax
				return. Nonresident partners, shareholders, employees, or beneficiaries shall
				not be included in a composite return if the nonresident has less than the
				minimum statutory filing amount. For example, for 2006 the minimum income from
				Iowa sources before a nonresident is required to file an Iowa individual income
				tax return is $1,000 of income attributed to Iowa sources as determined by
				applying the allocation and apportionment provisions of 701-Chapter 54 to the
				nonresident's prorated share of the entity's income. In addition, nonresident
				partners, shareholders, employees, or beneficiaries shall not be included in a
				composite return if the nonresident does not have more income from Iowa sources
				than the amount of one standard deduction for a single taxpayer plus an amount
				of income necessary to create a tax liability at the effective tax rate on the
				composite return sufficient to offset one personal exemption. For example, for
				2006 a standard deduction for a single individual is $1,650 and at the maximum
				tax rate of 8.98 percent, $445 of taxable income is required to offset the $40
				personal exemption. This equates to $2,095 ($445 plus $1,650) of income
				attributable to Iowa sources that would be required to be included in a
				composite return. The taxpayer must include a list of all nonresident partners,
				shareholders, employees, or beneficiaries who are filing separate income tax
				returns. The list must also include the address and social security number or
				federal identification number of the nonresident partners, shareholders,
				employees, or beneficiaries. Filing a composite return is an election which may
				not be withdrawn after the due date of the return (considering any extension of
				time to file), but the nonresidents may, as an individual or as a group,
				withdraw their election at any time prior to the due date (considering any
				extension of time to file).
2.
				Income of partners, shareholders, employees, or beneficiaries whose state of
				residence is not known by the taxpayer must be included in the composite
				return.
3. Income of partners in
				publicly traded limited partnerships held in street names by brokers must be
				included in the composite return unless the taxpayer can demonstrate that the
				partner is an Iowa resident.
4. A
				taxpayer who elects to file a composite return shall continue to file composite
				returns unless the taxpayer notifies the department in writing that the
				taxpayer wishes to discontinue filing composite returns. The notice shall be
				filed with the Iowa Department of Revenue, Examination Section, Compliance
				Division, P.O. Box 10456, Des Moines, Iowa 50306, before the due date of the
				return for the tax year for which the change in filing is to be made.
A taxpayer who was required to file a composite return for
				  the immediately preceding taxable year is required to file a composite return
				  unless permission is given to discontinue filing a composite return.
5. Each nonresident partner,
				shareholder, employee, or beneficiary whose income is included in the composite
				return must have the same tax year, which must be the tax year of the majority
				of the nonresident partners, shareholders, employees, or beneficiaries. Those
				nonresident partners, shareholders, employees, or beneficiaries who are not
				included in the composite return must file separate individual income tax
				returns.
This rule is intended to implement Iowa Code section
				  422.13.