Iowa Administrative Code › Agency 701 - Revenue Department › Title V - Pass-through Entity Income Tax › Chapter 405 - Composite Returns for Tax Years Beginning on or After January 1, 2022 › Rule 701-405.6 - Election Out of the Composite Return Tax Requirement

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
In
				general.
A nonresident member may elect to be excluded from a
				pass-through entity's composite return unless prohibited from doing so by the
				department under subrule 405.6(2). Electing out of the composite return only
				relieves the pass-through entity of the requirement to pay composite return tax
				on behalf of that nonresident member. It does not relieve the pass-through
				entity of the requirement to report that nonresident member on a composite
				return. For a nonresident member to be excluded from the composite return tax
				payment, both the nonresident member and the pass-through entity must complete
				and sign the Nonresident Member Composite Agreement, available on the
				department's website. The Nonresident Member Composite Agreement must be
				completed and signed by all parties prior to the pass-through entity's
				composite return due date, including extensions. The Nonresident Member
				Composite Agreement is only valid for the tax year for which it is executed.
				The nonresident member and the pass-through entity must complete and sign a
				separate Nonresident Member Composite Agreement for each tax year in which the
				nonresident member seeks to be excluded from the composite return.
(2)
Circumstances in which a
				pass-through entity or nonresident member may not elect out of the composite
				return requirement.
a. The ability
				to elect out of the composite return is conditionally granted by the department
				based on the nonresident member's promise to comply with the filing and payment
				requirements listed in subrule 405.6(3) and the pass-through entity's
				compliance with Iowa tax law.
b. If
				information available to the department indicates that the pass-through entity
				has not complied with Iowa tax law, including but not limited to properly
				reporting or sourcing its income or other tax items within and without Iowa,
				the department may revoke the pass-through entity's ability to enter into a
				Nonresident Member Composite Agreement with its nonresident members.
c. If information available to the department
				indicates that a nonresident member has not complied with the filing and
				payment requirements listed in subrule 405.6(3), the department may revoke the
				pass-through entity's ability to enter into a Nonresident Member Composite
				Agreement with that particular nonresident member.
d. The pass-through entity will be notified
				in writing of a revocation under paragraph 405.6(2)
"b"
or
"c,"
and such revocation will take effect 30 days following
				the date on the revocation letter. The revocation will not affect any
				Nonresident Member Composite Agreement entered into prior to the effective date
				of the revocation. After such revocation, a pass-through entity will not be
				allowed to enter into a Nonresident Member Composite Agreement with the
				affected nonresident members without written permission from the
				department.