Section 6-3-4-12 - Nonresident partners; withholding rate; returns; credits for tax withheld(a) Every partnership shall, at the time that the partnership pays or credits amounts to any of its nonresident partners on account of their distributive shares of partnership income, for a taxable year of the partnership, deduct and retain therefrom the amount prescribed in the withholding instructions referred to in section 8 of this chapter. Such partnership so paying or crediting any nonresident partner: (1) shall be liable to the state of Indiana for the payment of the tax required to be deducted and retained under this section and shall not be liable to such partner for the amount deducted from such payment or credit and paid over in compliance or intended compliance with this section; and(2) shall make return of and payment to the department monthly whenever the amount of tax due under IC 6-3 and IC 6-3.6 exceeds an aggregate amount of fifty dollars ($50) per month with such payment due on the thirtieth day of the following month, unless an earlier date is specified by section 8.1 of this chapter. Where the aggregate amount due under IC 6-3 and IC 6-3.6 does not exceed fifty dollars ($50) per month, then such partnership shall make return and payment to the department quarterly, on such dates and in such manner as the department shall prescribe, of the amount of tax which, under IC 6-3 and IC 6-3.6, it is required to withhold. If a partnership credits a partner with pass through entity tax imposed under IC 6-3-2.1, the withholding required for that partner under this section shall be reduced by the tax credited to the partner under IC 6-3-2.1, but in no event shall the tax required to be withheld be reduced to less than zero dollars ($0).
(b) Every partnership shall, at the time of each payment made by it to the department pursuant to this section, deliver to the department a return upon such form as shall be prescribed by the department showing the total amounts paid or credited to its nonresident partners, the amount deducted therefrom in accordance with the provisions of this section, and such other information as the department may require. Every partnership making the deduction and retention provided in this section shall furnish to its nonresident partners annually, but not later than the fifteenth day of the third month after the end of its taxable year, a record of the amount of tax deducted and retained from such partners on forms to be prescribed by the department.(c) All money deducted and retained by the partnership, as provided in this section, shall immediately upon such deduction be the money of the state of Indiana and every partnership which deducts and retains any amount of money under the provisions of IC 6-3 shall hold the same in trust for the state of Indiana and for payment thereof to the department in the manner and at the times provided in IC 6-3. Any partnership may be required to post a surety bond in such sum as the department shall determine to be appropriate to protect the state of Indiana with respect to money deducted and retained pursuant to this section.(d) The provisions of IC 6-8.1 relating to additions to tax in case of delinquency and penalties shall apply to partnerships subject to the provisions of this section, and for these purposes any amount deducted, or required to be deducted and remitted to the department under this section, shall be considered to be the tax of the partnership, and with respect to such amount it shall be considered the taxpayer.(e) Amounts deducted from payments or credits to a nonresident partner during any taxable year of the partnership in accordance with the provisions of this section shall be considered to be in part payment of the tax imposed on such nonresident partner for the nonresident partner's taxable year within or with which the partnership's taxable year ends. A return made by the partnership under subsection (b) shall be accepted by the department as evidence in favor of the nonresident partner of the amount so deducted for the nonresident partner's distributive share.(f) This section shall in no way relieve any nonresident partner from the nonresident partner's obligations of filing a return or returns at the time required under IC 6-3 or IC 6-3.6, and any unpaid tax shall be paid at the time prescribed by section 5 of this chapter.(g) Instead of the reporting periods required under subsection (a), the department may permit a partnership to file one (1) return and payment each year if the partnership pays or credits amounts to its nonresident partners only one (1) time each year. The return and payment are due on or before the fifteenth day of the fourth month after the end of the year. However, if a partnership is permitted an extension to file its income tax return under IC 6-8.1-6-1, the return and payment due under this subsection shall be allowed the same treatment as an extended income tax return with respect to due dates, interest, and penalties under IC 6-8.1-6-1.(h) If a partnership fails to withhold and pay any amount of tax required to be withheld under this section and thereafter the tax is paid by the partners, the amounts of tax as paid by the partners shall not be collected from the partnership but it may not be relieved from liability for interest or penalty otherwise due in respect to the failure to withhold under IC 6-8.1-10.(i) A partnership shall file a composite adjusted gross income tax return on behalf of all nonresident partners. The composite return must include each nonresident partner regardless of whether or not the nonresident partner has other Indiana source income.(j) If a partnership does not include all nonresident partners in the composite return, the partnership is subject to the penalty imposed under IC 6-8.1-10-2.1(j).(k) For taxable years beginning after December 31, 2013, the department may not impose a late payment penalty on a partnership for the failure to file a return, pay the full amount of the tax shown on the partnership's return, or pay the deficiency of the withholding taxes due under this section if the partnership pays the department before the fifteenth day of the fourth month after the end of the partnership's taxable year at least:(1) eighty percent (80%) of the withholding tax due for the current year; or(2) one hundred percent (100%) of the withholding tax due for the preceding year.(l) Notwithstanding subsection (a) or (i), a partnership is not required to withhold tax or file a composite adjusted gross income tax return for a nonresident partner if the partnership: (1) is a publicly traded partnership as defined by Section 7704(b) of the Internal Revenue Code;(2) meets the exception for partnerships under Section 7704(c) of the Internal Revenue Code; and(3) has agreed to file an annual information return reporting the name, address, taxpayer identification number, and other information requested by the department of each unit holder. The department may issue written guidance explaining circumstances under which limited partnerships or limited liability companies owned by a publicly traded partnership may be excluded from the withholding requirements of this section.
(m) Notwithstanding subsection (k), a partnership is subject to a late payment penalty for the failure to file a return, pay the full amount of the tax shown on the partnership's return, or pay the deficiency of the withholding taxes due under this section for any amounts of withholding tax, including any interest under IC 6-8.1-10-1, reported or paid after the due date of the return, as adjusted by any extension under IC 6-8.1-6-1.(n) For purposes of this section, a "nonresident partner" is: (1) an individual who does not reside in Indiana;(2) a trust that does not reside in Indiana;(3) an estate that does not reside in Indiana;(4) a partnership not domiciled in Indiana;(5) a C corporation not domiciled in Indiana; or(6) an S corporation not domiciled in Indiana.Amended by P.L. 1-2023,SEC. 8, eff. 2/22/2023, app. retroactive to 1/1/2022.Amended by P.L. 137-2022,SEC. 38, eff. 7/1/2022.Amended by P.L. 85-2017,SEC. 22, eff. 4/20/2017.Amended by P.L. 181-2016, SEC. 27, eff. 7/1/2016.Amended by P.L. 197-2016, SEC. 26, eff. 1/1/2017.Amended by P.L. 242-2015, SEC. 18, eff. 1/1/2015.Amended by P.L. 293-2013, SEC. 13, eff. 7/1/2013.Amended by P.L. 137-2012, SEC. 57, eff. 7/1/2012.(Formerly: Acts 1963(ss), c.32, s.412; Acts 1965, c.233, s.22; Acts 1969, c.326, s.7; Acts1971 , P.L. 65, SEC.2; Acts1973 , P.L. 50, SEC.4.) As amended by Acts1979 , P.L. 68, SEC.4; Acts1982 , P.L. 49, SEC.4; P.L. 2-1982 (ss), SEC.10; P.L. 23-1986, SEC.3; P.L. 211-2007, SEC.26.