Update on taxation of LLCs, LLPs and their owners.Several significant developments in the past year have affected state taxation of limited liability companies (LLCs) and limited liability partnerships (LLPs), and their members or partners. For example, both the California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). and Montana Montana (mŏntăn`ə), Rocky Mt. state in the NW United States. It is bounded by North Dakota and South Dakota (E), Wyoming (S), Idaho (W), and the Canadian provinces of British Columbia, Alberta, and Saskatchewan (N). legislatures have amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. their LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control acts to permit the organization of single-member LLCs (SMLLCs). Congress also recently approved the formation of SMLLCs in the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). . Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. is now the only state that expressly requires
a domestic LLC to have two or more members to operate. However, even
this may change, as its legislature legislature, representative assembly empowered to enact statute law. Generally the representatives who compose a legislature are constitutionally elected by a broad spectrum of the population. has reintroduced SMLLC SMLLC Single Member Limited Liability Company legislation,
which may pass this year. Several other state legislatures A state legislature may refer to a legislative branch or body of a political subdivision in a federal system.The following legislatures exist in the following political subdivisions: Hawaii, island (1990 pop. 120,217), 4,037 sq mi (10,456 sq km), largest and southernmost island of the state of Hawaii and coextensive with Hawaii co.; known as the Big Island. , New Jersey and South Dakota South Dakota (dəkō`tə), state in the N central United States. It is bordered by North Dakota (N), Minnesota and Iowa (E), Nebraska (S), and Wyoming and Montana (W). ) have recently adopted the Revised Uniform Partnership Act (RUPA), giving RUPA a majority among the states. RUPA typically governs the internal affairs Internal affairs may refer to:
In another favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. development, the Kentucky Supreme Court The Kentucky Supreme Court was created by a 1975 constitutional amendment. Prior to that the Kentucky Court of Appeals was the only appellate court in Kentucky. The Kentucky Court of Appeals is now Kentucky's intermediate appellate court. has amended its rules of practice to broaden the choice-of-entity horizon for attorneys. Previously, the court had ruled that attorneys practicing in Kentucky Kentucky, state, United States Kentucky (kəntŭk`ē, kĭn–), one of the so-called border states of the S central United States. It is bordered by West Virginia and Virginia (E); Tennessee (S); the Mississippi R. could not practice as either an LLC or an LLP LLP - Lower Layer Protocol . Kentucky law firms This list of the world's largest law firms by revenue is taken from The Lawyer and The American Lawyer and is ordered by 2006 revenue:[1]
Several key issues, however, remain unresolved Not completed; not finished; not linked together. See resolve. in the area of the state tax treatment of LLCs, LLPs and, to a lesser extent, limited partnerships, limited liability entities (LLEs) and their owners. Among the hottest topics subject to debate today in the state tax arena are entity-level taxation and nexus issues regarding LLE LLE Left lower extremity members or partners. Entity-Level Taxes Wyoming Wyoming, city, United States Wyoming, city (1990 pop. 63,891), Kent co., W Mich., in the greater Grand Rapids metropolitan area, on the Grand River; settled 1832, inc. 1959. , Tennessee Tennessee, state, United States Tennessee (tĕn`əsē', tĕn'əsē`), state in the south-central United States. and Alabama Alabama, indigenous people of North America Alabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). are the latest examples of states that impose significant entity-level taxes on LLEs. Both the Tennessee and Alabama legislatures The Alabama Legislature is the legislative branch of the state government of Alabama. It is a bicameral body composed of the Alabama House of Representatives, with 105 members, and the Alabama Senate, with 35 members. blamed a fiscal crisis in their state as the primary impetus Impetus is a stimulus or impulse, a moving force that sparks momentum. Impetus may also refer to:
adj. Not permitted; not permissible: impermissible behavior. im discriminated against foreign corporations in violation VIOLATION. An act done unlawfully and with force. In the English stat. of 25 E. III., st. 5, c. 2, it is declared to be high treason in any person who shall violate the king's companion; and it is equally high treason in her to suffer willingly such violation. of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Commerce Clause). Two other states tried to make similar attempts last year, but the legislation failed. Other states will probably attempt this in the near future. Some states, however, have recently bucked the trend. Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York enacted legislation that, beginning last year, phases out its capital stock and franchise tax over the next eight years. Michigan Michigan (mĭsh`ĭgən), upper midwestern state of the United States. It consists of two peninsulas thrusting into the Great Lakes and has borders with Ohio and Indiana (S), Wisconsin (W), and the Canadian province of Ontario (N,E). is phasing out its single business tax over the next 22 years, and Washington Washington, town, England Washington, town (1991 pop. 48,856), Sunderland metropolitan district, NE England. Washington was designated one of the new towns in 1964 to alleviate overpopulation in the Tyneside-Wearside area. reduced its business and occupation (B&O) tax. All three taxes apply to LLEs. Florida law The jurisprudence of this state offers major differences from doctrines prevailing in the United States at either the federal level or that of the various states. Homestead exemption from forced sale, the dangerous instrumentality doctrine, the right to privacy, and the Williams gradually grad·u·al adj. Advancing or progressing by regular or continuous degrees: gradual erosion; a gradual slope. n. Roman Catholic Church 1. eliminates the intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. tax, applicable to membership interests in LLCs, but not to partnership interests in LLPs. Nexus Issues The states sometimes disagree about whether mere ownership of a membership interest in an LLC doing business in a state is sufficient to allow that state to assert its taxing jurisdiction over a nonresident non·res·i·dent adj. 1. Not living in a particular place: nonresident students who commute to classes. 2. or foreign corporation member. To rationalize ra·tion·al·ize v. 1. To make rational. 2. To devise self-satisfying but false or inconsistent reasons for one's behavior, especially as an unconscious defense mechanism through which irrational acts or feelings are made to appear the attribution at·tri·bu·tion n. 1. The act of attributing, especially the act of establishing a particular person as the creator of a work of art. 2. of nexus to nonresident LLC members, several states have used a direct-ownership-of-property theory, analogizing LLC members to general partners. However, this theory appears to be flawed flaw 1 n. 1. An imperfection, often concealed, that impairs soundness: a flaw in the crystal that caused it to shatter. See Synonyms at blemish. 2. , at least with respect to multi-member LLCs treated as partnerships, because modern LLC statutes and the Uniform LLC Act explicitly ex·plic·it adj. 1. a. Fully and clearly expressed; leaving nothing implied. b. Fully and clearly defined or formulated: "generalizations that are powerful, precise, and explicit" state that members are not direct owners of the LLC's property. State RUPA statutes contain similar provisos applicable to general partnerships and to LLPs. Exhibits 1 and 2 list the states that have enacted RUPA or RUPA-type statutes. Recently, however, both an Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. appeals court in Borden Bor·den , Gail 1801-1874. American surveyor and inventor who developed condensed milk (1853) and other food products. Borden, Lizzie Andrew 1860-1927. Chemicals and Plastics, L. P, 726 NE2d 73 (2000), cert (Computer Emergency Response Team) A group of people in an organization who coordinate their response to breaches of security or other computer emergencies such as breakdowns and disasters. . denied, 731 NE2d 762 (2000), and the North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. Department of Revenue in Secretary of Revenue of North Carolina v. Perkins Per·kins , Frances 1882-1965. American social reformer and public official. As U.S. secretary of labor (1933-1945) she was the first woman to hold a cabinet position. Restaurants, Inc., N.C. Tax Review Board, Dkt. No. 351 (1999), found that limited partners were "doing business" in the respective states merely by virtue of their ownership of a limited partner interest in the partnership. Further, interpreting in·ter·pret v. in·ter·pret·ed, in·ter·pret·ing, in·ter·prets v.tr. 1. To explain the meaning of: interpreted the ambassador's remarks. See Synonyms at explain. a statute statute, in law, a formal, written enactment by the authorized powers of a state. The term is usually not applied to a written constitution but is restricted to the enactments of a legislature. more broad in scope and specifically directed to the income taxation of "individual" nonresident partners, the Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. Court of Appeals reversed a lower court and found that two Tennessee residents, limited partners, were subject to Georgia income tax on their distributive dis·trib·u·tive adj. 1. a. Of, relating to, or involving distribution. b. Serving to distribute. 2. shares of the limited partnership's income; see Georgia Dept. of Revenue (DOR Dor or Dora, Canaanite seaport, ancient Palestine (modern Israel), N of Caesarea Palestinae. It was never a Jewish city but rather a Phoenician outpost. It was rebuilt by the Romans; still visible are the ruins of a temple and a theater. ) v. Sledge, 528 SE2d 260 (2000), cert. denied (2000). Several states have specifically addressed this issue, usually in the form of a safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. or creation of an "investment LLE" exemption exemption n. 1) in income taxation, a credit given for each dependent, blindness or other disability, and age over 65, which result in a downward calculation in tax levels. ; New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Georgia and Connecticut Connecticut, state, United States Connecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). are examples. On the other hand, the Georgia DOR recently issued proposed regulations that automatically deem a nonresident limited partner or LLC member (other than an "investment limited partner"), either individuals or corporate entities, to be doing business in that state for income tax purposes merely because of its status as a partner or member. Many question the ability of a state taxing authority to issue valid regulations that extend beyond the reach of the state nexus statute, especially if the statute is of the "doing business" or "owning property" variety. Arguably ar·gu·a·ble adj. 1. Open to argument: an arguable question, still unresolved. 2. That can be argued plausibly; defensible in argument: three arguable points of law. , nexus could also be attributed to nonresident LLC members under an alternative theory that the LLC is acting as an agent on behalf of the member or that the intangible membership interest has been somehow put to use within the state (an analogy analogy, in biology, the similarities in function, but differences in evolutionary origin, of body structures in different organisms. For example, the wing of a bird is analogous to the wing of an insect, since both are used for flight. to the controversial Geoffrey Geoffrey (jĕf`rē), 1158–86, duke of Brittany (1171–86); fourth son of Henry II of England. Betrothed (1166) to Constance, heiress of Brittany, he was recognized as heir to the duchy in 1169 and succeeded to it on the death of her theory). Fortunately, the "agency" theory appears to have fallen out of favor disliked; under displeasure. - Dryden. See also: Out and, the "intangible nexus" theory, although advocated by the Multistate mul·ti·state adj. Of, relating to, or involving several states: a multistate environmental campaign. Tax Commission (MTC mtc - A Modula-2 to C translator. ftp://rusmv1.rus.uni-stuttgart.de/soft/Unixtools/compilerbau/mtc.tar.Z. ) in 1994, has not yet been applied in any reported case. But states may also assert at least their income tax jurisdiction over the nonresident members/partners if their levy To assess; raise; execute; exact; tax; collect; gather; take up; seize. Thus, to levy a tax; to levy a Nuisance; to levy a fine; to levy war; to levy an execution, i.e., to levy or collect a sum of money on an execution. A seizure. statute is more broadly worded than simply "doing business" or "transacting business." The Sledge case is a good example of that. Another trend finds several states enacting a California-style requirement on LLEs doing business in their state: to avoid an entity-level income or net-income-based franchise tax, each of the nonresident or foreign corporate members or partners must consent to jurisdiction and agree to pay the state tax on their distributive share of the entity's income; Ohio, Alabama and New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). are recent examples. The Georgia DOR proposes to expand its withholding Withholding Any tax that is taken directly out of an individual's wages or other income before he or she receives the funds. Notes: In other words, these funds are "withheld" from your wages. rules to cover all nonresident or foreign corporation partners and members, not just individuals, effective for tax years beginning after 2001. The MTC's Uniformity Committee is currently considering a proposal for its member states that would go a step further, by mandating entity-level withholding if the LLE has any nonresident members or partners, regardless of their willingness to file jurisdictional consents. The AICPA's State and Local Tax Technical Resource Panel has already written in opposition of that idea. If the states have their way, entity-level withholding or the requirement of nonresident jurisdictional consents would likely become the rule rather than the exception, and would seem to avoid the member/partner nexus issue altogether.
Exhibit I: State tax treatment of LLCs and LLPs (as of 2/28/01)(6)
State income tax
State LLC Act exists(5) classification of LLCs
Alabama(**) Yes State classification
(Ala. Code follows Federal
[subsections] classification
10-12-1-10-12-61) of LLC(1)
Alaska Yes State classification
(Alaska Stat. follows Federal
[subsections] classification
10.50.010-10.50.995) of LLC
Arizona(**) Yes State classification
(Ariz. Rev. Stat. Ann. follows Federal
[subsections] classification
29-601-29-857) of LLC(1)
Arkansas Yes State taxes domestic
(Ark. Code Ann. LLCs as partnerships;
[subsections] follows Federal
4-32-101-4.32-1316) classification if
(not available to foreign LLC
accountants)
California Yes State classification
(Cal. Corp. Code follows Federal
[subsections] classification
17,000-17,655) of LLC(1)
(not available to
listed
professionals)
Colorado(*) Yes State classification
(Colo. Rev. Stat. Ann. follows Federal
[subsections] classification
7-80-101-7-80-1101) of LLC
Connecticut(**) Yes State classification
(Conn. Gen. Stat. Ann. follows Federal
[subsections] classification
34-100-34-242) of LLC(1)
Delaware(**) Yes State classification
(Del. Code Ann., follows Federal
tit. 6, classification
[subsections] of LLC(1)
18-101-18-1106)
District of Yes State classification
Columbia (D.C. Code Ann. follows Federal
[subsections] classification of LLC
29-1301-29-1375)
Florida(**) Yes State classification
(Fla. Stat. Ann. follows Federal
[subsections] classification
608.401-608.471) of LLC(1)
(no state personal
income tax)
Georgia Yes State classification
(Ga. Code Ann. follows Federal
[subsections] classification
14-11-100-14-11-1109) of LLC(1)
Hawaii Yes State classification
(Haw. Rev. Slat. follows Federal
[sections] classification
28-101-428-1302) of LLC(1)
Idaho Yes State classification
(Idaho Code follows Federal
[subsections] classification
53-601-53-672) of LLC(1)
Illinois(**) Yes State classification
(Ill. Ann. Stat., follows Federal
ch. 805, [subsections] classification
180/1-1-180/60-1) of LLC(1)
(attorneys may use
LLCs but remain
jointly and severally
liable for malpractice
of other members/
employees by Ill.
S. Ct. rule)
Indiana Yes State classification
(Ind. Code Ann. follows Federal
[subsections] classification
23-18-1-1-23-18-13-1) of LLC(1)
Iowa(**) Yes State classification
(Iowa Code follows Federal
[subsections] classification
490A. 100-490A. 1601) of LLC(1)
Kansas(**) Yes State classification
(Kan. Stat. Ann. follows Federal
[subsections] classification
17-7601-17-7661) of LLC
Kentucky Yes State classification
(Ky. Rev. Stat. follows Federal
[subsections] classification
275.001-275.455) of LLC(1)
(Ky. S. Ct. rules (1998 Kentucky Acts
amended to allow ch. 341, clarifies
attorneys to use LLCs informal adoption
and LLPs, eff. 2/1/00, of check-the-box
but must maintain min. regulations;
insurance levels) eff. 7/14/98)
Louisiana(**) Yes State classification
(La. Rev. Stat. follows Federal
[subsections] classification
12:1301-12:1369) of LLC(1)
Maine Yes State classification
(Me. Rev. Stat. follows Federal
Ann., Tit. 31, classification
[subsections] 601-762) of LLC(1)
Maryland Yes State classification
(Md. Code Ann., follows Federal
Corps. & Ass'ns classification
[subsections] of LLC(1)
4A-101-4A-1103)
Massachusetts Yes State classification
(Mass. Gen. L., follows Federal
ch. 156C, classification
[subsections] 1-68) of LLC(1)
(check-the-box regs.
Followed only for
LLCs; other entity
classifications
determined by common
law, Kintner regs.)
Michigan Yes State classification
(Mich. Comp. Laws Ann. follows Federal
[subsections] classification
450.4101-450.5200) of LLC(1)
Minnesota Yes State classification
(Minn. Stat. follows Federal
[subsections] classification
322B.01-322B.955) of LLC(1)
Mississippi Yes State classification
(Miss. Code Ann. follows Federal
[subsections] classification
79-29-101-79-29-1201) of LLC(1)
(SMLLC's apportionment
factors now included
in calculation of
corp. owner's
franchise tax, SB
3088, Ch. 479,
eff. 1/1/00)
Missouri Yes State classification
(Mo. Rev. Stat. follows Federal
[subsections] classification
347.010-347.187) of LLC(1)
Montana Yes State classification
(Mont. Code Ann. follows Federal
[subsections] classification
35-8-101-35-8-1307) of LLC(1)
([sections] 35-8-201,
eff. 4/12/99,
recognizes SMLLCs)
Nebraska Yes State classification
(Neb. Rev. Stat. follows Federal
[subsections] classification
21-2601-21-2653) of LLC(1)
Nevada(*) Yes No state income tax
(Nev. Rev. Stat.
[subsections]
86.011-86.571)
New Hampshire Yes State classification
(N.H. Rev. Stat. Ann. follows Federal
[subsections] classification
304C:1-304C:85) of LLC
(conforms to
"check-the-box" but
only with respect to
New Jersey(**) Yes State classification
(N.J. Stat. Ann. follows Federal
[subsections] classification
42:2B-1-42:2B-71) of LLC(1)
New Mexico Yes State classification
(N.M. Stat. Ann. follows Federal
[subsections] classification
53-19-1-53-19-74) of LLC
(1994 N.M. State Bar
Adv. Op. Forbids use
of LLCs by attorneys)
New York Yes State classification
(N.Y.L.L.C. Law follows Federal
[subsections] classification
101-1403) of LLC(1)
North Carolina Yes State classification
(N.C. Gen. Stat. follows Federal
[subsections] classification
57C-1-01-57C-10-07) of LLC(1)
North Dakota Yes State classification
(N.D. Cent. Code follows Federal
[subsections] classification
10-32-01-10-32-155) of LLC(1)
Ohio Yes State classification
(Ohio Rev. Code Ann. follows Federal
[subsections] classification
1705.01-1705.58) of LLC(1)
Oklahoma(**) Yes State classification
(Okla. Stat. Ann. follows Federal
[subsections] classification
18-2000-2060) of LLC(1)
Oregon Yes State classification
(Or. Rev. Stat. follows Federal
[subsections] classification
63.001-63.990) of LLC(1)
Pennsylvania Yes Until 1998, state
(15 Pa. Cons. Stat. taxed LLCs as
[subsections] corporations except
8101-8998) for "restricted
professional
companies" or unless
state/Federal S
election was made. Act
97-7 conforms state
tax treatment to
Federal tax treatment
for CNI tax purposes,
eff. 1/1/98 (but
statute unclear
whether SMLLCs can be
disregarded)
Rhode Yes State classification
Island(**) (R.I. Gen. Laws follows Federal
[subsections] classification
7-16-1-7-16-68) of LLC(1)
(not available to
listed
professionals)
South Carolina Yes State classification
(S.C. Code Ann. follows Federal
[subsections] classification
33-44-101-33-44-1207) of LLC(1)
South Dakota(*) Yes No state income tax
(S.D. Codified Laws
Ann. [subsections]
47-34-1-47-34-59)
(S.D. Constitution,
Art. XVII [sections]
21, prohibits use of
LLEs for farming
except for "family"
farms)
Tennessee Yes State classification
(Tenn. Code Ann. follows Federal
[subsections] classification
48-201-101-48-248-606) of LLC(1)
Texas(*) Yes LLCs subject to
(Tex. Rev. Civ. corporate franchise
Stat. Ann., tax (no state personal
tit. 32, Arts. income tax)
1.01-11.07)
Utah(**) Yes State classification
(Utah Code Ann. follows Federal
[subsections] classification
48-2b-101-48-2b-157) of LLC(1)
Vermont Yes State classification
(Vt. Stat. Ann. follows Federal
tit. 11, classification
[subsections] of LLC(1)
3001-3162)
Virginia(*) Yes State classification
follows Federal
(Va. Code Ann. classification
[subsections] of LLC(1)
13.1-1000-13.1-1123)
Washington Yes State taxes LLC
(Wash. Rev. Code as partnership
[subsections] (no state personal
25.15.005-25.15.902) income tax)
West Yes State classification
Virginia(*) (W. Va. Code follows Federal
[subsections] classification
31B-1-101-318-13-1306) of LLC
Wisconsin Yes State classification
(Wis. Stat. follows Federal
[subsections] classification
183.0102-183.1206) of LLC(1)
Wyoming(*) Yes No state income tax
(Wyo. Stat.
[subsections]
17-15-101-17-15-144)
(domestic LLC electing
to be either a
"flexible LLC" or
"close LLC" may have
one or more members)
Entity-level tax on
State partnerships or LLCs(3) LLP Act exists
Alabama(**) Annual $100 minimum and Yes(2)
$15,000 maximum privilege (Ala. Code
tax (family investment [subsections]
LLEs subject to $500 10-8A-1001-10-8A-1010)(4)
cap), eff. 1/1/00
Alaska $100/year--domestic; Yes(2)
$200/year--foreign (Alaska Stat.
[subsections]
32.05.405-32.05.760)(4)
(RUPA adopted eff.
1/1/01; SLA 2000,
Chap. 115)
Arizona(**) No Yes(2)
(Ariz. Rev. Stat. Ann.
[sections] 29-244)(4)
Arkansas Annual $103 franchise tax Yes(2)
(Ark. Code Ann.
[sections] 4-42-703)(4)
(RUPA adopted eff.
1/1/00; Act 1518)
California Annual $800 minimum Yes(2)
franchise tax on all (Cal. Corp. Code
LLEs; maximum gross [subsections]
receipts tax of $9,377 on 16951-16962)(4)
LLCs; eff. 1/1/01, gross ("professionals" only)
receipts tax to be
reduced by 6%
Colorado(*) No Yes(2)
(Colo. Rev. Stat. Ann.
[sections] 7-60-144)(4)
Connecticut(**) No Yes(2)
(Conn. Gen. Stat. Ann.
[sections] 34-406)(4)
Delaware(**) $100 annual tax on Yes(2)
domestic & foreign LLCs (Del. Code Ann., tit. 6,
(LLPs subject to $100/ [sections] 15-1001)(4)
partner/year fee (RUPA adopted eff.
w/$120,000 cap) 1/1/00, S.B. 176)
District of 9.975% tax on D.C. source Yes(2)
Columbia income earned by (D.C. Code Ann.
unincorporated business [subsections]
but no tax on SMLLC owned 41-160.1-41-161.6)4
by another entity subject
to tax in D.C.
Florida(**) For tax years beginning Yes(2)
before 7/1/98, LLCs (Fla. Stat. Ann.
subject to 5.5% [sections] 620.9001)(4)
artificial entity tax
(LLPs subject to $100/FL
partner/year fee
w/$10,000 cap)
Georgia LLC/LLP pays 4% Yes(2)
withholding tax an (Ga. Code Ann.
distributions to [sections] 14-8-44)
nonresident members/
partners, with exemptions
Hawaii (LLPs subject to Yes(2)
$100/partner/year fee (Haw. Rev. Stat.
w/$10,000 cap) [subsections]
425-151-425-180)(4)
(RUPA adopted eff.
7/1/00, Act 284)
Idaho No Yes(2)
(Idaho Code
[subsections]
53-1001-53-1105)(4)
(RUPA enacted eff.
1/1/01)
Illinois(**) 1.5% income tax on Yes
partnerships and LLCs (Ill. Ann. Stat.,
(LLPs subject to $100/ ch. 805, [sections]
partner/year fee with 205/8-1)
$5,000 cap) (Ill. S. Ct. rule
does not allow attorneys
to use LLPs)
Indiana LLC/LLP pays withholding Yes(2)
tax on nonresident (Ind. Code Ann.
member's/partner's [subsections]
distributive share of IN 23-4-1-44-23-4-1-52)
income at highest (RUPA bill introduced
state rate in 2001 session, S.B. 88)
Iowa(**) LLC/LLP pays withholding Yes(2)
tax on nonresident (Iowa Code
member's/partner's [subsections]
distributive share of IA 486.1001-486.1105)(4)
income at highest
state rate
Kansas(**) LLCs and LLPs subject to Yes(2)
franchise tax on net (Kan. Stat. Ann.
capital accounts with [subsections]
$2,500 cap 56a-1001-56a-1105)(4)
Kentucky No Yes
(Ky. Rev. Stat.
[subsections]
362.555-362.605)
(attorneys may now use
LLPs, eff. 2/1/00)
Louisiana(**) No Yes
(H.B. 25 would require (La. Rev. Stat. Ann.
businesses taxed as [sections] 9:3431-9:3435
partnerships (including
LLCs) to make withholding
tax payments on behalf of
non-resident partners
and members)
Maine LLC "financial Yes
institutions" are taxed (Me. Rev. Stat. Ann.,
at the entity level at a Tit. 31,
rate of 1% of ME net [subsections] 801-876)
income and $0.08 per
$1,000 of ME assets
Maryland LLC/LLP pays 4.8% Yes(2)
withholding tax on (Md. Code Ann.,
nonresident individual Corps. & Ass'ns
member's/partner's [subsections]
distributive share of MD 9-801-9-805)(4)
income
Massachusetts No Yes(2)
(Mass. Gen. L., ch. 108A,
[subsections] 45-49)
Michigan Single Business Tax Yes
levied at 2.0% (as of (Mich. Comp. Laws Ann.
1/1/01) of specified LLC [subsections]
tax base (phasing out 449.44-449.48)
over 23-year period)
Minnesota LLC/LLP pays 8.5% Yes(2)
withholding tax on (Minn. Stat.
nonresident member's/ [sections] 323.44)(4)
partner's distributive
share of MN income
(annual flat fee for
non-farming partnerships)
Mississippi No Yes
(Miss. Code Ann. (Miss. Code Ann.
[sections] 27-13-1) [subsections]
79-12-87-79-12-117)
Missouri LLC/LLP pays withholding Yes(2)
tax on nonresident (Mo. Rev. Stat.
member's/partner's [subsections]
distributive share of MO 358.440-358.510;
income at highest state 358.150.2)
rate (LLPs subject to
$25/partner/year fee
w/$100 cap)
Montana No Yes(2)
(Mont. Code Ann.
[subsections]
35-10-701-35-10-710)(4)
Nebraska No Yes(2)
(Neb. Rev. Stat.
[sections] 67-344)(4)
Nevada(*) No Yes
(Nev. Rev. Stat.
[subsections]
87.440-87.560)
("professionals" only
if domestic RLLP)
New Hampshire 5% on dividends and Yes
interest; 8% on business (N.H. Rev. Stat. Ann.
profits; and 0.50% on [subsections]
the "business enterprise 304A:44-304A:55)
value tax base" of the
LLC; however, a
dollar-for-dollar credit
is allowed against the
business profits tax for
the amount of business
enterprise tax owed
New Jersey(**) No Yes(2)
(N.J. Stat. Ann.
[sections] 42:1-15)(4)
(RUPA adopted eff.
12/8/00; P.L. 2000,
Chapter 161)
New Mexico N.M. Stat. Ann [sections] Yes(2)
7-3-12 imposes for tax (N.M. Stat. Ann.
years after 1998 a [subsections]
withholding requirement 54-1A-1001-54-1A-1105)(4)
for nonresident partners/
members at a rate to be
determined by NMDOR
regulation (current rate
is 7.1%, eff. 12/14/00)
New York $50/member/partner annual Yes(2)
fee; w/$10,000 cap (N.Y Partnership Law
[subsections]
121-1500-121-1506)
("professionals" only)
North Carolina No Yes
(N.C. Gen. Stat.
[sections] 59-84.2)
North Dakota No (LLCs) Yes(2)
($25/LLP partner/year (N.D. Cent. Code
with $250 cap) [subsections]
45-22-01-45-22-27)(4)
Ohio LLC/LLP pays 5% Yes
withholding tax on (Ohio Rev. Code
distributions to Ann. [subsections]
nonresident members/ 1775.61-1775.65)
partners after certain
adjustments
Effective for tax years
beginning in 1998,
certain passthrough
entities with "qualifying
members" (generally
foreign corps, not
subject to Ohio franchise
tax) are liable for 8.5%
Ohio franchise tax,
unless nonresident
consents filed
Oklahoma(**) No Yes(2)
(Okla. Stat. Ann.
[subsections]
54-1-1001-54-1-1105)(4)
Oregon No Yes(2)
(Or. Rev. Stat.
[subsections] 67.500,
67.770)(4)
("professionals" only)
Pennsylvania LLCs, except for Yes
"restricted professional (15 Pa. Cons. Stat.
companies," subject to [subsections] 8201-8221)
capital stock tax of
0.749% of taxable capital
stock value (to be phased
out by 2009); RPC pays
withholding tax on
member's distributive
share of Pa. income at
highest state rate (plus
$300/Pa. member or
$200/Pa. partner
annual fee)
Rhode No Yes
Island(**) (codified at various
sections beginning with
R.I. Gen. Laws [sections]
7-12-13) (available to
attorneys and
accountants, but not to
other listed
professionals) (RUPA bill
introduced in 2001
session, II. 5739)
South Carolina LLC/LLP pays 5% Yes
withholding tax on (S.C. Code Ann.
nonresident member's/ [subsections] 33-41-370;
partner's distributive 33-41-1110-1220)
share of S.C. income,
unless nonresident
consents filed
South Dakota(*) No Yes(2)
(S.D. Codified Laws Ann.
[subsections] 48-2-15-19,
and [subsections]
48-7-108-48-7-111)(4)
(RUPA adopted
eff. 7/1/01, S.B. 123)
Tennessee LLC/LLP subject to Yes
franchise/excise tax (Tenn. Code Ann.
of $0.25 per $100 of net [subsections]
worth and 6% of net 61-1-143-61-1-147)
earnings (see Tax
Revision & Reform Act of
1999); corporate member
of disregarded SMLLC now
subject to TN
franchise/excise tax
Texas(*) Greater of 0.25% of Yes(2)
capital or 4.5% of earned (Tex. Rev. Civ. Stat.
surplus of LLCs (LLPs Ann., tit. 105, Art.
subject to $100/partner/ 6132b, [sections]
year fee) 3.08(a))(4)
(Revised TX Partnership
Act, eff. 1/1/99, is
based on RUPA but differs
in some respects)
Utah(**) No Yes
(Utah Code Ann.
[sections]
48-1-1-48-1-48)
Vermont Annual $250 entity tax; Yes(2)
LLC/LLP must make (Vt. Stat. Ann. tit. 11,
estimated tax payments at [sections] 3201-3293;
highest marginal rate on eff. 1/1/99)(4)
nonresident member's/
partner's distributive
share
Virginia(*) No Yes(2)
(Va. Code Ann.
[sections] 50-73.132)(4)
Washington B&O Tax of 0.138%-1.5% Yes
of gross income (Wash. Rev. Code
[subsections]
25.05.500-25.05.570)(4)
West Greater of $50 or 0.70% Yes
Virginia(*) of "capital" (generally, (W. Va. Code
balance of partners' [sections]
capital accounts per Form 47B-10-1-47B-10-5)(4)
1065) LLC/LLP pays 4%
withholding tax on
nonresident member's/
partner's distributive
share of W. Va. income,
unless nonresident
consents filed
Wisconsin If treated as Yes(2)
partnership, subject to (Wis. Stat.
temporary surcharge tax [subsections]
of up to $9,800 178.40-178.53)
Wyoming(*) Annual tax greater of Yes
$50 or 0.02% of capital, (Wyo. Stat.
property, and assets [subsections]
(capital employed) (Wyo. 17-21-1101-17-21-1105;
Stat. [subsections] eff. 7/1/98)(4)
17-15-132(o)(vi) and
17-16-1630(a);
eff. 7/1/00)
(*) Slate has received an IRS ruling holding that an LLC organized
under this state's statute will be classified as a partnership for
Federal income tax purposes under pre-"check-the-box" ruling
guidelines.
(**) Slate has received an IRS ruling holding that an LLC organized
under this state's statute may be classified either as a partnership
or an association taxable as a corporation depending on the articles
of organization and operating agreement, under pre-"check-the-box"
ruling guidelines.
(1) Indicates that state taxing authority has publicly announced that
it will follow IRS "check-the-box" regulations for state income tax
purposes, the state LLC act adopts the regulations either explicitly
or implicitly, or the stat adopts them by separate statute.
(2) Indicates "bulletproof" (broad form liability shield) LLP statute,
which can result from adoption of the 1997 version of RUPA.
(3) Assuming the entity is classified as a partnership and has filed
any required nonresident member jurisdictional consents. See
supplemental chart regarding net worth- or debt-based
corporate franchise taxes.
(4) State has adopted RUPA.
(5) Currently, the following states' statutes either specifically do
not allow or are ambiguous with respect to domestic SMLLCs: Idaho,
Massachusetts and Pennsylvania. The District of Columbia recently
enacted legislation to authorize SMLLCs, effective June 24, 2000. A
similar bill is pending in Massachusetts, S.B. 1690. Additionally,
some states, such as California, Connecticut, Delaware, Illinois,
Pennsylvania and South Dakota, restrict the use of LLCs by banks
and insurance companies.
(6) Currently, the following states authorize the formation of limited
liability limited partnerships (LLLPs): Arizona, Arkansas, Colorado,
Delaware, District of Columbia, Florida, Georgia, Iowa, Maryland,
Minnesota, Missouri, North Dakota, Pennsylvania, Tennessee, Texas
and Virginia. An LLLP bill is currently pending in North Carolina,
SB 842.
Copyright [C] 2/28/01. Tax Management Inc./Tanner & Guin, L.L.C.
All Rights Reserved. This chart is necessarily only a summary of
the applicable laws, regulations and rulings as of the date
stated above and should not be relied on as a definitive source
of information. Readers should consult their tax advisers and,
perhaps, local counsel, regarding the application of state and
local law to their particular circumstances. Legislative updates
would be most appreciated. Please call Bruce Ely, Chris grissom
or Peter Bond at (205) 633-0200, ar e-mail us at
bely@tannerguin.com.
Editor's note Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. : For more information on this subject, Mr. Ely Ely, town (1991 pop. 9,006), Cambridgeshire, E central England. It is a market town for the surrounding rich farming area and has food-processing industries. Tourism is also important. can be reached at (205) 633-0200 or bely Bely (masculine), Belaya (feminine), or Beloye (neuter), meaning "white" in Russian, may refer to:
Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. P. Ely, Esq. Tanner The code name for the Xeon version of the Pentium III chip. See Xeon. & Guin, L.L.C. Tuscaloosa Tuscaloosa (təskəl `sə), city (1990 pop. 77,759), seat of Tuscaloosa co., W central Ala., on the Black Warrior River; inc. 1819. , AL
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