§ 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.
Formerly: Acts 1963(ss), c.32, s.412; Acts 1965, c.233, s.22;
Acts 1969, c.326, s.7; Acts 1971, P.L.65, SEC.2; Acts 1973, P.L.50,
SEC.4. As amended by Acts 1979, P.L.68, SEC.4; Acts 1982, P.L.49,
SEC.4; P.L.2-1982(ss), SEC.10; P.L.23-1986, SEC.3; P.L.211-2007,
SEC.26; P.L.137-2012, SEC.57; P.L.293-2013(ts), SEC.13;
P.L.242-2015, SEC.18; P.L.181-2016, SEC.27; P.L.197-2016, SEC.26;
P.L.85-2017, SEC.22; P.L.137-2022, SEC.38; P.L.1-2023,
SEC.8.