§ 57-38-31.1 — Composite returns

North Dakota § 57-38-31.1

• Jurisdiction: North Dakota
• Title 57: Taxation
• Ch. 57-38: Income Tax

Text

1. For purposes of this section, unless the context otherwise requires:
a. "Member" means an individual or passthrough entity that is a shareholder of an
S corporation; a partner in a general partnership, a limited partnership, or a
limited liability partnership; or a member of a limited liability company, settlor of a
grantor trust, or a beneficiary of a trust.
b. "Nonresident" means an individual who is not a resident of or domiciled in the
state, a trust not organized in the state, or a passthrough entity that does not
have its commercial domicile in the state.
c. "Passthrough entity" means a corporation that for the applicable tax year is
treated as an S corporation under the Internal Revenue Code, a limited liability
company that for the applicable tax year is not taxed as a corporation for federal
income tax purposes, or a general partnership, limited partnership, limited liability
partnership, limited liability limited partnership, trust, grantor trust, or similar entity
recognized by the laws of this state that is not taxed for federal income tax
purposes at the entity level.
2. a. A passthrough entity may file a composite income tax return on behalf of electing
nonresident members reporting and paying income tax, at the highest marginal
rate provided in section 57-38-30.3, on the members' pro rata or distributive
shares of income of the passthrough entity from doing business in, or deriving
income from sources within, this state.

b. A nonresident member whose only source of income within the state is from one
or more passthrough entities may elect to be included in a composite return filed
under this section.
c. A nonresident member that has been included in a composite return may file an
individual income tax return and shall receive credit for tax paid on the member's
behalf by the passthrough entity.
3. a. A passthrough entity shall withhold income tax, at the highest tax rate provided in
section 57-38-30.3, on the share of income of the entity distributed to each
nonresident member and pay the withheld amount in the manner prescribed by
the tax commissioner. The passthrough entity is liable to the state for the
payment of the tax required to be withheld under this section and is not liable to
any member for the amount withheld and paid in compliance with this section. A
member of a passthrough entity that is itself a passthrough entity (a lower-tier
passthrough entity) is subject to this same requirement to withhold and pay
income tax on the share of income distributed by the lower-tier passthrough entity
to each of its nonresident members. The tax commissioner shall apply tax
withheld and paid by a passthrough entity on distributions to a lower-tier
passthrough entity to the withholding required of that lower-tier passthrough
entity.
b. At the time of a payment made under this section, a passthrough entity shall
deliver to the tax commissioner a return on a form prescribed by the tax
commissioner showing the total amounts paid or credited to its nonresident
members, the amount withheld in accordance with this section, and any other
information the tax commissioner may require. A passthrough entity shall furnish
to its nonresident member 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 withheld on
behalf of the member on a form prescribed by the tax commissioner.
c. Notwithstanding subdivision a, a passthrough entity is not required to withhold tax
for a nonresident member if:
(1) The member has a pro rata or distributive share of income of the
passthrough entity from doing business in, or deriving income from sources
within, this state of less than one thousand dollars per annual accounting
period;
(2) The tax commissioner has determined by rule, ruling, or instruction that the
member's income is not subject to withholding;
(3) The member elects to have the tax due paid as part of a composite return
filed by the passthrough entity under subsection 2;
(4) The entity is a publicly traded partnership as defined by section 7704(b) of
the Internal Revenue Code which is treated as a partnership for the
purposes of the Internal Revenue Code and which has agreed to file an
annual information return reporting the name, address, taxpayer
identification number, and other information requested by the tax
commissioner of each unitholder with an income in the state in excess of
five hundred dollars; or
(5) The member is a lower-tier passthrough entity that elects to be exempted
from the withholding requirement under this subsection. The election must
be made on a form and in a manner prescribed by the tax commissioner.
The form must include a statement that the member certifies that the
member will file any return and pay any tax required by this chapter on its
distributive share of income from the source passthrough entity and that the
member is subject to this state's jurisdiction for the collection of that tax and
any applicable penalty and interest. The tax commissioner may revoke the
exemption under this paragraph if the source passthrough entity or member
fails to comply with the requirements of this paragraph. If the exemption is
revoked, the source passthrough entity shall begin withholding from the
member within sixty days of receiving notification of the revocation from the

tax commissioner. The tax commissioner may prescribe any procedures and
guidelines necessary to administer this paragraph.
d. A passthrough entity failing to file a return, or failing to withhold or remit the tax
withheld, as required by this section, is subject to the provisions of
section 57-38-45.