Indiana DOR Determines Investment Partnership Not Required to Withhold Tax for Its Nonresident Partners

The Indiana Department of Revenue (DOR) March 31 determined in a letter ruling that Taxpayer, an out-of-state investment partnership earning income from Indiana sources, wasn’t required to withhold tax on behalf of its nonresident partners. Taxpayer was 97 percent owned by two partners, which were owned by two non-captive Real Estate Investment Trusts (REITS). Taxpayer’s income passed through to its partners, which later distributed the income to the REITs. Taxpayer protested the DOR’s assessment, contending that the DOR incorrectly reversed a deduction for dividends paid, resulting in an additional tax on income distributed to nonresident shareholders. The DOR noted that: ...