Massachusetts Releases Pass-Through Entity Compliance Guide

If you operate a pass-through entity in Massachusetts, then you need to know for tax years beginning on or after January 1, 2009, Massachusetts adopted new mechanisms for pass-through entities and their members to comply with Massachusetts tax laws.

The pass-through entity compliance program allows members of pass-through entities to choose how they will meet their Massachusetts tax obligations. The compliance program also requires pass-through entities to report to DOR how their members plan to comply.

The pass-through entity compliance program allows non-exempt members of pass-through entities to meet their tax obligation by:

1. agreeing to file and to subject themselves to personal jurisdiction in Massachusetts;
2. participating in a composite return by the pass-through entity; or
3. having the pass-through entity withhold and pay tax on their behalf.

The compliance program generally exempts the following members:

1. Massachusetts resident individuals
2. most Massachusetts estates and trusts;
3. federally tax-exempt organizations;
4. corporations subject to Massachusetts taxing jurisdiction filing their returns including any distributive share from the pass-through entity;
5. pass-through entities that are filing a return; and
6. insurance companies.

To be treated as exempt by the pass-through entity, these members must file an exemption certificate (Form PTE-EX) with the pass-through entity.

For more details, please see Massachusett's GUIDE.