Because of the passthrough structure of MLPs, unitholders in multistate MLPs may owe tax in each state in which the MLP earns income. The K-1 package provided to you by the MLP each year will include information on how much income has been allocated to you in each state.
Practically speaking, because of the large number of unitholders in any PTP and the deductions that are available to offset the income, the average investor is unlikely to have any significant tax liability in the states where he or she is a nonresident. However, because some states require filing even if no tax is owed, unitholders are advised to check the filing requirements of each state to be sure that they are in compliance.
Each state with an individual income tax has its own rate structure,
standard deduction, and threshholds for imposing tax.
- A table of state filing requirements for nonresidents, with personal exemption and standard deduction and links to state website, can be found by clicking here.
- A table showing state income tax rates, income brackets and personal
exemptions can be found on the website of the Federation of Tax Administrators,
and can be reached by clicking
- The Federation of Tax Administrators also provides links to the tax forms and alternative filing methods for each state, which you can access by clicking here.