Surveying the Battlefield: States' Continued Assertion of Nexus Over Nonresident Owners of Pass-Through Entities

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

Does merely holding an interest in a pass-through entity, such as an LLC or partnership, create nexus between the member/partner and the state in which the entity does business? As the use of pass-through entities becomes increasingly prevalent, even among Fortune 500 companies, state departments of revenue are becoming more and more aggressive in pursuing this line of attack. This assertion is often hotly contested, and the battle lines have been drawn. This article is the second in a two-part series and discusses several of the more interesting and noteworthy nonresident owner nexus cases and administrative rulings that have come out in the last three years. In part one, Lynn Gandhi of Honigman Miller Schwartz and Cohn LLP discussed pass-through entity nexus under Michigan's relatively new corporate income tax.