17 NCAC 06B .3503. PARTNERSHIP RETURNS

(a)  When Required -- A North Carolina partnership return, Form D-403, must be filed by every partnership doing business in North Carolina if a federal partnership return was required to be filed.  The partnership return must be filed on or before April 15 if on a calendar year basis and on or before the 15th day of the fourth month following the end of the fiscal year if on a fiscal year basis.  For individual income tax purposes, the term "business carried on in this State" means the operation of any activity within North Carolina regularly, continuously, and systematically for the purpose of income or profit.  A sporadic activity, a hobby, or an amusement diversion does not come within the definition of a business carried on in this State.  Income from an intangible source, including gain realized from the sale of intangible property received in the course of a business carried on in this State so as to have a taxable situs here (including income in the distributive share of partnership income, whether distributed or not) is included in the numerator of the fraction used in determining the portion of federal taxable income that is taxable to North Carolina by a nonresident.  The return must include the names and addresses of the individuals entitled to share in the net income of the partnership and must be signed by one of the partners and the individual preparing the return.

(b)  NC K-1 -- A partnership must provide a completed Schedule NC K-1, or similar schedule, to each person who was a partner in the partnership at any time during the year reflecting that partner's share of the partnership's income, adjustments, tax credits, and tax paid by the manager of the partnership. The schedule must be provided to each partner on or before the day on which the partnership return is required to be filed.  When reporting the distributive share of tax credits, a list of the amount and type of tax credits must be provided each taxpayer.

(c)  Investment Partnerships -- A partnership whose only activity is as an investment partnership is not considered to be doing business in North Carolina.  An investment partnership is a partnership that is not a dealer in securities, as defined in section 475(c)(1) of the Internal Revenue Code, and that derives income exclusively from buying, holding, and selling securities for its own account.  If any of the partnership's income is from other activities, either within or outside this State or either received directly or flowing through from other pass-through entities, the partnership is not an investment partnership for North Carolina tax purposes.  Other activities include but are not limited to providing services or products to customers and holding real property for appreciation and income.  An investment partnership is not required to file an income tax return in North Carolina or pay income tax to North Carolina on behalf of its nonresident partners.

 

History Note:        Authority G.S. 105-154(c); 105-262;

Eff. February 1, 1976;

Amended Eff. February 1, 2005; August 1, 2003; July 1, 2000; August 1, 1998; May 1, 1994; June 1, 1993; July 1, 1991; June 1, 1990.