PA K1 on an out of state Partnerhip

[MCWinters]

I have a question.  I prepared a New Jersey Partnership tax return.  The partnership is owned by two Pennsylvania partners.  I did not prepare a Pennsylvania partnership as the partnership is registered in just NJ and all operations are in NJ.  One of the partners is asking me for a PA K-1 which they say is required for their personal return.  Is there a reason why a PA return would need to be prepared?. 

I admit I  am out of practice but I can't think why I would need to register and prepare an extra state return.

Thanks so much.

[rjholton]

Yes, PA requires a partnership to file a PA return if they have a PA resident partner even if the partnership doesn't do any business in PA.  In practice, this isn't always done.  However, using data from a Federal K-1, rather than a PA RK-1, may trigger notices from PA Department of Revenue on the personal income tax side.  In some cases, it can also prevent the partner from electronically filing their personal PA income tax return, though that also depends on the software used.

See page 2 of the instructions from this link:  https://www.revenue.pa.gov/FormsandPublications/FormsforBusinesses/Partnerships-S-Corps-LLCs/Documen...

The relevant part reads:

Every domestic or foreign PA S corporation (72 P.S. § 7330.1),
partnership (72 P.S. §7335(c)) or entity formed as a limited
liability company that is classified as a partnership or S
corporation for federal income tax purposes must file the
PA-20S/PA-65 Information Return if any of the following apply:

1. During the taxable year, the partnership, PA S corporation
or its qualified subchapter S subsidiary earned, received
or acquired any gross taxable income (loss) allocable or
apportionable to Pennsylvania, regardless of the amount
of its income (loss) and whether or not the income was
distributed; or
2. During the taxable year, the PA S corporation had at least
one shareholder that was a Pennsylvania resident individual, estate, trust or disregarded entity owned by a resident individual; or at least one shareholder that was a
part-year Pennsylvania resident individual or disregarded
entity owned by a part-year resident individual; or
3. The partnership, at year-end, had at least one partner
that was a Pennsylvania resident individual, estate, trust
or disregarded entity owned by a resident individual.