So, you're advising your client just to ignore these instructions from Indiana?
Who Must File and When
Partnerships conducting business within Indiana must file an annual
return (Form IT-65) and information returns (Schedule IN K-1)
with the Department of Revenue. These forms must disclose each
partner’s distributive share of the partnership income distributed or
undistributed. These forms are due on or before the 15th day of the
4th month following the close of the partnership’s tax year.
Enclose with Form IT-65 the first five pages of the U.S. Partnership
Return of Income, Form 1065 or 1065B. Also enclose Schedule M-3.
Federal Schedules K-1s should not be enclosed but must be made
available for inspection upon request by the department.
Any partnership doing business in Indiana or deriving gross income
from sources within Indiana is required to file a return. In addition,
any partnership that has partners residing in Indiana is required to
file a return, even if the partnership is not doing business in Indiana.
For Indiana adjusted gross income (AGI) tax purposes, the term doing
business generally means the operation of any business enterprise or
activity in Indiana, including but not limited to the following:
• The maintenance of an office, a warehouse, a construction
site, or another place of business in Indiana;
• The maintenance of an inventory of merchandise or material
for sale, distribution, or manufacture, or consigned goods;
• The sale or distribution of merchandise to customers directly
from company-owned or -operated vehicles when the title of
merchandise is transferred from the seller or distributor to
the customer at the time of sale or distribution;
• The rendering of a service to customers in Indiana;
• The ownership, rental, or operation of a business or property
(real or personal) in Indiana;
• The acceptance of orders in Indiana with no right of approval
or rejection in another state;
• Interstate transportation; or
• The maintenance of a public utility.