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noncorporate taxpayers by IRC Section 1211; (b) No deduction

Filing Procedure

is permitted for interest paid on investment indebtedness under

for IT-65COMP Composite Return

IRC Section 163(d) (limitation on interest investment

indebtedness); (c) No deduction is permitted for carryover of

A partnership may file a composite adjusted gross income

net operating losses or capital losses; (d) No personal

tax return on behalf of qualifying non-Indiana resident individual

exemption is permitted; (e) No deduction is allowed for

partners. Nonresident partners properly electing to participate

charitable contributions allowed or allowable pursuant to IRC

in the composite return will be relieved of the obligation to file

Section 170; (f) No credit is permitted for taxes paid to other

an Indiana individual adjusted gross income tax return.

states; (g) No credit carryovers are permitted; and (h) All other

The composite return, Schedule IT-65COMP, shall be filed

credits which flow through to partners on a pro rata basis are

with and have the same due date as the partnership return. If

limited to the partner’s state income tax liability. See list of

the Internal Revenue Service allows the partnership an

Pass-through Tax Credit on pages 19 to 21.

extension to file its income tax return, the due date for its

The partnership filing a composite return is liable not only

Indiana return is automatically extended for the same period,

for the tax shown on the return but also for any additional tax,

plus thirty (30) days.

interest, and penalty as a result of a subsequent audit or

Composite income means each nonresident partner’s

examination. Any refund of state or county tax as a result of

distributive share of income derived from sources within Indiana

filing a composite return shall be remitted directly to the

as determined by the use of the apportionment formula

partnership.

described in IC 6-3-2-2(b) plus Indiana modifications.

The partnership should send a copy of general Indiana filing

Composite filing does not negate the partnership’s

requirements to each nonresident partner. The partnership

requirement to file on a monthly, quarterly or annual basis

must determine partners electing to be included in the

Form WH-1 (Employer's Withholding Tax Return), used for

composite return and partners not electing to be included.

submitting withholding tax payments for all nonresident

See Income Tax Information Bulletin #72 for more information.

partners along with any withholding for employees. However,

withholding is not required on residents of reverse credit states

Instructions for

(Arizona, California, Oregon, District of Columbia), except when

Completing Composite Return

a California resident is included on the Indiana composite return.

The amount of tax withheld on partners is shown as a

PART I - The partnership must disclose the name and

credit on Form WH-18, (Indiana Miscellaneous Withholding

complete address of its nonresident partners who are excluded

Tax Statement for Nonresident). Copy A of Form WH-18 must

from this composite return. These partners are required to

be filed with the Department of Revenue together with Form

file separate Indiana income tax returns.

WH-3, Annual Withholding Reconciliation, on or before the

last day of February.

PART II - Indicate the name of each partner electing to be

a member included in this composite return. Subject to the

Filing Requirements

limitations and conditions specified in the filing requirements,

for Composite Return

separately compute the state tax liabilities and credits on the

composite return attributable to each partner.

The partner electing to be included in the composite return

authorizes the partnership to file on his or her behalf. This

Column E. If a nonresident individual is engaged in principal

election, once made, is irrevocable for that tax year.

work activity in an adopting county on January 1, the county

However, any partner within the following categories must,

tax should be calculated. Multiply column C by the applicable

in all cases, be excluded from the composite return: (a) Any

nonresident county tax rate. Use Departmental Notice #1 to

partner that is a corporation, a partnership or fiduciary; (b)

determine if a composite member is subject to a county tax

Any partner who received a distribution(s) during the year in

and call the Department to verify the county’s tax rate.

excess of his or her distributive share of net income from

partnership operations; (c) Any partner who sold any portion

Column G. The amount of pro rata pass-through credit

of his or her interest in the partnership during the year; (d) Any

available to each composite member is limited to the respective

partner receiving income during the year from an Indiana source

amount of tax calculated in column D.

other than the partnership; and (e) Any partner who for a portion

Insert only the total state and county liabilities and pass-

of the year was a resident of Indiana.

through credits of those nonresident partners included in the

The following limitations and conditions will apply to each

composite return to the appropriate lines on Form IT-65.

partner included as a member in the composite return: (a)

Any short term capital gain (loss) plus any long term capital

Note: A federal Schedule K-1 for each partner is not required

gain (loss) specifically allocated for a partner is allowed, subject

to be attached but must be made available for inspection upon

to any “passive activity” loss limitations pursuant to IRC

request by the Department.

Section 469 and capital loss limitations imposed on

If you have any questions you may contact the Corporate Income Tax Section: (317) 615-2662.

Instructions For It-65comp Composite Return, Form It-65 - Indiana Department Of Revenue

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