Instructions For Partnership Income Tax Return (Form D-403a)

2014

Instructions for Partnership

D-403A

Income Tax Return

Web

12-14

North Carolina Department of Revenue

The references to line numbers and form numbers on federal income tax forms were correct at the time of

printing. If they have changed and you are unable to determine the proper line to use, please contact the

Department of Revenue. These instructions are to be used as a guide in the preparation of a North Carolina

partnership income tax return and are not intended to cover all provisions of the law.

percent of the tax for each month, or part of a month, the return is

Do not attach a copy of Federal Form 1065 or copies of K-1s to

late. The maximum penalty is 25 percent of the unpaid tax. Returns

Form D-403. If copies are needed, the Department will request

filed after April 15 without a valid extension are subject to a late

them at a later date.

payment penalty of 10 percent of the unpaid tax. If a partnership has

an extension of time for filing its return, the 10 percent late payment

A. Who must file Form D-403 - Every partnership doing business

in North Carolina must file a partnership income tax return, Form

penalty will apply on the remaining balance due if the tax paid by

D-403, for the taxable year if a federal partnership return was

the due date of the return is less than 90 percent of the total amount

of tax due. If the 90 percent rule is met, any remaining balance due

required to be filed. (Exception:

A partnership whose only

activity is as an investment partnership is not considered to be

must be paid with the partnership return on or before the expiration of

doing business in North Carolina. Consequently, an investment

the extension period to avoid the late payment penalty. In addition,

penalties are provided by law for willful failure to file a return on time

partnership is not required to file an income tax return in North

Carolina nor pay income tax to North Carolina on behalf of its

and for willful attempt to evade or defeat the tax.

nonresident partners.) A limited liability company classified as a

F. Manager’s Responsibility - In a partnership having one or

partnership for federal income tax purposes is also classified as a

partnership for State income tax purposes and is required to file

more nonresident partners, the managing partner is responsible

for reporting the share of the income of nonresident partners and

a partnership income tax return if a federal partnership return is

required to be filed. A partnership which elects to be taxed as a

is required to compute and pay the tax due for each nonresident

corporation for federal income tax purposes will also be taxed as a

partner. If the nonresident partner is a corporation, partnership,

trust or estate, the managing partner is not required to pay the

corporation for North Carolina income tax purposes. The partnership

must file a corporation income tax return, Form CD-405, in lieu of

tax on that partner’s share of the partnership income provided the

filing Form D-403.

partner files Form NC-NPA, Nonresident Partner Affirmation. Form

NC-NPA affirms that the partner will pay the tax with its corporation,

B. Time and place for filing - The return of a partnership on a

partnership, trust or estate income tax return.

(Note: This

provision does not extend to grantor trusts because no tax is paid

calendar year basis must be filed with the North Carolina Department

on grantor trust returns.) In such cases, a copy of NC-NPA must

of Revenue on or before April 15 following the close of the calendar

year. If on a fiscal year basis, the return must be filed on or before

be attached to the partnership return when it is filed. Important:

A nonresident partner that is an individual cannot file Form NC-NPA

the 15th day of the fourth month following the close of the fiscal

and the managing partner is required to compute and pay the tax

year. A fiscal year return should be filed on a form for the year in

which the fiscal year begins. (For example, a 2014 form should be

due for all nonresident partners that are individuals. A nonresident

individual partner is not required to file a North Carolina income tax

used for a fiscal year beginning in 2014.)

return when the only income from North Carolina sources is the

nonresident’s share of income from a partnership doing business

C. Signature - The partnership return must be signed by the

in North Carolina, and the manager of the partnership pays the tax

managing partner. If the return is prepared by a person or firm other

due for the nonresident partner. Payment of the tax due by the

than a partner, it must be signed also by the one preparing the

managing partner on behalf of corporations, partnerships, trusts or

return. If the partnership is a limited partnership, the return must be

estates that are partners does not relieve the partner from filing a

signed by a general partner. The managing partner should provide

North Carolina tax return. Credit for the tax paid by the managing

a telephone number where he may be reached during the day if we

partner may be claimed on the partner’s income tax return. The

need additional information to process the return.

manager is authorized by statute to withhold the tax due from each

nonresident partner’s share of the partnership income. Note: If a

D. Extensions - If the partnership return cannot be filed by the

nonresident partner is a tax-exempt organization as described in

due date, the partnership may apply for an automatic 6-month

Section 501 of the Internal Revenue Code, the managing partner

extension of time to file the return. To receive the extension, the

is not required to pay the tax unless the partnership income is from

partnership must file Form D-410P, Application for Extension

a business enterprise not related to the organization’s tax-exempt

for Filing Partnership, Estate, or Trust Tax Return, by the

purpose. Also, the managing partner is not required to pay the

original due date of the return.

tax for nonresident partners who serve as investment vehicles for

investing in IRAs and other qualified retirement plans.

A partnership is not required to send a payment of tax it estimates as

due to receive the extension; however, it will benefit the partnership

Publicly Traded Partnerships - Effective for taxable years

to pay as much as it can with the extension request. An extension

beginning on or after January 1, 2008, a publicly traded partnership

of time for filing the partnership return does not extend the time for

that is described in section 7704(c) of the Code is exempt from

paying the tax due. A partnership may file the return at any time

the payment and filing requirements under G.S. 105-154(c) and

within the extension period but it must be filed on or before the end

(d). The filing requirement is limited to partners whose distributive

of the extension period to avoid the late filing penalty.

share of the partnership’s net income during the tax year was more

than five hundred dollars ($500.00) and the payment requirements

E. Penalties - If a partnership return on which tax is due is not

do not apply.

filed by the due date, the partnership will have to pay a penalty of 5

Instructions For Partnership Income Tax Return (Form D-403a) - 2014 Page 2

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