Is Your Club Required to File a State Tax Return?    

We focus so much on the federal filing requirements for investment clubs (partnerships) it's easy to miss the fact that your club MAY be required to file a state partnership tax return.   Not all states require partnership returns.   

First, we must determine which state to file with, if any?  

When your club was formed it should have created a legal document called a partnership agreement.   One of the first items addressed in most partnership agreements is the identification of which state the club was formed in.   That state then becomes the tax home for the partnership and the laws of that state govern the operation of the partnership, including whether or not the partnership must file a state partnership tax return.  

And, how do we know if we are required to file a state partnership return?

One way is to check with your state's Department of Revenue, Taxpayer Assistance, or similar agency.     The National Association of Investors Corporation (NAIC) also has a listing of  State Requirements for Partnership Tax Filing that may be found at http://www.better-investing.org/clubs/tax99_states.html .   In most cases, state partnership returns are fairly simple to complete, often requiring that you attach copy of your club's federal return.  

In any case, be aware of your state requirements.   It is much less painful to file the appropriate returns now than it is to deal with an angry tax authority later.

Jerry Dressel
St.Louis, Missouri
Trez_Talk@bivio.com