Every Maryland pass-through entity must file a return on Form 510, even if it has no income or the entity is inactive. Every other pass-through entity that is subject to Maryland income tax law must also file on Form 510.
A multi-state pass-through entity that operates in Maryland, but is not subject to the Maryland income tax law is not required to file, although a return reflecting no income allocable to Maryland may be filed for record purposes. Letters in lieu of filing will not be accepted.
Qualified Sub-S Subsidiaries are treated as divisions under the Internal Revenue Code and are not considered as separate entities for Maryland purposes. These divisions will be included on the parent company's annual Maryland return.
Maryland will follow the IRS rules for a single member LLC electing to be disregarded as a separate entity ("check the box") and certain partnerships that do not actively conduct a business that have elected not to be treated as a partnership.
Additional filing requirements
The filing of Form 510 and the payment by the pass-through entity of the Nonresident Member Tax does not eliminate the requirement that all nonresident and resident members of the pass-through entity must file the applicable Maryland income return. The nonresident member can claim a credit for the amount of tax paid by the pass-through entity that is attributable to that nonresident member's share of the pass-through entity's nonresident taxable income.
When the nonresident member tax that is due is expected to exceed $1,000 for the tax year or period, the pass-through entity must file Maryland Form 510D, Pass-Through Entity Declaration of Estimated Tax, and make quarterly estimated payments.
For more detailed information, including information on certain nonresident members that are exempt, see Administrative Release No. 6, Taxation of Pass-Through Entities Having Nonresident Members. See also Md. Code Ann., Tax-Gen. § 10-102.1 and C.O.M.A.R. 03.04.07.
- Be sure to include your federal employer identification number (FEIN) and taxable year beginning and ending dates on all forms and payments.
- Entities claiming business tax credits must complete Form 500CR.
- Nonresident partners and shareholders must file a nonresident return, Form 505. Credit may be claimed on the nonresident return for any tax paid on behalf of the nonresident by the pass-through entity.
- Certain investment partnerships are not subject to the nonresident tax. See the specific instructions for line 4 on Form 510.