If a partner is a combined group member, the partner must include or exclude its distributive share of income or loss in the following manner:
(a) Starting point for a partner: A partner on the D-20 or D-30 generally starts with federal income and deduction items which are modified for District purposes. In this income, the distributive share of partnership interest should already have been included and modified for District tax purposes on the “Other income (loss)” line (currently line 9, on D-20 or D-30).
(b) Exclusion modification: If the distributive share has been reported by and taxed against any person, the partner’s distributive share of this income or loss shall be excluded from the partner’s return on line 9 of the D-20 or D-30 to prevent double taxation or double deduction (see also UB Worksheet A and B). The amount that should be excluded is that which has been apportioned to and taxed within the District and that portion which has been subject to apportionment and taxed outside the District.
(c) Treatment of distributive loss: If the distributive share of a partner is a loss and the entity which issued the distributive share is also filing a District return (stand-alone or combined), and the entity is carrying forward that loss to future years, the distributive share of that loss is not allowed on the partner’s return to avoid double deduction of the loss because this loss is a loss of the entity and not of the partner.
(d) No flow through of factors: A partner shall not flow through its share of the UB or partnership’s apportionment factors and combine them with its own factors. However, a single member entity, if disregarded for federal income tax purposes, shall be treated as disregarded for District income and franchise tax purposes, and all the income, deductions, and apportionment factors shall be included with and reported by the owner of the single member entity.
(e) Apportionment of partner’s distributive share of UB or partnership: If the UB or partnership is both within and without the District, then any portion of the partner’s distributive share from the K-1 (modified for District tax purposes) which has not been reported and taxed at the UB level on the combined report shall be included in the partner’s income and apportioned, if it is business income.
(f) To calculate the apportionment factor to apply to the untaxed income as indicated in (e):
(1) Denominator. The denominator shall be the total net unreported and untaxed distributive share of the income which shall be added to the partner’s sales factor.
(2) Numerator. The numerator shall be the unreported and untaxed portion of the distributive share multiplied by the UB’s or partnership’s apportionment percentage.
(3) Example: If the distributive share is $200 and $100 of that share was reported and taxed at the UB level, and the remaining $100 (the net amount) was untaxed, that $100 will be added to the partner’s sales factor denominator. If the UB’s apportionment factor is 50%, then $50 will be added to the partner’s sales factor numerator for purposes of apportioning the part which was not previously apportioned and taxed.
(g) UB filing requirements: If a UB is a member of the combined group, the UB shall report all its income and apportionment factors on the combined report only and not file a stand-alone return.