Is a grantor trust that owns an interest in an S-Corporation able to claim a resident credit on income taxes paid by the S-Corporation to states where the S-Corporation is taxed as a C-Corporation?

Q:

Is a grantor trust that owns an interest in an S-Corporation able to claim a resident credit on income taxes paid by the S-Corporation to states where the S-Corporation is taxed as a C-Corporation? Examples of states where this could be the case include New York and the District of Columbia.

A:

If the taxes paid to New York and the District of Columbia are based upon income, the resident credit should be able to be claimed by an irrevocable trust. However, the resident credit cannot be passed through to a beneficiary of the irrevocable trust. For a revocable trust the resident credit would be claimed at the individual level on the PA-40.