Q&A with the Pennsylvania Department of Revenue

Would a distribution from an LLC to a corporate member be included in the corporate member’s net income if it constituted a “return of capital"?

Jun 23, 2010
A distribution to a member, up to the amount of the member’s share of earnings for that period plus the member‘s share of accumulated earnings from prior periods, is a distribution of earnings and included in book income. Any distribution above that amount is a return of capital excluded from book income. If the distribution is from a properly documented sale of an ownership interest, the distribution is a return of capital.

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These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.