Q&A with the Pennsylvania Department of Revenue

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?

Dec 08, 2016
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.

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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.