Q&A with the Pennsylvania Department of Revenue

Scenario: A Pennsylvania Limited Partnership (LP) has sold its last piece of real estate and has decided not to continue this business entity

Dec 13, 2016
Q:

A Pennsylvania Limited Partnership (LP) has sold its last piece of real estate and has decided not to continue this business entity. There seems to be conflicting information on the Department’s website with regard to the procedures that practitioners need to undertake.

There is an S-Corporation which is the General Partnership (GP).  That entity will need a Tax Clearance Certificate and will and the appropriate documents will need to be filed with the DOS. But, what, if anything, needs to be done with the DOS for the LP?

In one FAQ answer posted on the Department’s site, it states that GPs that are not required to withhold tax at the source (employer withholding and sales tax) are not required to obtain tax clearance certificates. They just file the PA-65 and check the box as final. In another FAQ it says to dissolve a LP, you need to file the REV-181 for the LP as well as for the Corporate partner. The LP has only ever owned and leased out commercial real estate. So, no sales tax, no withholding. Also if the entities still will file a 2016 tax return, can the tax clearance certificate be obtained now, or do we need to wait until after the entity has completed its final filing?

A:

If an entity is registered at DOS and the entity wants to dissolve (regardless if it is the LP or the corporate partner), a tax clearance certificate is needed (the key here is if the entity is registered at DOS).

Regarding 2016 filing – if the entity only files the PA-20S/PA-65, our procedure has been not to wait until 2017 to issue a clearance.  If an entity files the RCT-101, we do require the final tax return be filed before a clearance certificate will be issued.

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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.