FAQs - Pass Through Entity

What is the department's position in a case where (a) the S-corporation or partnership has considerably less funds available than the distributive share and/or (b) by law the funds can not be used for withholding on a regular basis?

(a) The tax is based upon the distributive share of income. It is the responsibility of the pass-through entity to have the cash necessary to pay the tax even if this means (i) reducing the distributions to the investors and/or (ii) borrowing money. (b) Similarly, where federal statutes (for example, HUD housing partnerships) limit the frequency of cash distributions by the partnership to the investors, then the department has waived (and will continue to waive) the estimated tax payment requirements — but only the estimated tax provisions and not the yearly tax payment provisions.