Partnership Highlights

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2021 HIGHLIGHTS

 

Partnership Returns

A partnership that has no Arizona income, deductions or credits for a taxable year is not required to file a partnership return for that year.

 

Inclusion of Federal Return with Arizona Return

The department requests that partnerships include a copy of their “as-filed” federal Form 1065 and all its schedules and attachments with their Arizona return.

 

Bipartisan Budget Act of 2015 (P.L. 114-74)

For taxable years beginning after December 31, 2017, partnerships must elect NOT to participate in the federal imputed underpayment assessment program. Only those partnerships that issue 100 or fewer statements under 6031(b) of the Internal Revenue Code with respect to its partners may elect not to participate.

  • If a partnership is issued a federal imputedunderpayment adjustment by the IRS, thatpartnership must file the federal changes to Arizonausing Arizona Form 165PA.
  • If a partnership does not receive a federal imputedunderpayment assessment from the IRS, it will fileits federal changes to Arizona on an amendedArizona Form 165.

 

Electronic Filing of Partnership Tax Returns

Electronic filing of Arizona partnership income tax returns is required for the 2020 taxable year. Please see the department’s website at https://azdor.gov for a list of approved software vendors.

Any partnership that is required to file its income tax return electronically may apply to the director for an annual waiver from the electronic filing requirement. The waiver may be granted and renewed for one subsequent year if any of the following apply:

  • The partnership has no computer.
  • The partnership has no internet access.
  • Any other circumstance considered to be worthy by the director.

Waivers are granted on an annual basis and expire at the end of the requested tax year. Waivers must be renewed each calendar year. If a waiver is not renewed, you will be subject to statutory electronic filing and payment requirements at the expiration of your waiver.

To request a waiver, submit Arizona Form 292, Electronic Filing and Payment Waiver Application, to the department. Arizona Form 292 is available at: Electronic Filing and Payment Waiver Application

A waiver is not required if the partnership tax return cannot be electronically filed for reasons beyond the taxpayer’s control, including situations in which the taxpayer was instructed by either the Internal Revenue Service or the Arizona Department of Revenue to file by paper.

Please contact the department at [email protected] if you need assistance in electronically submitting your Arizona partnership tax return.

Partnerships filing their partnership return electronically must electronically submit Schedule(s) K-1 and K-1(NR) to the department.

Partnerships filing their partnership return by paper may submit Schedule(s) K-1 and K-1(NR) to the department by CD, DVD, flash drive (Optical Media), or by paper.

 

Change to MSP Election

Effective for taxable years beginning from and after December 31, 2019, the Multistate Service Provider election includes sales from services or sales from intangibles in its calculation. This includes sales derived from credit and charge card receivables, including fees, merchant discounts, interchanges, interest and related revenue. See the instructions for the MSP for additional information.

 

Credit No Longer Available to Individual Taxpayers

For taxable years beginning after December 31, 2019, individual taxpayers may no longer claim the Environmental Technology Facility Credit claimed on Arizona Form 305.

A partnership may not pass this credit through to its individual partners; however, it may pass the credit through to its corporate partners.

 

CredCredit Retroactively Reinstated

The Credit for Donation of School Site, claimed on Form 331, was retroactively reinstated for corporate taxpayers for taxable years beginning from and after December 31, 2019.

A partnership may pass this credit through to all of its partners.