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State Tax Issues Related to Flow-Through Investments Part Three
Part Three: Federal Limits on State Taxing Power. This article is the final part of a three-part series on tax opportunities and issues facing nonresident owners of multistate flow-through entities (i.e., partnerships, limited liability companies, etc.).
Part One discussed statutory and regulatory safe harbor provisions that may protect nonresident investors in multistate investment partnerships from state income taxes. Part Two discussed partnership withholding and apportionment of multistate income. This article discusses federal law that may limit a state’s ability to assert a tax reporting obligation on nonresident partners.