Did Kansas repeal withholding on nonresident S corporation shareholders, partners and LLC members?

Plain-English summary

Kansas Notice 14-09 (July 1, 2014) announces the repeal of nonresident-owner withholding for pass-through entities.

The change. 2014 Senate Bill 265 (Section 9) repealed K.S.A. 79-32,100e, part of the Kansas withholding tax act. That statute had required:

• S corporations to withhold Kansas tax from a nonresident shareholder's share of Kansas taxable income, whether distributed or undistributed;
• partnerships to withhold from a nonresident partner's share; and
• limited liability companies to withhold from a nonresident member's share.

Those requirements were carried out on forms KW-7, KW-7S, KW-7A and form K-19.

Effective date / refunds. The repeal is effective July 1, 2014. Because withholding is not reported until the end of the year, the repeal is, as a practical matter, effective immediately in many cases. If income tax was withheld from a nonresident shareholder, partner or member and remitted to Kansas during tax year 2014, that owner can file a 2014 income tax return and claim a refund if appropriate.

What this means for you

Pass-through entities (S corporations, partnerships, LLCs)

• You are no longer required to withhold Kansas tax on nonresident owners' shares of Kansas taxable income after the repeal.

Nonresident owners

• If Kansas tax was withheld from your distributive share and remitted during 2014, file a 2014 Kansas return to recover any overpayment.

Common questions

What was repealed? K.S.A. 79-32,100e, the nonresident-owner withholding requirement.

Which entities were affected? S corporations, partnerships and LLCs with nonresident owners.

When is the repeal effective? July 1, 2014 -- effectively immediate in many cases since withholding is reported at year-end.

Can withheld amounts be recovered? Yes -- a nonresident owner can file a 2014 return and claim a refund if appropriate.

Citations and references

• K.S.A. 79-32,100e -- the nonresident-owner withholding requirement (forms KW-7, KW-7S, KW-7A, K-19), repealed by Section 9 of 2014 Senate Bill 265.
• 2014 Senate Bill 265, Section 9 -- the repealing legislation.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 14-09

Original ruling text

Policy & Research Phone: 785-296-3081
915 SW Harrison St FAX: 785-296-7928
Topeka KS 66612-1588 www.ksrevenue.org
Nick Jordan, Secretary Department of Revenue Sam Brownback, Governor
Richard Cram, Director

                                         Notice 14-09
             Withholding Repealed For Nonresident Shareholders Of S Corporations,
                    Partners, And Members Of Limited Liability Companies
                                        (July 1, 2014)

  During the 2014 Legislative Session Senate Bill 265 was passed and signed into law. Section 9 of the Bill

repeals K.S.A. 79-32,100e. K.S.A. 79-32,100e is part of the Kansas withholding tax act, and its provisions
require that:

 Corporations for which an election as a S corporation under subchapter S of the federal internal
 revenue code is in effect are required to deduct and withhold tax . . . from a nonresident
 shareholder's share of Kansas taxable income of the corporation, whether distributed or
 undistributed . . .

 Partnerships are required to withhold tax . . . from a nonresident partner's share of Kansas taxable
 income of the partnership, whether distributed or undistributed . . .

 Limited liability companies are required to withhold tax . . . from a nonresident member's share of
 Kansas taxable income of the limited liability company, whether distributed or undistributed . . .

  The reporting requirements of K.S.A. 79-32,100e are accomplished by using Kansas forms KW-7, KW-

7S, or KW-7A, in addition form K-19.

 Senate Bill 265 is effective July 1, 2014. As a practical matter, however, in many cases the repeal of

K.S.A. 79-32,100e is effective immediately because withholding is not reported until the end of the year. If
income tax is withheld from a shareholder, partner, or member and remitted to the state of Kansas during tax
year 2014, the shareholder, partner, or member can file a 2014 income tax return and claim a refund, if
appropriate.

                                        Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site,
www.ksrevenue.org. If you have questions about this Notice, please contact:

                                    Taxpayer Assistance Center
                                   Kansas Department of Revenue
                                   915 SW Harrison St., 1st Floor
                                     Topeka, KS 66612-1588
                                       Phone: 785-368-8222

                                         Fax: 785-291-3614