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Last Updated: 12/21/2017

Federal "Large Partnership" Treatment and Minnesota Taxes

For individuals, estates and trusts, income from a partnership is sometimes treated differently on your federal and Minnesota returns, depending on how that partnership reports taxes at the federal level.

If you have partnership income, you must report (or “add back”) additional income on your Minnesota return if all of the following conditions apply:

  • At the federal level, the partnership elected to be treated as a “large partnership.”
  • The partnership’s federal return was adjusted by the IRS, increasing partnership income.
  • The partnership elected not to pass through the adjustments to the partners, but instead paid the additional federal tax at the maximum corporate tax rate.

Under Minnesota law, the partnership isn’t allowed to pay tax directly on the adjustment. Instead, the partners must add back to their Minnesota income their prorated share of the income adjustment for the appropriate year.

Reporting the income on your Minnesota return

To report your share of this income, complete Schedule M1M, Income Additions and Subtractions, as follows:
  • Since there is no line under “Additions to income” specifically for this purpose, cross out an unused line.
  • Write "partner of electing large partnership" on the dotted line to the left of the amount you are reporting.
  • Include a copy of Schedule M1M when submitting Form M1, Individual Income Tax.

Note: Nonresident individual partners who elected to have the partnership pay composite income tax on their behalf are not required to make this addition on their Minnesota return.

View the statute (M.S. 290.0133, subd 10).