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Federal Large Partnership Treatment

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For individuals, estates, and trusts, income from a partnership may be treated differently on your federal and Minnesota returns depending on how that partnership reports federal taxes.

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

  • The partnership elected to be treated as a large partnership at the federal level
  • The IRS adjusted the partnership’s federal return, 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

Reporting the Income on Your Return

Complete Schedule M1M, Income Additions and Subtractions, as follows:

  1. Cross out any unused line under Additions to Income on Schedule M1M, since there is no line for this purpose.
  2. Write the amount you are reporting on the crossed out line.
  3. Write "partner of electing large partnership" on the dotted line to the left of the amount.
  4. Include Schedule M1M when submitting Form M1, Individual Income Tax.

Note: You do not need to make this addition if you are a nonresident individual partner who elected to have the partnership pay composite income tax on your behalf.

A partnership cannot pay tax directly on the adjustment. The partners must add back their prorated share of the income adjustment to their Minnesota income for the appropriate year.

For more information, see Minnesota Statute 290.0133, subdivision 10.

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