A pass-through entity is required to file Maryland Form 510, Pass-through Entity Income Tax Return, if the entity is formed or incorporated in Maryland, does business in Maryland, or has Maryland income (or losses). The following are pass-through entities:
- Partnerships, as defined in § 761 of the Internal Revenue Code.
- Limited Liability Companies (defined under Title 4A-101 of the Corporations and Associations Article of the Maryland Code Annotated) classified as partnerships, as defined in § 761 of the Internal Revenue Code, and not taxed as a corporation or disregarded as an entity.
- S corporations, as defined in § 1361 AND 1362 of the Internal Revenue Code.
- Business trusts, as defined in Maryland Corporation and Associations Article, Section 12-101.
A pass-through entity files Form 510 to report the pass-through entity's items of income, adjustments, gains, losses, and other required information. These items are passed through the entity to be taxed to the partners, shareholders, members or beneficiaries (referred collectively hereafter as "member"). Each member is then required to file the applicable Maryland income tax return and pay any tax due on the member's distributable or pro-rata share of the pass-through entity's items for the tax year. Payment of the Maryland income tax is not required with the filing of Form 510 unless the pass-through entity is subject to the nonresident member tax.
If a pass-through entity has a nonresident member and any nonresident taxable income, then the pass-through entity is subject to the Maryland income tax. The pass-through entity is taxed on the nonresident taxable income, which is the sum of the nonresident members' distributive or pro-rata shares of the pass-through entity's income allocable to Maryland.
A "nonresident member" includes a nonresident individual member (defined as a person or fiduciary) and a nonresident entity member. A nonresident entity member is a corporation or pass-through entity that is not qualified or registered with the Maryland Department of Assessments and Taxation to do business in Maryland or not formed under Maryland law.
Effective tax year 2011, Form 510C is used by PTEs to file a composite income tax return on behalf of nonresident individual members. Please do not file a composite return using Form 505.