Every partnership and S corporation that is required to file form DR 0106 that does not make an election under the SALT Parity Act must file a nonresident composite return (Part II of form DR 0106). Along with the nonresident composite return, the partnership or S corporation must make a composite payment of tax.
The nonresident composite return must include, and payment must be made for, all of the nonresident partners or shareholders, except for those nonresident partners and shareholders that are excluded from the return. In general, any partner or shareholder that is a nonresident individual, estate, or trust must be included in the composite return and payment. Any partner that is a corporation or partnership is not included in the composite return. Additionally, any nonresident partner or shareholder that timely files a Nonresident Partner or Shareholder Agreement (form DR 0107) is excluded from the composite return.
The partnership or S corporation may claim a credit allocated to a nonresident partner or shareholder included in a composite return, subject to various limitations. To the extent the credit exceeds the composite payment with respect to the partner or shareholder and the excess may be carried forward or refunded, the amount not applied to the composite payment is generally passed through to and may only be claimed by the partner or shareholder. A partnership or S corporation may not carry forward or claim a refund for any credit, except for electric bicycle credits and assigned innovative motor vehicle or truck credits that the partnership or S corporation may claim on form DR 0619.
Nonresident partners and shareholders included in a composite return may file their own Colorado income tax returns and claim credit for their share of the tax paid by the partnership or S corporation in the composite return. Nonresident partners and shareholders can find additional information in the Individual Partner and Shareholder Instructions for Colorado K-1 (DR 0106K) available online at Tax.Colorado.gov/individual-income-tax-guidance-publications.