A SALT Parity Act election made by a lower-tier partnership has no effect on a tiered partner’s return, except with respect to the Colorado K-1s the tiered partner issues to its partners or shareholders. Each partnership or S corporation may make a SALT Parity Act election regardless of whether an election is made by any lower-tier partnership in which the partnership or S corporation is a partner (a “tiered partner”). Any SALT Parity Act election made by a lower-tier partnership does not obligate any of its tiered partners to make a similar election.
A tiered partner cannot claim any credit or subtraction, or make any other adjustment on its return, based on a SALT Parity Act election made by a lower-tier partnership. In particular, an electing partnership or S corporation cannot claim any credit for any part of the tax paid by a lower-tier partnership that also made a SALT Parity Act election.
The credit resulting from a lower-tier partnership’s SALT Parity Act election passes through to the tiered partner’s partners or shareholders, who may each claim their share of the credit on their own return. The tiered partner must report on the appropriate line of each Colorado K-1 (DR 0106K) it issues to each partner or shareholder that partner’s or shareholder’s share of any tax paid by any lower-tier partnership that also made a SALT Parity Act election.
