PA Partnership Filing
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PA Partnership Filing Hi Folks, I'm looking for help from clubs in PA. Our club is currently registered in NJ but we have members living in both NJ and PA. I'm the treasurer and I live in PA. NJ charges filing fees of $150 per member when the club worth is greater than $335,000 at last year end. The dollar amount adjusts for inflation annually. Last year we approached this limit. If we have a good 2016 we could go over it. We are debating moving our club from NJ to PA to avoid this filing fee. For the clubs in PA, are there any filing fees or other costs we need to consider before moving our club from NJ to PA? Thanks, Bill See attached article from New Jersey. It states that an investment club is not subject to the filing fee. The article gives a definition of an investment club. Please read the article and the definition. As long as the investments do not include land or a business in NJ you are ok. Investing in securities is not considered a business activity located in the state. Non-residents of NJ do not pay tax to NJ on investment income. Linda Wiltse, tax preparer Pointe Players On Tue, Jul 05, 2016 at 09:38 AM, William Austin via bivio.com wrote: > Hi Folks, > > I'm looking for help from clubs in PA. Our club is > currently registered in NJ but we have members living in > both NJ and PA. I'm the treasurer and I live in PA. > > NJ charges filing fees of $150 per member when the club > worth is greater than $335,000 at last year end. The dollar > amount adjusts for inflation annually. Last year we > approached this limit. If we have a good 2016 we could go > over it. We are debating moving our club from NJ to PA to > avoid this filing fee. > > For the clubs in PA, are there any filing fees or other > costs we need to consider before moving our club from NJ to > PA? > > Thanks, Bill Linda, Partnerships without any NJ source income are not liable for the NJ Partnership Filing Fee except if they also have hedge fund status. Investment clubs (common definition) that only invest in common stocks and interest paying accounts do not have NJ source income, but unfortunately, they meet the NJ definition of hedge fund status. So a special exemption was created to exempt NJ investment clubs. The NJ definition of an exempt investment club has a maximum value of $332,800 in 2016. If the club's assets are worth more than that (or more than $46,600/member) on 12/31 they will be subject to the filing fee. William's investment club is on the threshold of failing to qualify as an investment club under NJ law. It's total value is bumping up against the maximum. If the club finds itself subject to the NJ Partnership Filing Fee, it will need to pay it for each of its NJ-resident members and any nonresident members who have physical nexus to NJ (perhaps through employment or ownership of other NJ assets). There is also a partnership tax in NJ.that applies to the income allocated to non-resident partners. There are three exceptions that can apply to what we would call an investment club: (1) the club meets the NJ definition of investment club (see above limitation), (2) the club meets the definition of a Qualified Investment Partnership, or (3) the club meets the NJ definition of a hedge fund. Fortunately, most investment clubs using bivio would qualify for at least one of these exceptions. Ira Smilovitz, E.A. On Tue, Jul 5, 2016 at 4:13 PM, LINDA WILTSE <wiltse@optonline.net> wrote: See attached article from New Jersey. It states that an investment club is not subject to the filing fee. The article gives a definition of an investment club. Linda and Ira, Thank you for jumping in. I read the document Linda referenced and it's not very clear. It references the term "investment club" and it says it's explained below but that term is only mentioned again in terms of non-resident partners. Clear as mud! It seems like NJ clubs need to abide by the limits or pay $150 per member. In our club that's 19 members, 18 living in NJ or in a state (PA) with physical nexus to NJ. That's $2,700 for the privilege of having our club in NJ and it provides us no benefit. That said, do clubs in PA have to pay filing fees or are there any other gotchas that need to be taken into consideration before moving a club from NJ to PA? Thanks, Bill Bill, "... 18 living in NJ or in a state (PA) with physical nexus to NJ." Just a small correction - it's not a member living in a state adjacent to NJ, but a member who has a tax connection to NJ (typically through employment in NJ or ownership of assets located in NJ). As to your real question - what differences will the club encounter as a PA partnership vs. as a NJ partnership, the major difference is that the PA return is a bit more complicated to prepare than the NJ return. Of course, that isn't an issue for your club as you already have to prepare both returns and bivio will prepare them for you. As of now, PA does not charge any fees that I'm aware of, nor do I know of any under consideration. If any of your members are also members of BetterInvesting, I would suggest contacting a member of one of their PA chapters to learn if they are aware of any other issues facing PA investment clubs. Ira Smilovitz On Fri, Jul 8, 2016 at 4:13 PM, William Austin via bivio.com <user*23414000001@bivio.com> wrote: Linda and Ira, |
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