Most corporate partners generally believe that a partnership’s apportionment factors flow through, to be combined with the corporation’s own factors.

For federal income tax purposes, partnerships generally have no formal federal filing requirements other than information returns, and, because a partnership is a conduit, items of partnership income, expense, gain, or loss pass through to the partners and are given tax effect at the partner level. For state and local tax purposes, however, a partnership can generate an array of complex tax issues.

Corporations may invest in partnerships, or they may place certain operations or ventures in partnership form. For state income tax apportionment purposes, a particular state’s approach in these areas dictates, among other things, whether, in apportioning its partnership income, a corporate partner must (1) combine its own apportionment factors with those of the partnership, (2) use only its own separate factors, or (3) use only those of the partnership.