Pennsylvania PA Schedule NRK-1 - Nonresident Schedule of Shareholder/Partner/Beneficiary Pass Through Income, Loss and Credits

PA Schedule NRK-1 - Nonresident Schedule of Shareholder/Partner/Beneficiary Pass Through Income, Loss and Credits
2023 PA Schedule NRK-1 - Nonresident Schedule of Shareholder/Partner/Beneficiary Pass Through Income, Loss and Credits (PA-20S/PA-65 NRK-1)
IMPORTANT: FILL IN FORM MUST BE DOWNLOADED ONTO YOUR COMPUTER PRIOR TO COMPLETING

PA SCHEDULE NRK-1
Nonresident Schedule of Shareholder/
Partner/Beneficiary Pass Through
Income, Loss and Credits
PA-20S/PA-65 NRK-1 (DR) MOD 04-23 (FI)
PA Department of Revenue

2307310058

2023
Suffix First Name

Last Name

START
➜ SSN
Spouse’s SSN
If jointly held

MI

Name of Owner Receiving NRK-1 (if other than an individual)

9 DIGIT - NO DASH

FEIN
First Line of Address

Street Address - If Address has Apartment Number, Suite, RR No.
Place on this Line.

Amended Schedule

Do not exceed six decimal places

Final

Owner Type:

Shareholder’s stock ownership: ________%
SECTION
I

Second Line of Address
If Owner is D Fill in:

Partner’s percentage of:

City or Post Office

State

ZIP Code

FEIN

Profit sharing: ________%
Use ALL CAPITAL LETTERS
for address information.

Loss sharing: ________%
Ownership of capital: ________%

Name of Entity Issuing NRK-1
Partner Type:

City or Post Office
FEIN

State

ZIP Code

Entity Type:

9 DIGIT - NO DASH

52/53 Week
Begin
NOTE: Amounts from this schedule must be reported on the appropriate PA Tax Return.

SECTION SECTION
V
VI

SECTION
IV

SECTION
III

SECTION
II

Fiscal Year

SECTION
VII

General Partner
or LLC Member
- Manager

Included on
PA-40 NRC Return
Short Year
End
MM/DD/YY

Limited Partner
or Other LLC
Member
Enter whole dollars only

00

1 PA-Taxable Business Income (Loss) from Operations . . . . . . . . . . . . .

If a loss, fill in the oval.

1

l

2 Net Gain (Loss) from the Sale, Exchange or Disposition of Property . .

If a loss, fill in the oval.

2

l

3 Net Income (Loss) from Rents, Royalties, Patents and Copyrights . . . .

If a loss, fill in the oval.

3

l

00
00

If a loss, enter "0"

00

4 Income of/from Estates or Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

5 Gambling and Lottery Winnings (Loss) . . . . . . . . . . . . . . . . . . . . . . . . .

5

l

6 PA Nonresident Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

l

7 Total Other Credits. Submit statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

l

8 Distributions of Cash, Marketable Securities and Property - not including guaranteed payments . . . .

8

l

9 Guaranteed Payments for Capital or Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

l

10 All Other Guaranteed Payments for Services Rendered (PA-Apportioned Amount Only) . . . . . . . . . 10

l

11 Guaranteed Payments to the Retired Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

l

12

l

13 Distributions of Cash, Marketable Securities and Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

l

14

l

15 Owner’s Share of IRC Section 179 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

l

16 Owner’s Share of Straight-Line Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

l

17 Partner’s Share of Nonrecourse Liabilities at year-end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

l

18 Partner’s Share of Recourse Liabilities at year-end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

l

If a loss, fill in the oval.

12 Distributions from PA Accumulated Adjustments Account . . . . . . . If liquidating, fill in the oval.

14 Nontaxable income (loss) or nondeductible expenses required to . . . . . . .
calculate owner’s economic investment. Submit statement.

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If a loss, fill in the oval.

l

00
00

00
00
00

00
00
00
00

00

00
00

00
00

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2023
Instructions for PA-20S/PA-65 Schedule NRK-1
PA-20S/PA-65 NRK-1 IN (DR) MOD 04-23

Nonresident Schedule of Shareholder/Partner/Beneficiary
Pass Through Income, Loss and Credits

WHAT’S NEW
The Phone Number field was removed.
The Owner section was updated to include Disregarded
Entity and beneficial owner information.
A 52/53 Week oval was added.
Please see each section in the instructions for more
information.

GENERAL INFORMATION
PURPOSE OF SCHEDULE
Partnerships and S corporations use the PA Schedule
NRK-1 to report income and losses by class of income to
each of its nonresident owners. A PA Schedule NRK-1 is
prepared for each individual partner, member or
shareholder showing the share of income (losses) by class
and other items required to be reported.
Nonresident Pennsylvania partners, members or
shareholders (owners) who are individuals are subject to
Pennsylvania personal income tax on their share of the
entity’s Pennsylvania source income, whether or not the
income is actually distributed.
The PA-20S/PA-65 Schedule NRK-1 provides each
nonresident partner, member or shareholder (owner) and
entity owner their share of income, losses and credits from
the partnership, PA S corporation, estate, trust and/or entity
formed as a limited liability company classified as a
partnership or S corporation for federal income tax purposes.

WHO SHOULD RECEIVE
PA SCHEDULE NRK-1
A PA-20S/PA-65 Schedule NRK-1 must be completed for
every nonresident owner that has an ownership interest in a
partnership, S corporation, estate, trust and/or entity formed
as a limited liability company classified as a partnership or
S corporation for federal income tax purposes.
A copy of the PA-20S/PA-65 Schedules NRK-1 for each
partner, member or shareholder (owner) must accompany
the entity’s PA-20S/PA-65 Information Return. Owners must
receive a copy or copies to prepare Pennsylvania tax or
information returns. The PA S corporation or partnership must
also retain a copy of all the PA-20S/PA-65 Schedules NRK-1
as part of the entity’s records.
In addition, a PA-20S/PA-65 Schedule NRK-1 must be
completed for all nonresident owners that are estates, trusts,
other PA S corporations, disregarded entities or other
partnerships. The Pennsylvania taxable income passes
through to the final taxpayer. Therefore, the immediate
partners, members and shareholders must know the total
Pennsylvania taxable income in the event the final owner is
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a Pennsylvania resident. In the event that the final owner is
a nonresident of Pennsylvania, the owner must know
Pennsylvania source taxable income.
A partnership, S corporation or limited liability company
classified as a partnership or S corporation for federal tax
purposes (entity) that fails to file a PA-20S/PA-65, S
Corporation/Partnership Information Return may be subject
to a $250 non-filer penalty. The $250 penalty also applies to
each missing PA Schedule RK-1 or NRK-1.
NOTE: Entity owners receive both the PA-20S/PA-65
Schedules NRK-1 and RK-1.

PA SCHEDULE NRK-1 FOR
C CORPORATION PARTNERS
PAPER RETURNS AND ELECTRONIC FILED RETURNS
The PA-20S/PA-65 Schedule NRK-1 submitted with the PA20S/PA-65 Information Return does not need to be issued
to C corporation taxpayers unless a credit from the PA20S/PA-65 Schedule OC has been allocated.
If a C corporation taxpayer receives a PA-20S/PA-65
Schedule NRK-1, the amount from Line 7, Total Other
Credits, must be reported on the appropriate Pennsylvania
tax return.

PART-YEAR RESIDENT OWNERS
The requirements are different for PA S corporations and
partnerships to issue PA Schedules RK-1 and/or NRK-1 to
its owners as described below.
PA S CORPORATIONS ONLY SHAREHOLDER
NONRESIDENCY PERIOD
A PA S corporation must submit a separate PA-20S/PA-65
Schedule NRK-1 for that portion of the tax year during which
a part-year resident shareholder was a nonresident of
Pennsylvania. Part-year shareholders have business
income and losses prorated based upon the number of days
in the tax year these individuals are located within and
outside the state. Each shareholder’s pro rata distributive
share of total PA source income, losses and credits reported
on the PA-20S/PA-65 Information Return determines the
income amounts for the lines that are included on the PA
Schedule NRK-1. Income is allocated based on days
residing or not residing in Pennsylvania. Pennsylvania
considers any day or partial day an owner has a residence
or domicile within the commonwealth to be a Pennsylvania
residency day. The owner will receive PA Schedules NRK-1
and RK-1 reflecting the proportionate share of income
earned while a resident and a nonresident.
PA-20S/PA-65 NRK-1
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In order to calculate the PA Schedule NRK-1 income and
losses by class for the non-residency period, first determine
the proportional number of days a shareholder did not reside
in the state. Using the number of days a shareholder was not
located in the state as the numerator, divide this figure by the
total number of days in the tax year representing the
denominator. The resulting ratio should be multiplied by the PA
source income and losses by class shown on page one of the
PA-20S/PA-65 Information Return. This figure is then multiplied
by the shareholder’s stock ownership percentage to determine
the PA Schedule NRK-1 income and losses by class.
PARTNERSHIPS ONLY
NONRESIDENCY PERIOD
A nonresident partner reports income based upon residency
status at year-end and does not prorate the income. The
partnership must submit a separate PA-20S/PA-65 Schedule
NRK-1 for each individual partner if during the partnership’s
taxable year the partner was:
● A nonresident of Pennsylvania at the close of the taxable
year;
● Deceased and a nonresident of Pennsylvania at the time
of the partner’s death during the taxable year; and/or
● A nonresident of Pennsylvania at the close of business
on the day during the taxable year that the partner sold,
exchanged, disposed of, liquidated, or redeemed the
entire interest in the partnership.
NOTE: Income is considered earned on the final day
of the tax year. If the partner is a nonresident on the
last day of the year, the partner will receive a PA-20S/PA-65
Schedule NRK-1 showing Pennsylvania source income only.

ENTITIES WITH A SIGNIFICANT
NUMBER OF OWNERS
The department will not accept any Schedules RK-1/NRK1 in CD rom format. Please reference Informational Notice
PIT 2013-02. Schedules RK-1 and NRK-1 submitted in this
format will not be processed and the entity may be subject
to the $250 non-filer penalty that applies for each missing
Schedule RK-1 and NRK-1.

HOW TO AMEND PA SCHEDULE NRK-1
An amended PA-20S/PA-65 Information Return and an
amended PA-20S/PA-65 Schedule NRK-1 for each owner
must be filed to correct any error on or reflect any change to
the original PA-20S/PA-65 Information Return, whether or
not an amended federal Form 1120S or federal Form 1065
was filed for that year.
To amend an original PA-20S/PA-65 Schedule NRK-1, use
a blank schedule for the tax year to be amended and fill in
the “Amended Schedule” oval at the top of the schedule. Do
not send a copy of the original schedule. Complete the
schedule by entering the corrected information and submit
it with the amended PA-20S/PA-65 Information Return. See
WHERE TO FILE in the PA-20S/PA-65 Information Return
instructions.
2

IMPORTANT: When submitting an amended NRK-1,
the amended PA-20S/PA-65 Information Return must
accompany it.

COMPLETING PA SCHEDULE NRK-1
FOREIGN ADDRESS STANDARDS
If the PA S corporation, partnership or entity formed as a
limited liability company classified as a partnership or PA S
corporation for federal income tax purposes is located
outside the U.S., it is important to write the foreign address
on the PA-20S/PA-65 Schedule NRK-1 according to U.S.
Postal Service standards.
Failure to use these standards may delay processing or
correspondence necessary to complete the processing of
the return.
To comply with foreign address standards, use the following
rules when completing the address portion of the PA-20S/
PA-65 Schedule NRK-1.
● Eliminate apostrophes, commas, periods and hyphens.
Write the address in all uppercase letters. Addresses
should have no more than four lines and must be written
in black ink or typewritten. Pencil is unacceptable.
● Write the name of the entity in the spaces provided. Mail
may not be addressed to a person in one country “in
care of” a person in another country. The address of
items sent to general delivery must indicate the
addressee’s full legal name.
● Write the address in the spaces provided, including
street and building name and number, apartment or
suite numbers, city name and city or provincial codes.
All lines of the delivery address should appear in all
capital letters. The house number and street address or
box number must appear when mail is addressed to
towns or cities.
● Write only the name of the country in the space provided
for the city or post office.
● Do not include any entries in the state field other than
“OC” for Out-of-Country. The ZIP Code spaces should
remain blank on the PA-20S/PA-65 Schedule NRK-1.
Providing the address in this format will better ensure that
the department is able to contact the entity if additional
information is required.
Below are examples of properly completed foreign
addresses.
Foreign Address Examples
Name: DIETRICH ENTERPRISES
Address 1: HARTMANNSTRASSE 7
Address 2: 5300 BONN 1
City: GERMANY
State: OC
ZIP Code: Leave Blank

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OR
Name: DIETRICH ENTERPRISES
Address 1: 117 RUSSELL DR
Address 2: LONDON W1PGHQ
City: ENGLAND
State: OC
ZIP Code: Leave Blank
Canada (Only) Address Example
The following address format may be used when the postal
address delivery zone number is included in the address:
Name: NORTH BY NORTHWEST CO
Address 1: 1010 CLEAR ST
Address 2: OTTAWA ONT K1A 0B1
City: CANADA
State: OC
ZIP Code: Leave Blank
If the entity’s address does not fit in the available spaces on
the PA-20S/PA-65 Schedule NRK-1 using this format, submit
a separate statement that includes the entity’s name, entity’s
federal employer identification number, tax year and
complete address.
NOTE: For a Canadian address, two spaces must
exist between the province abbreviation and the postal
code. Please review example above where “ONT” (province
abbreviation) and “K1A 0B1” (postal code) are shown with
the proper address format, separated by two spaces.

SECTION I
GENERAL INFORMATION
SSN
Enter the nine-digit Social Security number (SSN) of the
individual receiving the PA-20S/PA-65 Schedule NRK-1. If
the owner is a disregarded entity, use the SSN of the
beneficial owner. Do not use the TIN of a disregarded entity.
LAST NAME, SUFFIX, FIRST NAME, MIDDLE INITIAL
Enter the last name; suffix such as Jr., Sr., etc.; first name
and middle initial of the individual receiving the PA-20S/PA65 Schedule NRK-1.
SPOUSE’S SSN
Enter the nine-digit SSN of the spouse (if jointly held)
receiving the PA-20S/PA-65 Schedule NRK-1.
FEIN
Enter the nine-digit federal employer identification number
(FEIN) of the owner (if other than an individual) receiving the
PA-20S/PA-65 Schedule NRK-1.
NOTE: Do not use the TIN of a disregarded entity as
the owner receiving NRK-1. List the TIN of the
beneficial owner in the appropriate section for SSN or FEIN.
Provide the FEIN of the disregarded entity within in the
owner portion of Section I.
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NAME OF OWNER RECEIVING NRK-1 (IF OTHER
THAN AN INDIVIDUAL)
If the owner of the entity is a partnership, PA S corporation,
estate, trust or entity formed as a limited liability company
classified as a partnership or PA S corporation for federal
income tax purposes, enter the name of the entity owner
receiving the PA-20S/PA-65 Schedule NRK-1. Eliminate all
punctuation such as apostrophes, commas, periods and
hyphens.
If the PA Schedule NRK-1 is being issued to an individual or
disregarded entity whose beneficial owner is an individual
(See, NOTE under FEIN above), leave this field blank.
FIRST LINE OF ADDRESS
Enter the street address of the owner receiving the PA-20S/
PA-65 Schedule NRK-1. If the address has an apartment
number, suite or RR number, enter it after the street address.
Eliminate all punctuation such as apostrophes, commas,
periods and hyphens.
NOTE: If the street address along with the apartment
number, suite or RR number does not fit on the first
line of address, then enter the street address on the second
line of address and the apartment number, suite or RR
number on the first line of address.
SECOND LINE OF ADDRESS
Enter the post office box, if appropriate, of the owner
receiving the PA-20S/PA-65 Schedule NRK-1. If there is no
post office box, leave the second line of the address blank.
Eliminate all punctuation such as apostrophes, commas,
periods and hyphens.
For a foreign address enter the city or municipal designation.
See FOREIGN ADDRESS EXAMPLES.
For a Canadian address, enter the city and postal delivery
zone number. See CANADA ADDRESS EXAMPLE.
IMPORTANT: If the address has only a post office box,
enter on the first line of address.
CITY, STATE AND ZIP CODE
Enter the appropriate information in each box. Eliminate all
punctuation such as apostrophes, commas, periods and
hyphens.
NAME OF ENTITY ISSUING NRK-1
Enter the name of the entity issuing the PA-20S/PA-65
Schedule NRK-1. Eliminate all punctuation such as
apostrophes, commas, periods and hyphens.
CITY, STATE AND ZIP CODE
Enter the appropriate information of the entity issuing the PA
Schedule NRK-1 in each box. Eliminate all punctuation such
as apostrophes, commas, periods and hyphens.
FEIN
Enter the nine-digit FEIN of the entity issuing the PA-20S/
PA-65 Schedule NRK-1.
PA-20S/PA-65 NRK-1
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AMENDED SCHEDULE
Fill in the oval if the PA-20S/PA-65 Schedule NRK-1 is an
amended schedule.

ENTITY
From the list below, enter the code that corresponds with the
type of owner issuing the PA-20S/PA-65 Schedule NRK-1:

FINAL

● S = S Corporation

Fill in the oval if the PA-20S/PA-65 Schedule NRK-1 is a final
schedule.

● P = Partnership

SHAREHOLDER’S STOCK OWNERSHIP

● T = Trust

Enter the shareholder’s percentage of stock ownership in
the PA S corporation.

● L = LLC

Valid values are: “00000” to “10000”, where 10000 = 100%
Decimal point is implied after 3rd character from the left
e.g. to indicate 33.33%, the value should be “03333”
e.g. to indicate 25%, the values should be “02500”
PARTNERSHIP PERCENTAGE
Enter the partner’s percentage of each of the following at the
close of the taxable year:
● Profit sharing
● Loss sharing

FISCAL YEAR
If the PA S corporation, partnership or limited liability
company filing as a partnership or PA S corporation for
federal income tax purposes does not file on a calendar-year
basis, fill in fiscal-year oval. Enter the month, day and year
(MMDDYY) when the fiscal year begins and ends.
52/53 WEEK
If the PA S Corporation, partnership or limited liability
company filing as a partnership or PA S corporation for
federal income tax purposes files on a basis of 52/53 week,
fill in the oval. Enter the month day and year (MMDDYY)
when the 52/53 week year begins and ends.
NOTE: Do not fill in the fiscal filer oval.

● Ownership of capital
Valid values are: “00000” to “10000”, where 10000 = 100%
Decimal point is implied after 3rd character from the left
e.g. to indicate 33.33%, the value should be “03333”
e.g. to indicate 25%, the values should be “02500”
OWNER
From the list below, enter the code that corresponds with the
type of owner is receiving the PA-20S/PA-65 Schedule
NRK-1:
● I = Individual
● S = S Corporation
● C = C Corporation
● E = Estate
● T = Trust
● P = Partnership

SHORT YEAR
A short year is an accounting period shorter than one year
and not a 52/53 week taxable year.
A short-year return is required for the following reasons:
● Changes in the annual accounting period. For example,
the entity changes from a fiscal-year filer to a calendaryear filer; or
● An entity is in existence during only part of the tax year.
For example, if the year is the initial year or final year
for all entities.
See the PA-20S/PA-65 Information Return instructions on
how to file a short-year return.

LINE INSTRUCTIONS
SECTION II
OWNER’S DISTRIBUTIVE SHARE OF PENNSYLVANIA
SOURCE INCOME (LOSS)

LINE 1

● L = LLC
● X = Exempt
● D = Disregard Entity
If owner is a disregarded entity, the FEIN field below must
be filled out.
PARTNER
Fill in the oval that designates what type of partner received
the PA-20S/PA-65 Schedule NRK-1. Fill in one oval only.
4

● E = Estate

PENNSYLVANIA TAXABLE BUSINESS INCOME (LOSS)
FROM OPERATIONS
Enter the owner’s pro rata distributive share from the PA20S/PA-65 Information Return, Line 2h. The entity must
report the owner’s share of income (loss) whether distributed
or not. If reporting a loss fill in the oval.
Guaranteed payments should not be included on Line
1 of PA-20S/PA-65 Schedule NRK-1.

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LINE 2

LINE 8

NET GAIN (LOSS) FROM THE SALE, EXCHANGE
OR DISPOSITION OF PROPERTY
This figure will flow from PA-20S/PA-65 Schedule D, Part I,
Line 18. If reporting a loss fill in the oval.

DISTRIBUTION OF CASH, MARKETABLE SECURITIES
AND PROPERTY NOT INCLUDING GUARANTEED
PAYMENTS
Enter the partner’s share of such distributions of cash,
marketable securities and property other than guaranteed
payments. Nontaxable distributions reduce the nonresident’s
economic investment.

LINES 3 THROUGH 5
Enter the owner’s pro rata distributive share of the
separately stated items of other Pennsylvania taxable
income (loss) from the PA-20S/PA-65 Information Return. If
reporting a loss on Line 3 and/or Line 5, fill in the oval.

SECTION III
OWNER’S SHARE OF PENNSYLVANIA CREDITS
Enter the owner’s pro rata distributive share of the
separately stated credits that the PA S corporation or
partnership passes through to the owners from the PA20S/PA-65 Information Return.

LINE 6
PENNSYLVANIA NONRESIDENT TAX WITHHELD
Enter the Pennsylvania nonresident tax withheld from
nonresident owners of Pennsylvania that was submitted to
the Pennsylvania Department of Revenue.
Include the excess withholding paid on behalf of
nonresidents of Pennsylvania if the owner will receive a
refund or credit of the excess.

LINE 7
TOTAL OTHER CREDITS
Enter the owner’s pro rata share from PA-20S/PA-65
Information Return, Section V, Line 13a. The entity must
provide the owner with a statement listing which credit(s)
have been passed through to them.
When applicable, Line 7 includes credits for PA S
corporations treated as C corporations in other states.
The statement must include the entity’s name, entity’s
federal employer identification number, tax year, owner
name(s), and owner tax identification number(s).
IMPORTANT: See PA-20S/PA-65 Schedule OC
instructions for which credits must be applied to
corporate tax liability prior to being passed through to the
entity’s owners. C corporation owners cannot claim credit for
taxes paid to other states.

SECTION IV
DISTRIBUTIONS FROM PARTNERSHIPS
Noncorporate shareholders and partners should use the
amounts from PA-20S/PA-65 Schedule NRK-1, Section IV
through Section VII, to determine or calculate their
Pennsylvania economic investment in the entity. Partners
include Line 10 in net classified income on their
Pennsylvania tax returns.
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LINE 9
GUARANTEED PAYMENTS FOR CAPITAL
OR OTHER SERVICES
Enter the partner’s share of guaranteed payments for capital
or other services. For nonresidents a guaranteed payment
for other services or for the use of capital is allocable to their
state of residence. Nonresidents are not taxed on a
guaranteed payment for the use of capital for Pennsylvania
personal income tax purposes.
Pennsylvania personal income tax rules classify
distributions of guaranteed payments for capital or other
services as follows:
● A withdrawal proportionately from the capital of all
partners;
● A gain from the disposition of the recipient’s partnership
interest and a loss from the disposition of the other
partners’ partnership interests, to the extent derived from
the capital of the other partners; and
● A return of capital by the recipients to the extent derived
from their own capital. The distributions that the
partnership makes that represent repayments of the
partner’s own capital are not considered income for
Pennsylvania personal income tax purposes.

LINE 10
ALL OTHER GUARANTEED PAYMENTS FOR
SERVICES RENDERED (PENNSYLVANIAAPPORTIONED AMOUNT ONLY)
Enter the partner’s share of such payments taxable in
Pennsylvania. Pennsylvania taxes nonresidents of
Pennsylvania on guaranteed payments based on
Pennsylvania-apportioned calculations for ordinary income.
NOTE: The partner must know the class of income
from which the partnership made the guaranteed
payments. The partner must then properly classify the
payments on the PA-40 Individual Income Tax Return.
Guaranteed payments are apportioned the same as
business income. For example if the guaranteed payment is
$100 and the Pennsylvania apportionment is 50 percent,
then only $50 is included in the business income.
IMPORTANT: If the total guaranteed payments include
more than one of the income classes described below,
the partnership must provide a statement to the partners
showing the amounts for each line.
PA-20S/PA-65 NRK-1
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5

For Pennsylvania personal income tax purposes,
guaranteed payments are classified as follows:

had been paid to him or her in full. Code Sec. 1402(a)(10)
Reg §1.1402(a)-17.

● If services are rendered directly in the production of
income from a business, profession, or farm, the
guaranteed payments are gross income from that
income class.

SECTION V

● If services are rendered directly in the production of
rental or royalty income, the guaranteed payments are
gross income from that income class.
A guaranteed payment is allocable to Pennsylvania to the
extent it is deductible from net profits or rental and royalty
income that is allocable to Pennsylvania. Income allocable to
Pennsylvania is income derived from Pennsylvania sources.
HEALTH SAVINGS ACCOUNTS (HSA)
Contributions by a partnership to a bona fide partner’s HSA
are not contributions by an employer. The contributions are
treated as a distribution of money and are not included in
the partner’s income.
Contributions by a partnership to a partner’s HSA for
services rendered, however, are treated as guaranteed
payments that are deducted by the partnership and included
in the partner’s income. In both situations, the partnership
can deduct the contribution made to the partner’s HSA.
Contributions to a nonresident partner’s HSA for services
must be apportioned.
Contributions by an S corporation to a 2 percent
shareholder/employee’s HSA for services rendered are
deducted by the S corporation as wage or salary expense
and included in the shareholder/employee’s gross
compensation. The shareholder/employee can deduct the
contribution made to the shareholder/employee’s HSA.

LINE 11
GUARANTEED PAYMENTS TO A RETIRED PARTNER
Guaranteed payments to a retired partner must meet the
exception as described in IRC §1402(a)(10).
Generally, retirement payments received by a retired partner
from a partnership (of which he or she is a member or former
member) are counted as net earnings from self-employment.
Certain periodic payments by a partnership to a retired
partner made on account of retirement under a written plan
of partnership are excluded from the tax. To be effective, the
plan must meet such requirements as are prescribed by Reg
§1.1402(a)-17. It must apply to partners generally or to a
class or classes of partners, and provide such payments at
least until the retired partner's death.
The exclusion applies to retirement payments received by a
retired partner only if he or she renders no services in any
business conducted by the partnership during the taxable
year of such partnership, ending within or with his or her
taxable year in which amounts were received. At the end of
such partnership's taxable year: (1) there must be no
obligation from other partners to the retired partner, other
than to make retirement payments under the plan; and (2)
the retired partner's share in the capital of the partnership
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DISTRIBUTIONS FROM PA S CORPORATIONS

LINE 12
DISTRIBUTIONS FROM THE PENNSYLVANIA
ACCUMULATED ADJUSTMENTS ACCOUNT
Enter the shareholder’s share of such distributions.
Nontaxable distributions reduce the nonresident’s economic
investment. If a liquidating distribution, fill in the oval.

LINE 13
DISTRIBUTIONS OF CASH, MARKETABLE
SECURITIES AND PROPERTY
Enter the shareholder’s share of such distributions.
Nontaxable distributions reduce the nonresident’s
economic investment.
The PA S corporation should not include distributions to
Pennsylvania nonresident shareholders from its PA C
corporation earnings and profits as taxable dividend income.

SECTION VI
NONTAXABLE INCOME (LOSS)
OWNER’S ECONOMIC INVESTMENT

LINE 14
NONTAXABLE INCOME OR NONDEDUCTIBLE
EXPENSES REQUIRED TO CALCULATE OWNER’S
ECONOMIC INVESTMENT. SUBMIT A STATEMENT
The difference between federal and Pennsylvania
depreciation should not be included on this line. Line 14 is
based on permanent nontaxable income or nondeductible
expenses in calculating Pennsylvania taxable income. This
amount is generally not the same amount reported on the
PA-20S/PA-65 Information Return, Section IV, Line 12
because Line 12 should include non-permanent items.
The owners need this information to determine their
personal Pennsylvania economic investment in the entity,
taking into consideration the losses and distributions that
may exceed their economic investment. Submit a statement
that includes the entity’s name, federal employer
identification number and tax year and provide a breakdown
of all nontaxable income earned and all non-deductible
expenses not taken. This amount should only include
permanent differences needed to calculate the owner’s
economic investment in the entity. If reporting a loss fill in
the oval.
The entity provides the owners with this information so the
owners can calculate their economic investment. Examples
of nontaxable income are tax-exempt interest, gifts,
inheritance, loan proceeds, insurance proceeds and federal
tax refunds. Examples of nondeductible expenses are

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partner's retirement contributions, partner’s life and health
insurance premiums.
These items may be listed on federal Form 1120S Schedule
K as “Items Affecting Shareholder Basis” and on federal
Form 1065 Schedule K as “Other Information”.

SECTION VII
SUPPLEMENTAL INFORMATION
The owners will need certain information to determine their
personal Pennsylvania economic investment in the entity.

LINE 15
OWNER’S SHARE OF IRC §179 ALLOWED
(PENNSYLVANIA-APPORTIONED AMOUNT ONLY)
Enter the owner's share of IRC §179 depreciation expense.
Each entity and individual taxpayer is limited to the IRC §179
federal depreciation expense for years beginning on or after
January 1, 2023. Do not deduct this amount from any income
class. This is for information only and is used to verify the
owner has not exceeded the IRC §179 depreciation expense
on a individual entity or aggregate basis.

LINE 16
OWNER’S SHARE OF STRAIGHT-LINE DEPRECIATION
(PENNSYLVANIA-APPORTIONED AMOUNT ONLY)
Enter the owner’s share of the entity’s total expense. In years

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in which the entity incurs a loss and the owner is not able to
use the entire loss, the owner is required to reduce their
economic investment in the entity by their share of straightline depreciation. Therefore, assets for which accelerated
depreciation has been calculated must be recalculated using
straight-line depreciation in order to calculate Pennsylvania
economic investment. The life of the asset must be the same
life that was used to calculate depreciation expense deducted
in determining Business Income (Loss) from Operations
and/or Rental Income (Loss).

LINE 17
PARTNER’S SHARE OF NONRECOURSE LIABILITIES
AT YEAR-END
Enter the partner’s share of nonrecourse liabilities at year-end.
A nonrecourse liability is a secured liability, identified by the
partnership, for which the partners are not personally liable.
Nonrecourse liabilities apportion such debts to each
partner’s outside basis and validate deductions based on
such liabilities.

LINE 18
PARTNER’S SHARE OF RECOURSE LIABILITIES
AT YEAR-END
Enter the partner’s share of recourse liabilities at yearend. A recourse liability is one for which a partner is
personally liable.

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