45 IAC 3.1-1-66 Subchapter S corporations and shareholders

Authority: IC 6-8.1-3-3

Affected: IC 6-3-2-2.8; IC 6-3-4-13

Sec. 66. Subchapter S Corporations. Corporations electing Subchapter S status under Internal Revenue Code §1372 and which comply with the withholding requirements of IC 6-3-4-13 are exempt from adjusted gross and supplemental net income tax on all income except capital gains subject to tax under Internal Revenue Code §1378. This exemption is effective until the corporation's shareholders terminate the election with the Internal Revenue Service or until the corporation engages in transactions which disqualify it from Subchapter S status. A complete or partial corporate liquidation or the intent to dissolve will not in itself terminate the election.

Subchapter S corporation shareholders are taxed on their distributive shares of income at the individual income tax rate. The character of the income (as capital gains or ordinary income) also passes through to the shareholders.

Although Subchapter S corporations are generally not subject to adjusted gross income tax, they are subject to use tax and intangibles tax, and must report and pay such tax at the time the annual return is filed. Subchapter S corporations must also withhold adjusted gross income tax on any nonresident shareholder's share of corporate income. See Regulation 6-3-4-13(010) $45 IAC 3.1-1-109$ et seq.

For filing requirements of Subchapter S corporations, see Regulation 6-3-2-3(b)(020) $45 IAC 3.1-1-67$.

(Department of State Revenue; Reg 6-3-2-3(b)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1534; errata, 2 IR 1743)