This Technical Information Release ("TIR") outlines how to qualify for a waiver of the requirement of filing Partner's Massachusetts Information Schedule 3K-1 with Form 3. It explains the procedure and the information to be included by the General Partner when, under special circumstances, the Partnership uses substitute Federal K-1s with cover statements in place of the Massachusetts Schedule 3K-1s.

General Rules

Subject to the conditions set out below, the Department of Revenue ("Department") will accept a timely filed Form 3: Partnership Return of Income which, in lieu of Massachusetts Schedule 3K-1s, contains a Federal K-1 and cover statement for each partner. (Partner, for purposes of this TIR, includes resident, nonresident, corporate or other partner). In all cases, the partnership must provide the Department and each partner information on each partner's distributive share of items of income, loss, deduction, credit, and any other separately stated items, apportionment percentages, and Massachusetts capital account reconciliation, in sufficient detail to allow the partner accurately to report items on the partner's Massachusetts income tax return.

Prior approval from the Department is not required by a partnership which meets the conditions specified below for the waiver of filing Schedule 3K-1 with its Form 3. However, the Department reserves the right to reject any Form 3 which fails to meet the conditions outlined below or fails to contain all pertinent information described in this TIR. Rejection of a return or supporting schedule may subject the partnership to penalties under G.L. c. 62C.

Conditions for Waiver

Partnerships which are required to file Form 3: Partnership Return of Income under G.L. c. 62C, also must file a Massachusetts Schedule 3K-1 for each partner. Massachusetts Schedule 3K-1 Parallels the federal K-1 and is designed to allow a partnership to report each partner's distributive share of partnership income separately, to reconcile each partner's Massachusetts capital account, and to inform each partner of the differences between the partner's Massachusetts and U.S. income. The Department will waive the requirement of filing Massachusetts Schedule 3K-1 with Form 3, as long as the federal K-1 for each partner is attached, and the following additional conditions are satisfied:

1. There are no differences for each and every item, other than apportionment, between the partner's Massachusetts and U.S. income; and

2. The partnership provides each partner and the Department with the applicable apportionment percentages for Massachusetts; and

3. The partnership attaches a statement to the federal K-1 of each partner noting the above conditions and sufficient information for the partner to report the partner's distributive share of partnership items on the partner's Massachusetts return, including the reconciliation of each partner's Massachusetts capital account. The federal K-1 and cover statement should be attached to and filed with Form 3 and sent to each partner with appropriate Massachusetts instructional information.

Circumstances in which Substitute Federal K-1s with Cover Statement are Not Sufficient

The waiver of the requirement of filing Schedule 3K-1 is allowed only when there are no Massachusetts and U.S. differences for each and every item, other than apportionment differences. Accordingly, where the partnership has portfolio income which includes Massachusetts and out of state interest income, guaranteed payments, or any other kind of income, deduction, credit, etc. whose treatment for Massachusetts purposes is different from its treatment for U.S. purposes, for reasons other than apportionment, the partnership must satisfy the requirements of filing Massachusetts Schedule 3K-1. Of course, in such cases, a partnership may continue to submit with its Form 3, substitute computerized schedules for the 3K-1s along with copies of the federal K-1s, as long as the substitute computerized schedules meet the Department's specifications for computer prepared forms, as set forth in Technical Information Release 87-12.

Consequences of Failing to Follow these Requirements

The Department reserves the right to reject any Form 3 that fails to meet these conditions. Rejection of a return or supporting schedules may subject the partnership to penalties under G.L. c. 62C.

/s/Stephen W. Kidder
Stephen W. Kidder
Commissioner of Revenue

February 8. 1989

TIR 89-1