How do multi-state SALT rules affect developers operating across multiple jurisdictions?

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Separately, crossing state lines can trigger filing, withholding, composite return, and entity-level tax obligations even where a project is temporary or held in a single-purpose entity.

Federal SALT framework

IRC §164(a) generally allows deductions for state and local real property taxes, personal property taxes, and income taxes paid or accrued. For individuals, IRC §164(b)(6) and (7) impose a state and local tax (SALT) deduction cap. For 2026, the cap is $40,400, reduced by 30% of modified AGI above $505,000, but not below $10,000; married filing separately generally uses half-threshold mechanics.

That matters for developers because owners often incur large property taxes, state income taxes on gain, and taxes from multiple project states. If those taxes are paid personally, the federal benefit may be limited. By contrast, Notice 2020-75 states that state and local income taxes imposed on and paid by a partnership or S corporation are deductible by the entity in computing non-separately stated income or loss, and are not counted again against the owners’ individual SALT limitation.

Multi-state filing exposure

For developers, the practical issue is not just where a project sits, but where the entity is treated as doing business, earning source income, or having resident owners. State partnership filing rules vary sharply.

Enumerated examples:

1. Georgia requires a partnership return if the entity is engaged in business in Georgia, owns Georgia property, has Georgia-domiciled members, or has Georgia-source income.
2. Indiana requires filing if the partnership does business in Indiana, has Indiana-source income, or merely has Indiana-resident partners.
3. New Jersey requires filing if the partnership has New Jersey-source income or any New Jersey resident partner.
4. New York State requires filing if the partnership has New York-source items or at least one New York resident individual, estate, or trust partner.
5. Oregon and Pennsylvania also treat resident partners as independent filing triggers.

SALT Issues

Developers also need to track corporate-style nexus standards for blocker corporations, taxable REIT subsidiaries, or entities taxed as corporations. An income tax nexus by state chart shows that some states use factor thresholds rather than physical presence. For 2026, California uses $757,070 of sales or 25% of total sales; Colorado and Tennessee use $500,000 of sales; New York uses $1,283,000 of in-state sales.

These State and Local Tax Rules can affect:

• project-level entity choice,
• whether PTET elections improve federal deductibility,
• nonresident withholding and composite return obligations,
• resident-partner-driven filing in states with no project activity,
• and apportionment or sourcing for development fees, management income, and gain.

In short, multi-state developers must analyze both IRC §164 and each state’s filing trigger. The federal limitation may restrict owner-level deductions, but entity-level taxes may preserve deductibility, while state-by-state nexus and partnership rules can create compliance obligations well beyond the project location.

How BT Can Help

For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact DiAndria Green, Partner and Co-Leader of Bennett Thrasher’s State and Local Tax (SALT) practice, or call us at 770.396.2200.

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