MLP State Filing Requirements: Which Tax Returns Do You Actually Need to File?

When you own units of a midstream MLP, you are a limited partner in a business that physically operates pipelines, processing plants, and storage terminals across dozens of states. Each state where the partnership earns income can claim the right to tax your share of that income.

Your K-1 includes a state allocation schedule — typically the last few pages of the tax package — that breaks down your income by state. A large midstream MLP like Energy Transfer or MPLX might show allocations in 20 or more states.

Category 1: No Income Tax States

Nine states have no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire fully repealed its income tax effective 2025. If your K-1 allocates income to these states, no filing is required regardless of the amount.

This is particularly relevant for PAA and parts of ET, which have heavy Texas operations. Texas-weighted MLPs automatically reduce your state filing burden.

Category 2: Threshold States (Most Common)

Many states only require nonresident filing when your income from sources within that state exceeds a minimum threshold. These thresholds vary widely — and they're the key to determining your actual filing obligations.

*Ohio uses an exemption-based system: up to $2,400 for MAGI ≤$40k, lower for higher incomes. PA threshold is the income equivalent of the $1 tax-liability rule at the 3.07% flat rate. "$0 (any)" states require filing for any amount of state-source income. Thresholds verified against official state DOR sources as of March 2026.

Category 3: Zero-Threshold States

Many states require a nonresident return for any amount of income, no matter how small. This includes Colorado, Louisiana, New Mexico, West Virginia, Kansas, North Dakota, and others. Colorado is particularly significant for WES unitholders with DJ Basin operations. Pennsylvania's ~$33 threshold (income equivalent of $1 tax liability) is effectively zero.

In practice, many investors still skip these when the allocated income is under $100. But they are technically required to file.

Select your MLP to see which states it operates in and what filing obligations may apply. Click any state for details.

A composite return is a single tax filing made by the MLP on behalf of all its nonresident partners in a given state. When available, the MLP calculates and pays state tax for you — typically at the state's highest marginal rate — and you don't need to file a separate nonresident return.

This is the section most state filing guides won't give you straight. Here's the practical reality of MLP state tax enforcement for small unitholders:

The cost-benefit reality: Preparing and filing a nonresident state return costs $50-$150+ per state (whether you use software or a CPA). If your allocated income in a state is $75 and the state tax would be $4, the cost of compliance exceeds the tax owed by 10-30x.

How states actually enforce: State tax authorities prioritize high-value noncompliance — businesses with $100K+ of unreported income, not individuals with $75 of PTP pass-through. Most states receive K-1 data from partnerships but don't have automated matching systems sophisticated enough to flag $4 of unpaid tax from nonresident PTP unitholders. This doesn't make nonfiling legal — it makes it low-risk for tiny amounts.

What most practitioners actually do:

Given the complexity, here's the approach most MLP investors and tax professionals follow:

1. Always file your home state. Include all MLP income on your resident return. Claim credits for taxes paid to other states (directly or via composite returns).
2. Enroll in composite returns for every state the MLP offers. This eliminates most nonresident filing obligations automatically and is the single highest-ROI action.
3. File in states with over $1,000 of allocated income that don't have composite coverage. The tax owed is meaningful, and the income is large enough that the state may notice.
4. Evaluate $100-$1,000 states on a cost-benefit basis. If the state tax would be $20 but filing costs $75, many practitioners consider the nonfiling risk minimal.
5. States under $100 — most investors and CPA firms skip these unless the investor is extremely risk-averse. The practical enforcement risk is essentially zero.

Each MLP has a different geographic footprint. Here's a quick overview of state filing for the major MLPs:

During normal holding years, state allocations are typically small — $50-$500 per state for a $20,000 position. The filing burden is manageable, especially with composite returns.

The year you sell is fundamentally different. When you dispose of your MLP units, the gain on sale is allocated across every state where the partnership operates. If you have a $5,000 gain, portions are sourced to each operating state based on the partnership's apportionment factors.

Key things to know about sale-year filings:

• Allocations spike. Instead of $100 to Ohio, you might have $800. States below threshold during holding years may now require filing.
• Composites may not cover it. Some MLPs only file composites for ongoing income, not sale-year gain. Verify with Tax Package Support.
• Extensions are almost always necessary. The final-year K-1 may not arrive until September. File extensions in every required state.
• §751 ordinary income adds complexity. Section 751 recapture is allocated by state too — you may owe ordinary income rates in some states alongside capital gains in others.

Most states with income taxes offer a credit for taxes paid to other states on the same income. This prevents double taxation.

The mechanics: You report full MLP income on your home state return, then claim a credit for nonresident state taxes you paid (directly or via composite return). The credit is typically limited to the lesser of: the tax actually paid to the other state, or the tax your home state would charge on that same income.