The Act of October 30, 2017, No. 43, P.L. 672, amended the Tax Reform Code of 1971 by adding new requirements for the withholding of Pennsylvania income tax from payments of Pennsylvania source income to nonresidents, and the Department of Revenue has recently published some guidelines regarding the new rules in its bimonthly newsletter, “Tax Update” (No. 197, June/July 2018), and on its website. Although the Department of Revenue describes these new withholding rules in very broad terms, it appears that these new rules do not apply to distributions from estates and trusts to nonresident beneficiaries.
Specifically, the Act adopted new withholding rules for the following:
- Payments of Pennsylvania source income for which a Form 1099-MISC is required. (See new Code § 316.2, added by Act § 13.) This would include payments made in the course of a trade or business for things like non-employee compensation for services performed in Pennsylvania, or royalties paid for mineral interests in Pennsylvania.
- Payments by lessees of Pennsylvania real estate to a nonresident lessor, but only for lease payments in the course of a trade or business. (See new Code § 324.4, added by Act § 25.) According to the Department of Revenue, this does not apply to residential leases.
So these new provisions might apply to an estate or trust, but only if the estate or trust were conducting a trade or business and were making the kinds of payments described above. Even then, other exceptions might apply.