Owning MLP units can create state tax filing obligations in states where you don't live — because the MLP operates there and allocates income to you. But the reality for most small investors: you probably owe returns in 0–3 states beyond your home state. Many allocations are $5–50, often below filing thresholds. This page tells you which states matter and which you can likely ignore.
By Lucas Andersen — Last updated March 6, 2026
When you own MLP units, you are a limited partner in a business that operates across multiple states. Each state where the MLP has operations can claim the right to tax your proportional share of income earned in that state. Your K-1 includes a supplemental state allocation schedule showing income allocated to each state. A large MLP like Energy Transfer might show 40+ states. Black Stone Minerals can show 20+ from scattered mineral rights.
For a typical $10,000 position in a major midstream MLP, your allocated income in most states is single digits to low double digits. You might see $3 allocated to Montana, $8 to New Mexico, $47 to Oklahoma. The question is: do you actually need to file a nonresident return in each of these states?
The answer for most small investors: No. Between states with no income tax, filing thresholds that exceed your allocation, and composite returns filed by the MLP on your behalf, most retail MLP investors file 0–3 state returns beyond their home state during holding years.
This table covers the states most commonly seen on MLP K-1 state supplements. Thresholds are for individual nonresident filers. Verified against official state DOR/tax authority sources as of March 2026. Many states have no dollar threshold — they require filing for any state-source income if you have a federal filing requirement.
| State | Income Tax? | Nonresident Filing Threshold | Composite Available? | Notes |
|---|---|---|---|---|
| Alaska | No | N/A | — | No filing required |
| Arkansas | Yes | Any income (no threshold) | Often | DKL state. No nonresident dollar threshold — any AR-source income requires filing. |
| California | Yes | Varies by status (e.g. $22,941 gross, single <65) | No | FTB threshold based on total worldwide gross income, not just CA-source. Most investors exceed it, so effectively any CA-source income triggers filing. No composite return. |
| Colorado | Yes | No de minimis — any income | Often | WES primary state (DJ Basin). Any CO-source income requires filing. Composite strongly recommended. |
| Florida | No | N/A | — | No filing required |
| Illinois | Yes | $2,850 (2025 personal exemption) | Often | NRP, BSM states. Threshold tied to personal exemption amount, updated annually. |
| Kansas | Yes | Any income (no threshold) | Often | No nonresident dollar threshold — any KS-source income requires filing. |
| Kentucky | Yes | $15,650 total income (single) | Often | NRP primary state. Threshold is on total modified gross income from all sources — most investors exceed it, so effectively any KY-source income triggers filing. |
| Louisiana | Yes | Any income (no threshold) | Often | Major MLP state. LA’s $12,500 standard deduction (2025 reform) is NOT a filing threshold. Nonresidents must file for any LA-source income if federal filing required. |
| Montana | Yes | Any income if federal filing required | Sometimes | NRP state. Post-SB 399 (2024): MT no longer has a state-specific threshold. Must file if federal filing required + any MT-source income. |
| Nevada | No | N/A | — | No filing required |
| New Hampshire | No | N/A | — | I&D tax repealed 2025. No filing required. |
| New Mexico | Yes | Any income (no threshold) | Sometimes | No nonresident dollar threshold. Any NM-source income requires filing if federal filing required. Permian Basin allocations relevant for WES, PAA. |
| New York | Yes | $8,000 NY std deduction (single) | No | Threshold based on total federal AGI, not NY-source. Most investors exceed it, so effectively any NY-source income triggers filing. No composite return. |
| North Dakota | Yes | Any income if federal filing required | Often | Bakken allocations. No state-specific threshold — ND defers to federal filing requirement. If you file federally and have any ND-source income, you must file. |
| Ohio | Yes | Exemption-based (~$2,400) | Often | USAC state. No filing required if personal exemption (up to $2,400 for MAGI ≤$40k) exceeds Ohio AGI. Municipal income tax may also apply separately. |
| Oklahoma | Yes | $1,000 (OK-source gross income) | Often | Major MLP state. Confirmed: $1,000 OK-source gross income threshold per OTC. Common filing state for midstream MLPs. |
| Pennsylvania | Yes | ~$33 ($1 tax at 3.07%) | Often | PA rule: file if $1+ in tax liability. At 3.07% flat rate, that’s ~$33 of income. Extremely low. USAC, CAPL, NRP state. One of the most common NR filing states for MLP investors. |
| South Dakota | No | N/A | — | No filing required |
| Tennessee | No | N/A | — | Hall tax repealed 2021. No income tax on partnership income. DKL state. |
| Texas | No | N/A | — | No individual income tax. Franchise tax applies to entities only, not individual unitholders. Most common MLP operating state. |
| Virginia | Yes | $11,950 VAGI (single/MFS) | Often | CAPL, NRP state. Confirmed per tax.virginia.gov. Threshold based on total AGI — most investors exceed it, so effectively any VA-source income triggers filing. |
| Washington | No | N/A | — | No income tax. Capital gains tax applies to sales of stocks/bonds, not partnership pass-through. |
| West Virginia | Yes | Any income (no threshold) | Often | USAC, NRP state. No nonresident dollar threshold — any WV-source income requires filing if federal filing required. |
| Wyoming | No | N/A | — | No filing required. NRP soda ash operations here. |
A composite return is filed by the MLP on behalf of all eligible nonresident unitholders in a given state. The MLP calculates your state tax liability, withholds the tax (typically at the state’s highest marginal rate), and files the return for you. Check your K-1 package for composite return opt-in instructions — you typically must enroll through Tax Package Support or Partner DataLink before the filing deadline.
Key composite return rules: (1) Not all MLPs offer composites in all states. (2) Your home state is excluded — you always file your own resident return. (3) If you opt into a composite return for a state, you generally do NOT need to file a separate nonresident return for that state. (4) The tax rate used in composite returns is typically the highest marginal rate, which may be higher than your actual rate. (5) Composite returns may not cover the sale year — check with the MLP.
During holding years, your state allocations are typically small — $5 to $200 in most states. But when you sell MLP units, the disposition gain is allocated across ALL operating states proportionally. States where you had $20/year of income might suddenly show $500+ of gain in the sale year. This can push multiple states above their filing thresholds simultaneously.
Practical implications: (1) You may owe nonresident returns in 5–10+ states in the year of sale vs 0–3 during holding years. (2) Composite returns may NOT cover sale-year gain — verify with the MLP. (3) Filing costs can run $200–$500 per state for CPA-prepared returns. (4) You will almost certainly need a filing extension (Form 4868) to wait for the final K-1. This is one more argument for the hold-forever strategy that avoids §751 recapture.
Most states offer a credit for taxes paid to other states on the same income. You report your full MLP income (including all state allocations) on your resident state return, then claim a credit for taxes paid directly or via composite returns to other states. Missing this credit means paying tax twice on the same income — once to the operating state and once to your home state.
Here is a quick reference for the primary operating states of each MLP we cover. Your K-1 state supplement is the definitive source.
Step 1: Get your K-1 state supplement. It is usually a separate page or section in your K-1 tax package listing income by state.
Step 2: Cross out every no-income-tax state (TX, WY, TN, FL, NV, AK, SD, WA, NH).
Step 3: For remaining states, compare your allocated income to the filing threshold in the table above.
Step 4: Check if the MLP filed a composite return for you in each state that exceeds the threshold.
Step 5: For states above threshold without composite coverage, you need a nonresident return. For states below threshold: you technically may still have a filing obligation in some states, but enforcement on $12 of allocated partnership income is effectively zero. The cost of filing ($50–$300 per state) often exceeds the tax owed. This is a risk/reward decision — we cannot tell you to skip a legal filing requirement, but we can tell you that states focus enforcement resources on high-value noncompliance, not $4 of PTP pass-through income.