I must be dense on this.

The entity pay the tax.  (1).

But I still have to report the K-1 Federally and on my resident state (2).  The first post above said you can claim the credit paid for taxes paid to another state but of course there is no other state tax return to attach since you as the individual aren't paying the tax.  

I still see this as entity (1) and me personally on my resident state (2).