Composite Return - Double Taxation?

[dascpa]

Never filed a composite return before but isn't it double taxation?  Once at the entity level and then at the owner's resident state level?  If no composite return the taxpayer reports and pays income to the "other" state but gets a credit on their resident state.  Or is my thinking incorrect?

[sjrcpa]

Most states allow the individual to claim a tax credit for the composite nonresident tax paid on their behalf by the entity.

[Accountant-Man]

A composite return is filed so the partner(s) don't have to file the same state's return for themselves. So no double taxation.

But you can still claim a deduction of federal schedule A and a credit on your home state. The payment of the composite tax for the benefit of the partner is a draw on the 1065, not a tax deduction on the 1065.

[dascpa]

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).

[Accountant-Man]

Yes, you file the k-1 on the 1040, but you do not file a state income tax return. THAT IS THE WHOLE POINT OF A COMPOSITE RETURN. Since the partner has no other connection to that particular state, the only income is the k1, then you do not need to file a personal state return in that state.

Attach a copy of the composite form showing the tax paid for the individual to the resident state claiming the credit.