Tennessee Revenue explains who qualifies for Obligated Member Entity election and filing steps

Billy Trout, Taxpayer Education with the Tennessee Department of Revenue, opened a departmental webinar describing the Obligated Member Entity (OME) election as a way to obtain pass-through tax treatment for franchise and excise taxes.

"The purpose of this OME election-- it's to obtain a pass-through tax treatment," Trout said, adding that the election is intended to "avoid duplication of taxation" under Tennessee law.

Why it matters: The department said OME can prevent an entity and its members from being taxed twice at the entity level, but only certain business types and properly timed filings qualify. The session cited Tennessee Code Annotated 67-4-2008 as the statutory basis for the OME provisions.

Who can elect and how it works: Department officials said only limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs) may make the election. Trout said all members must make the election for it to be valid: "If one or more members doesn't make the election,…