Traditionally, entities exempt from having to file federal tax returns were also exempt from having to file state and local returns. But some local jurisdictions, including the cities of Philadelphia and Detroit, among others, now require returns as they seek to account for income generated within their borders. This may become more prevalent as city budgets and associated deficits continue to grow. The tax or filing requirement will have different names depending upon jurisdiction similar to the ‘business privilege tax’.
So we recommend contacting municipal authorities where your properties are located for information about requirements, and then consulting your accounting and tax advisors. This is a good time to get a separate Taxpayer Identification Number (TIN) for your account in case you need to file.