distributions aren't taxable unless your tax basis is reduced below $0. as for filing in nonresident states. some allow the carryover of losses. but it's only important if there is eventually income attributable to that state. if you don't file returns every year to report those losses, the state would likely disallow any loss you tried to claim to offset income reported in a future year. this can be significant if the entity is engaged in rental real estate and sells property in a state in which you don't reside. if you don't file those loss year returns, those losses will not be available to offset any gain from the sale.
