I have this exact same situation.  IN S-Corp business with a couple of nonresidents.  The company as a whole and ALL shareholders have losses allocated.  The Schedule Composite is checked, but the form will not activate since all nonresident shareholders had losses.  I was under the belief that the schedule was not needed in this case, so it was filed without.  And we just received a notice of a $500 penalty for "not paying taxes on time".  Upon a call to the IN DOR, the rep stated the penalty was because a schedule composite was not filed.  I have been trying to get this schedule to populate in Proseries without any success.  To get the form to activate, I had to force the bottom line to be a net income (from net loss) then print out the form and manually correct it.    Does anyone have any more advice or knowledge of this issue?