diff --git a/go.mod b/go.mod
index 29829ebe..bccf7826 100644
--- a/go.mod
+++ b/go.mod
@@ -4,7 +4,7 @@ go 1.24.0
 
 require (
 	github.com/aws-controllers-k8s/pkg v0.0.19
-	github.com/aws-controllers-k8s/runtime v0.54.0
+	github.com/aws-controllers-k8s/runtime v0.54.1
 	github.com/aws/aws-sdk-go v1.49.0
 	github.com/aws/aws-sdk-go-v2 v1.32.7
 	github.com/dlclark/regexp2 v1.10.0 // indirect
diff --git a/go.sum b/go.sum
index 2198a935..91568a5d 100644
--- a/go.sum
+++ b/go.sum
@@ -73,8 +73,12 @@ github.com/asaskevich/govalidator v0.0.0-20180720115003-f9ffefc3facf/go.mod h1:l
 github.com/asaskevich/govalidator v0.0.0-20190424111038-f61b66f89f4a/go.mod h1:lB+ZfQJz7igIIfQNfa7Ml4HSf2uFQQRzpGGRXenZAgY=
 github.com/aws-controllers-k8s/pkg v0.0.19 h1:q/NhMvj6fCkHAJTyasrOWNdYME9/eCdeA5tStz4hHb8=
 github.com/aws-controllers-k8s/pkg v0.0.19/go.mod h1:VvdjLWmR6IJ3KU8KByKiq/lJE8M+ur2piXysXKTGUS0=
+github.com/aws-controllers-k8s/runtime v0.53.1 h1:l9MkR1KfZW8H8icT5rrRK3pdnVVA4io/eINVe5aspWs=
+github.com/aws-controllers-k8s/runtime v0.53.1/go.mod h1:OkUJN+Ds799JLYZsMJrO2vDJ4snxUeHK2MgrQHbU+Qc=
 github.com/aws-controllers-k8s/runtime v0.54.0 h1:RWv5cVb428styiRTHugRF8bMWjXkgsDc5E6Q/BoD8gA=
 github.com/aws-controllers-k8s/runtime v0.54.0/go.mod h1:OkUJN+Ds799JLYZsMJrO2vDJ4snxUeHK2MgrQHbU+Qc=
+github.com/aws-controllers-k8s/runtime v0.54.1 h1:0mbCJELz3t7jbG4abNecF0yeRd8YeFZQPr7nnzr8DC8=
+github.com/aws-controllers-k8s/runtime v0.54.1/go.mod h1:OkUJN+Ds799JLYZsMJrO2vDJ4snxUeHK2MgrQHbU+Qc=
 github.com/aws/aws-sdk-go v1.49.0 h1:g9BkW1fo9GqKfwg2+zCD+TW/D36Ux+vtfJ8guF4AYmY=
 github.com/aws/aws-sdk-go v1.49.0/go.mod h1:LF8svs817+Nz+DmiMQKTO3ubZ/6IaTpq3TjupRn3Eqk=
 github.com/aws/aws-sdk-go-v2 v1.32.7 h1:ky5o35oENWi0JYWUZkB7WYvVPP+bcRF5/Iq7JWSb5Rw=
diff --git a/pkg/generate/ack/runtime_test.go b/pkg/generate/ack/runtime_test.go
index 20e211b0..60ff95d4 100644
--- a/pkg/generate/ack/runtime_test.go
+++ b/pkg/generate/ack/runtime_test.go
@@ -147,7 +147,7 @@ func (frm *fakeRM) EnsureTags(
 	return nil
 }
 
-func (frm *fakeRM) FilterSystemTags(acktypes.AWSResource) {}
+func (frm *fakeRM) FilterSystemTags(acktypes.AWSResource, []string) {}
 
 // This test is mostly just a hack to introduce a Go module dependency between
 // the ACK runtime library and the code generator. The code generator doesn't
diff --git a/templates/pkg/resource/manager.go.tpl b/templates/pkg/resource/manager.go.tpl
index 01188517..fde8e633 100644
--- a/templates/pkg/resource/manager.go.tpl
+++ b/templates/pkg/resource/manager.go.tpl
@@ -312,13 +312,26 @@ func (rm *resourceManager) EnsureTags(
 {{- end }}
 }
 
-// FilterAWSTags ignores tags that have keys that start with "aws:"
-// is needed to ensure the controller does not attempt to remove
-// tags set by AWS. This function needs to be called after each Read
-// operation.
-// Eg. resources created with cloudformation have tags that cannot be
-//removed by an ACK controller
-func (rm *resourceManager) FilterSystemTags(res acktypes.AWSResource) {
+// FilterSystemTags removes system-managed tags from the resource's tag collection
+// to prevent the controller from attempting to manage them. This includes:
+//   - Tags with keys starting with "aws:" (AWS-managed system tags)
+//   - Tags specified via the --resource-tags startup flag (controller-level tags)
+//   - Tags injected by AWS services (e.g., CloudFormation, EKS, etc.)
+//
+// This filtering is essential because:
+//   1. AWS services automatically add system tags that cannot be modified by users
+//   2. Attempting to remove these tags would result in API errors
+//   3. The controller should only manage user-defined tags, not system tags
+//
+// Must be called after each Read operation to ensure the resource state
+// reflects only manageable tags. This prevents unnecessary update attempts
+// and maintains consistency between desired and actual resource state.
+//
+// Example system tags that are filtered:
+//   - aws:cloudformation:stack-name (CloudFormation)
+//   - aws:eks:cluster-name (EKS)
+//   - services.k8s.aws/* (Kubernetes-managed)
+func (rm *resourceManager) FilterSystemTags(res acktypes.AWSResource, systemTags []string) {
 {{- if $hookCode := Hook .CRD "filter_tags" }}
 {{ $hookCode }}
 {{ else }}
@@ -342,7 +355,7 @@ func (rm *resourceManager) FilterSystemTags(res acktypes.AWSResource) {
 {{ end -}}
     existingTags = r.ko.Spec.{{ $tagField.Path }}
 	resourceTags, tagKeyOrder := convertToOrderedACKTags(existingTags)
-	ignoreSystemTags(resourceTags)
+	ignoreSystemTags(resourceTags, systemTags)
 {{ GoCodeInitializeNestedStructField .CRD "r.ko" $tagField "svcapitypes" 1 -}}
 	r.ko.Spec.{{ $tagField.Path }} = fromACKTags(resourceTags, tagKeyOrder)
 {{- end }}
diff --git a/templates/pkg/resource/tags.go.tpl b/templates/pkg/resource/tags.go.tpl
index 27f0b592..d715f44b 100644
--- a/templates/pkg/resource/tags.go.tpl
+++ b/templates/pkg/resource/tags.go.tpl
@@ -11,7 +11,6 @@ import(
 var (
 	_ = svcapitypes.{{ .CRD.Kind }}{}
 	_ = acktags.NewTags()
-    ACKSystemTags = []string{"services.k8s.aws/namespace", "services.k8s.aws/controller-version"}
 )
 
 {{- if $hookCode := Hook .CRD "convert_tags" }}
@@ -59,13 +58,14 @@ func fromACKTags(tags acktags.Tags, keyOrder []string) {{ $tagFieldGoType }} {
 {{ end }}
 
 // ignoreSystemTags ignores tags that have keys that start with "aws:"
-// and ACKSystemTags, to avoid patching them to the resourceSpec.
+// and systemTags defined on startup via the --resource-tags flag,
+// to avoid patching them to the resourceSpec.
 // Eg. resources created with cloudformation have tags that cannot be
 // removed by an ACK controller
-func ignoreSystemTags(tags acktags.Tags) {
+func ignoreSystemTags(tags acktags.Tags, systemTags []string) {
 	for k := range tags {
 		if strings.HasPrefix(k, "aws:") ||
-			slices.Contains(ACKSystemTags, k) {
+			slices.Contains(systemTags, k) {
 			delete(tags, k)
 		}
 	}