STATE PTE TAX: THE RISKS, REQUIREMENTS, AND SAVINGS OPPORTUNITIES
Did you know that each state PTE tax involves different eligibility requirements, election due dates, filing deadlines, and effective dates?
IT'S ALL IN THE DETAILS
Click on your state below, and review your state's specific information, to see if you can take advantage of the State Pass-Through Entity Cap Workaround.
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EFFECTIVE DATE
Jan. 1, 2021
ELECTION DUE DATE
On or before the 15th day of the third month following the close of the tax year the entity elects to be taxed as a PTE.
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CALIFORNIA
California’s Gov. Gavin Newsom recently signed Assembly Bill 150 (“AB150”), which created a workaround for the current $10,000 limitation on the deduction for state and local taxes paid for individuals established by the Tax Cuts and Jobs Act (TCJA). AB150 creates an elective tax that allows the taxes on pass-through income to be paid at the entity level. This means owners will be able to bypass the cap’s limitation that could otherwise be applicable.
EFFECTIVE DATE
On or after Jan. 1, 2021 and before Jan. 1, 2026
ELECTION DUE DATE
Made on an original, timely filed return; however, failure to pay first installment tax payment by Jun. 15th (of the year before the election is due) for tax years 2022 - 2025 may be deemed as invalid.
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2018
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2018
ELECTION DUE DATE
On or before 15th day of third month following close of taxable year.
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2021
ELECTION DUE DATE
On or before the due date of the qualifying entity's timely filed original return, or on an amended return filed before the original due date of the 15th day of fourth month following the close of the taxable year.
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EFFECTIVE DATE
Jan. 1, 2021
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2019
ELECTION DUE DATE
On or before the 15th day of the fourth month of the current taxable year.
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MARYLAND
EFFECTIVE DATE
Jan. 1, 2020
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2021
ELECTION DUE DATE
Due date depends on the type of PTE making the election. Form 63D-ELT is due at the same time the PTE’s Form 3, Form 355S, or Form 2 is due. MA’s general rules regarding extensions apply to the PTE Excise. The election may not be made on an amended return.
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EFFECTIVE DATE
Jan. 1, 2021
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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NEW JERSEY
EFFECTIVE DATE
Jan. 1, 2020
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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NEW YORK
New York City
The New York State budget act for the 2022-2023 state fiscal year, SO8009, includes various changes to the state’s pass-through entity tax (PTET), S Corporation election provisions, and individual income tax rates, among other updates. Read on for summaries of some of the key items included in the Act, which was signed into law by Gov. Kathy Hochul on April 9.
The Act creates the City of New York PTET, effective for tax years beginning on or after Jan. 1, 2023.
EFFECTIVE DATE
Jan. 1, 2021
ELECTION DUE DATE
Mar. 15 of the tax year for which the election is being made. All elections must be made by this date irrespective of entity type or tax filing period.
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EFFECTIVE DATE
Jan. 1, 2019
ELECTION DUE DATE
Anytime during the previous tax year or in the first two months and fifteen days after the beginning of the tax year.
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EFFECTIVE DATE
Jan. 1, 2019
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2021
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2019
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Pending
ELECTION DUE DATE
Pending
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
Election to be made on an annual basis before the business entity's original due date (Apr. 15 for calendar year filers) or extended due date (Oct. 15 for calendar year filers).
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EFFECTIVE DATE
Jan. 1, 2021
ELECTION DUE DATE
Tax years beginning in 2021 only: On or before the 15th day of the fourth month.
Tax years beginning in 2022 or later: On or before the 15th day of the third month.
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VIRGINIA
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EFFECTIVE DATE
Tax years beginning on or after Jan. 1, 2021
ELECTION DUE DATE
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
The election is made on a timely filed return.
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
On or before the 15th day of the third month following the close of the taxable year. Such election is binding for all future years unless formally revoked.
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EFFECTIVE DATE
NA
ELECTION DUE DATE
The election is made on a timely filed return.
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EFFECTIVE DATE
Jan. 1, 2022
ELECTION DUE DATE
2022 to 2025: On or before the due date or extended due date of the qualifying entity's return.
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EFFECTIVE DATE
2022
ELECTION DUE DATE
On or before the deadline for the electing entities tax return for the filing period.
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RISKS
Since the pass-through entity tax is an elective tax in most states, the need for conversations around the pros and cons of making an election lies squarely on the shoulders of the members of each pass-through entity.
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COMPLEXITIES
Though there could be significant tax savings for members, pass-through entities, especially those with complex structures and significant tax filings in multiple states, should evaluate with both their members and trusted tax advisors whether making an election is beneficial.
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