PTE Taxes

[Lee B]

Earlier today I took an online CPE Class about state PTE Taxes presented by the OSCPA.

There were 471 people in attendance so it was a very popular class.

There are now 27 states plus New York City with different variations of the PTE Tax.

Some of the key differences are:

1.  Is it an annual election or a perpetual election?

2.  Is 100 % Owner Consent required or less than 100%?

3. If the PTE Tax is overpaid, is the credit refundable or is it a carryforward?

It was a very interesting class with quite a few issues in many states still unresolved.

[Lion EA]

CT is required and lowered the % of the pass-through credit. NY has opt-in deadlines, which I think they extended. Every state is a little different. If your partnership/S-corporation files in multiple states, you can have some complex computations to determine which PTE scenario works best for the partners/shareholders. Even more complicated/time-consuming if you're not the preparer for both the business AND all the partners/shareholders. This started out as a benefit to the partners/shareholders, but it's really a money-maker for the states. So more and more states are getting on board. We have to keep up.

[JackieCPA]

I took a class for MN and they had answers to all of those questions for our state. Annual election - filing the MN Sch PTE is making the election. 50% ownership consent is required. The credit is refundable or it can be carried forward. MN has made it very easy to do - my only hope is that ATX will have the form available for next year so I don't have to do them all by hand again. 

 

[Patrick Michael]

NY is an annual election, that must be made by 3/15.  The election, estimated payments, and return must be filed through the NY Tax website.  Payments are prorated to each member/partner and their share of the payment is a refundable credit on their personal returns.  Only other quirk in NY (not sure about other states) is that the PTET is added back into NY income on the personal returns.

[Lion EA]

3/15 of 2022 for 2022 returns? Or 2/15 of 2023 for 2022 returns like the partnership/s-corp return filing deadline?

[Patrick Michael]

20 hours ago, Lion EA said:

3/15 of 2022 for 2022 returns? Or 2/15 of 2023 for 2022 returns like the partnership/s-corp return filing deadline?

Must be by 3/15/22 for YE 12/31/2022, 3/15/23 for YE 12/31/23, and so on.  Not sure how it works for fiscal year ends.

[TAXMAN]

To my Virginia friends, do we not yet know how to handle this thing?

[Lee B]

Copied from my class materials:

 

"Virginia – PTE Guidance Issued

Tax Bulletin 22-6, Vir. Dept. Tax. (4/15/22).
» The Virginia Department of Taxation (Department) issued a tax bulletin “intended to provide taxpayers with
preliminary guidance” on new law that permits qualifying pass-through entities to make an annual election in
Virginia to pay an entity-level state income tax (PTE tax) for taxable years beginning on and after January 1, 2021,
but before January 1, 2026.
» In this guidance, the Department states that pass-through entities interested in making the election for taxable
year 2021 must file returns by their original or extended due date, “but do not try to pay the elective PTE tax” with
such taxable year 2021 returns as the Department “cannot accept or process the elective PTE tax at this time.”

 

Virginia – PTE Guidance Issued, cont.

 "Correspondingly, the Department states that individuals must file their taxable year 2021 returns by their original
or extended due date “but do not try to claim a credit for the elective tax paid by your PTE to Virginia,” warning
that doing so may result in the assessment of interest and penalties. Instead, the Department explains that if a
PTE makes the election for taxable year 2021, the corresponding individuals “will receive information from your
PTE on or after October 2023 informing you of the amount to claim and how to claim it.”
» Under Virginia’s new law, individuals may claim a credit for certain taxes paid by a pass-through entity under
another state’s substantially similar pass-through entity level state income tax for taxable years beginning on and
after January 1, 2021, but before January 1, 2026; the bulletin states that the implementation of this provision is
not delayed. As such, for taxable year 2021, individuals may claim a credit for taxes paid by a pass-through entity
under another state’s substantially similar pass-through entity level tax in proportion to their ownership in such
pass-through entity."