31, 2021, calendar year-end.Įlecting entities are required to make four equal estimated tax payments for every quarter of a calendar year. 15, 2021, as well if the fiscal year filer’s final date of the entity’s taxable year falls before the Dec. A fiscal year filer is required to make the election by Oct. For the 2021 tax year only, an election must be made by Oct. The election is made annually and will be effective for the current taxable year. To file and pay PTE tax, the eligible partnership or S corporation must make an irrevocable election by the first estimated payment due date, which is March 15 of the calendar year prior to the year in which the PTE tax return is required. The following highlights some of the key NYS PTE provisions. Eligible entities include any partnership under Internal Revenue Code (IRC) Section 7701(a)(2), other than a publicly traded partnership pursuant to IRC Section 7704, including a limited liability company treated as a partnership for federal income tax purposes and any New York S corporation, including a limited liability company treated as an S corporation for federal income tax purposes that is otherwise eligible. NYS’s optional PTE tax, outlined under newly enacted Article 24-A, is effective for tax years beginning on or after Jan. However, in November 2020, the IRS issued Notice 2020-75, essentially providing that PTE taxes are deductible at the entity level (e.g., these items are not subject to the $10,000 “cap” had these taxes been paid by the pass-through entities’ owners).īased on this favorable IRS position, on April 19, 2021, as part of its 2021-2022 Budget Bill, New York State (NYS) joined the list of states that have enacted similar tax laws and created their own PTE tax. When these PTE taxes were initially enacted, there was significant ambiguity as to whether such PTE tax regimes would be accepted by the IRS. Subjecting the pass-through entity to tax lowers the income flowing from the pass-through entity to its owners, lowering such owner’s federal income tax. Historically, pass-through entities were not subject to an income tax – their owners were taxed. In response to this limitation and to protect their resident individuals from an increase in federal income taxes potentially arising from this limitation, many states considered and/or enacted a state-level income tax on pass-through entities (often referred to as a pass-through entity (PTE) tax). When the Tax Cuts and Jobs Act (TCJA) was enacted, it created, for the 2018 through 2025 tax years, an itemized deduction “cap,” limiting to $10,000 the amount of state and local taxes an individual could deduct each year.
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