New York | New guidance on Pass through Entity Tax

New York Department of Tax and Finance has issued a new guidance on Pass through Entity Tax on August 25, 2021. The PTET is tax that partnerships or New York S corporations may annually elect to pay on certain income for tax years beginning on or after January 1, 2021.

 

Key points of the guidance are:

  • For 2021, the election must be made by October 15, 2021 and once made it is irrevocable for the year. From 2022 onwards, the annual election must be made by March 15 of the year for which the election is made.
  • Electing entities will have the option to make estimated tax payments prior to December 31, 2021. An online form will be made available for this purpose by December 15, 2021.
  • A direct partner, member, or shareholder eligible to claim the credit means one to whom the electing entity issues a federal Schedule K-1.
  • The guidance states that a partnership cannot include in its PTE taxable income amounts distributed to direct partners, such as partnerships or other entities that are not subject to PIT, even if the income is ultimately taxable to a partner or member through tiered partnerships.
  • The PTE credit must be claimed on the owner’s separate New York State tax returns; it cannot be claimed on a group return.
  • Owners who are New York State residents are also allowed a resident tax credit for “substantially similar” PTE taxes imposed by other states and localities. The Department says it will post on its website a list of substantially similar taxes that qualify for a resident tax credit.


*Tanvi Singh, Editorial Assistant has reported this brief.

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