The NYS Pass-Through Entity Tax Election Is Due October 15, 2021
October 12, 2021DownloadsDownload Article
On April 19, 2021, the former governor of New York, Andrew Cuomo, signed the 2021-2022 fiscal year budget bill that included a provision for an elective pass-through entity tax (“PTET”). These provisions were intended as a workaround to the $10,000 state and local tax (“SALT”) deduction limitation imposed by the federal Tax Cuts and Jobs Act.
The PTET is an optional tax that partnerships, limited liability companies (“LLCs”) treated as partnerships for U.S. federal income tax purposes, and S corporations that have elected to be treated as S corporations for New York State (“NYS”) income tax purposes may annually elect to pay on certain income for tax years beginning on or after January 1, 2021.1
If a partnership, LLC or New York S corporation (a pass-through entity or “PTE”) elects to pay PTET, partners, members or shareholders of an electing PTE who are subject to New York income tax under Article 22 are eligible for a PTET credit on their New York State income tax returns.
As discussed in more detail below, on August 25, 2021, the NYS Department of Taxation and Finance released Technical Memorandum TSB-M-21(1)C (the “TM”)2 to provide PTEs further guidance on electing to be subject to the PTET and when and how to make estimated PTET payments for 2021 and beyond.
Although the TM states that estimated payments for 2021 are not due until March of 2022, based on current Internal Revenue Service guidance, in order to take the PTET deduction for federal income tax purposes (which is the reason for the PTET in the first place), PTEs should make their 2021 PTET payments before December 31, 2021.
1: Legislation. NY State Senate. https://www.nysenate.gov/legislation/laws/TAX/A24-A
2: Pass-through entity tax - tax.ny.gov. https://www.tax.ny.gov/pdf/memos/ptet/m21-1c-1i.pdf