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The PTET is an optional 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.
If an eligible partnership or eligible New York S corporation (electing entity) elects to pay the PTET, its partners, members, or shareholders subject to tax under Article 22 (personal income tax) may be eligible for a PTET credit on their New York State income tax returns.
The tax is imposed under Tax Law Article 24-A, which was enacted in 2021.
For PTET taxable years 2022 and later, the eligible entity may opt in on or after January 1 but no later than March 15. The election to opt in to the PTET must be made online on an annual basis and is irrevocable.
An electing entity that is a calendar-year taxpayer for federal purposes must use a calendar-year basis to elect, file, and pay the PTET. An electing entity that is a fiscal-year taxpayer must elect, file, and pay the PTET for the calendar year in which its fiscal year ends.
Example: A partnership’s fiscal year is March 1, 2021, through February 28, 2022. The partnership can make the election on January 1, 2022, for the 2022 PTET taxable year because the partnership's fiscal year ended during the 2022 calendar year.
If an electing entity has more than one tax year within a calendar year, it can make only one election during each calendar year.
An authorized person can opt in to the PTET on behalf of an eligible entity through the entity's Business Online Services account. If the entity does not have a Business Online Services account, the authorized person will need to create one.
To opt in to the PTET:
Important: The authorized person must electronically sign and attest to having the electing entity's authorization.
The calculation of PTE taxable income differs between electing partnerships and electing New York S corporations.
For calculations related to the PTET, see Calculating the PTE taxable income, the PTET, and the credit.
Both authorized persons and tax professionals may make estimated PTET payments on behalf of the entity.
To make an estimated PTET payment:
Entities must use our online Web File application and pay by ACH debit when making PTET payments. They cannot pay by check or other methods. To ensure ACH debit payments are successful, see ACH debit block information.
An electing entity must use the online application to pay estimated tax on the amount of the PTET calculated for the current taxable year. Estimated payments are due on or before March 15, June 15, September 15, and December 15 in the calendar year prior to the year in which the due date of the return falls. If the due date of the estimated payment falls on a Saturday, Sunday, or legal holiday, the payment is due on the next business day.
Each quarterly payment should be an amount equal to at least 25% of the required annual payment for the taxable year. The required annual payment is the lesser of:
If the entity did not opt in to the PTET for the preceding year, the required annual payment is 90% of the tax reported on the PTET return for the taxable year.
Note: An electing entity cannot make estimated tax payments after filing a return.
An electing entity may apply its PTET estimated payments only to its PTET liability, not to any other taxes. In addition, it cannot transfer payments between related entities or individuals.
Example: Partnership P opts in to the PTET for 2022. P makes estimated tax payments of $500,000 through June of 2022. In July 2022, P determines the partnership will incur a loss for the year and will not owe any PTET. P would like to transfer the estimated payments to the estimated tax accounts of its partners, B and C. However, P is not allowed to transfer funds from the partnership’s PTET account to its partners. P must file a PTET return by the filing due date and claim a refund of all overpaid tax amounts. Partners B and C may not claim any of P’s payments as their own estimated tax payments. B and C must independently make estimated tax payments sufficient to cover their own tax liabilities for 2022.
If an electing entity fails to pay on time or pays less than it owes, it is subject to penalty and interest charges, based on the rules in Article 22.
Example: A partnership’s fiscal year is March 1, 2021, through February 28, 2022. Although the partnership reports its income for Article 22 purposes on a 2021 IT-204, Partnership Return, the partnership will make its PTET election for the 2022 PTET taxable year by March 15, 2022, and file its PTET return by March 15, 2023.
If the due date of the return falls on a Saturday, Sunday, or legal holiday, the return is due on the next business day. An electing entity may make an online request by March 15 for a six-month extension of time to file its annual PTET return. An electing entity may not amend an annual PTET return for any reason once that return has been filed.
Penalties and interest will apply for late filing of the return or late payments based on the rules under Article 22. An electing entity, and certain responsible persons, will be liable for any unpaid tax due under Article 24-A [see Tax Law § 866(c)].
The PTET entity must file the return online through the entity’s Business Online Services account. To file a PTET annual return:
The PTET entity must identify all the entity’s Article 22 partners, members, or shareholders eligible to claim PTET credits on its annual PTET return.
The filing application allows the PTET entity to manually enter information for up to 100 eligible credit claimants. If the entity has more than 100 eligible credit claimants, it must upload a data file containing the information. The data file must be in a comma delimited format with a .txt or .csv extension.
The PTET entity must include the following information for each eligible credit claimant:
The filing application will allow a filer to save their work without filing and come back later to complete the return. It is important for the PTET entity to report this information correctly. The entity may not amend any of the reported information once the return has been submitted. If the entity omits any information for an owner or submits incorrect information, some or all credit claimants may not be allowed to claim their PTET credits.
Overpayments cannot be carried forward to future years and will automatically be reviewed and processed as a refund. A physical check will be issued for the refund amount and sent to the PTET entity’s address on record.
S corporations must provide a statement to each shareholder that includes the shareholder’s direct share of PTET credit to be claimed by the shareholder.
Partnerships must include on Form IT-204-IP, New York Partner’s Schedule K-1, which is required to be provided to the partner, the following information:
The PTET annual return is generally due on March 15 after the close of the PTET taxable year. However, the electing entity can request a six-month extension of time to file through its Business Online Services account.
The extension is an extension of time to file the annual return; it is not an extension of time to pay any tax due. The electing entity must pay all the PTET by the original due date of the return, or penalties for failure to pay taxes due are applicable.
The PTET entity must file the extension online through the entity’s Business Online Services account. To file a PTET annual return:
Eligible credit claimants that receive a PTET credit from an electing entity may claim the credit on their personal income tax returns. If the eligible credit claimant is a trust, other than a trust that is disregarded for tax purposes, it is allowed a PTET credit on the trust’s fiduciary income tax return, but it is not permitted to distribute any PTET credit it receives to its beneficiaries.
A partner, member, or shareholder that is not subject to tax under Article 22, including but not limited to a corporate partner, is not eligible for the PTET credit. Additionally, a partner that is itself a partnership is not eligible for the PTET credit.
Each eligible credit claimant’s PTET credit is equal to its direct share of PTET that was reported by the electing entity on the entity’s PTET annual return. If the claimant receives more than one PTET credit, the credits are aggregated. If the amount of the PTET credit allowable for any taxable year exceeds the tax due for the year, the excess is treated as an overpayment, to be credited or refunded without interest.
Reference: Tax Law § 606(kkk)
Eligible credit claimants must file an individual personal income tax return and attach Form IT-653, Pass-Through Entity Tax Credit, to claim the PTET credit. The PTET credit may not be claimed on Form IT-203-GR, Group Return for Nonresident Partners, or Form IT-203-S, Group Return for Nonresident Shareholders of New York S Corporations.
An addition modification to federal adjusted gross income or federal taxable income must be made on the eligible credit claimant’s New York State personal income tax return for an amount equal to the amount of the PTET credit claimed. See Form IT-225-I, Instructions for Form IT-225, New York State Modifications, for more information.
For tax years beginning on or after January 1, 2021, resident partners, members, or shareholders will be allowed a resident tax credit against their New York State personal income tax for any pass-through entity tax imposed by another state, local government, or the District of Columbia, that is substantially similar to the PTET imposed under Article 24-A. The pass-through entity tax must be paid by a partnership or New York S corporation to another jurisdiction on income derived from that jurisdiction and subject to tax under Article 22. This includes any taxes paid by an LLC treated as a partnership or S corporation for New York tax purposes. In the case of taxes paid by an S corporation, the S corporation must be treated as a New York S corporation. An ineligible S corporation will be deemed to have met this requirement to the extent it is treated as a New York S corporation for purposes of computing the New York adjusted gross income of the resident shareholder.
Reference: Tax Law § 620(b)
For a list of jurisdictions with a tax that qualifies as substantially similar to New York's PTET, see States with a tax substantially similar to PTET.
Resident partners, members, or shareholders must make an addition modification to federal adjusted gross income or federal taxable income on their New York State personal income tax returns equal to the amount of pass-through entity tax paid to another state, local government, or the District of Columbia on their behalf and that is the basis for computing the resident tax credit. See Form IT-225-I, Instructions for Form IT-225, New York State Modifications, for more information.
A shareholder of a subchapter S corporation or a partner in a partnership is not allowed a resident tax credit for any tax imposed upon or payable by the S corporation or partnership to another state, local government, or the District of Columbia, even if the tax is substantially similar to New York’s PTET. However, a shareholder or partner may be allowed a resident tax credit if the taxes are calculated on the income of the S corporation or partnership, but are imposed upon and payable by the shareholder or partner.
Authorized person: An individual who is eligible to make the election into the PTET on behalf of an eligible partnership or eligible S corporation. For partnerships, authorized person includes any member, partner, owner, or other individual with authority to bind the entity and sign returns under Tax Law § 653. For New York S corporations, authorized person includes any officer, manager, or shareholder of the New York S corporation who is authorized under the law of the state where the corporation is incorporated or under the S corporation’s organizational documents to make the election, and who represents to having that authorization under penalty of perjury.
Direct partner, member, or shareholder: Any member, partner, or shareholder that is issued a federal Schedule K-1 by the electing entity based on the member’s, partner’s, or shareholder’s direct ownership interest in the electing entity. A federal Schedule K-1 issued to an entity that is disregarded for tax purposes, such as a single-member limited liability company, is treated as if issued directly to the individuals or entities that include the disregarded entity’s activity on their income tax returns.
Eligible partnership: Any partnership [including a limited liability company (LLC) treated as a partnership for federal income tax purposes] that has a filing requirement under Tax Law § 658(c)(1) and is not a publicly traded partnership. A partnership is eligible to make the election even if it has partners that are not eligible for the PTET credit, including, but not limited to, corporate partners.
Eligible S corporation: Any New York S corporation (including an LLC treated as an S corporation for New York and federal income tax purposes) as defined by Tax Law § 208.1-A that is subject to the fixed dollar minimum tax under Tax Law § 209.
A federal S corporation that does not have nexus to New York is considered an ineligible corporation under Tax Law 620(b)(3)(B). These corporations are not eligible to opt in to the PTET.
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