by Jill C. McNally
The Pass-through Entity Tax (PTET) is an elective tax imposed on an electing entity’s pass-through taxable income. In addition to updating forms, instructions, and other information due to recent Budget Bill technical amendments, the Department of Taxation and Finance has also provided additional guidance on the PTET and NYC PTET. (New York Pass-Through Entity Tax, N.Y. Dept. of Taxation and Finance, 08/17/2023.)
Revoking the election.
As stated, the PTET is an elective entity tax. Once the election has been made by the entity’s authorized person (on or after January 1, but no later than March 15), it can be revoked only up to the due date of the first estimated PTET payment. In its frequently asked questions, the Department cautions that an electing entity cannot revoke the election by filing a zero return unless the entity is reporting no pass-through entity taxable income.
Extension of time.
While the annual PTET return is generally due on March 15 after the close of the PTET taxable year, an electing entity can request a six-month extension of time to file the return. This extension of time does not include tax payments that must be paid when the original return is due. With a valid PTET extension, additional PTET payments may be made until the PTET annual return is filed or through April 15, whichever comes first. However, no PTET payments are permitted after the annual return is filed.
Amended returns.
An amended PTET return may be permitted if a written request is made to the Department that must include the following information:
- the entity name;
- the entity’s taxpayer ID number;
- the PTET tax year;
- a detailed description of the reason for the request, including the reason for the amendment, the specific incorrect information, and the new information;
- a signature of an owner, officer, previously authorized POA, or other responsible person;
- identification of signors relationship to the entity;
- the best daytime phone number; and
- a valid e-mail address.
Amended returns must be received by the following dates: for the 2021 Tax Year, by September 15, 2023; and for the 2022 Tax year by September 16, 2024.
If eligible claimants file their personal income tax returns before claiming the PTET credit, they must file an amended personal income tax return.
PTET payments.
For entities that have opted into both the PTET and NYC PTET, the payments are applied in aggregate to both liabilities on the annual PTET return. If any of the estimated tax payments exceed the PTET or the NYC PTET, the excess will be applied as necessary to any outstanding PTET or NYC PTET liabilities. However, transfer of payments between different tax types or related individuals or entities is not permitted. Any amounts exceeding both the PTET or NYC PTET will be refunded after the annual return is processed.
Successor entities.
After a federal reorganization, the PTET partnership election can remain effective for the successor entity if:
- the successor entity is a continuation of the original partnership;
- the original partnership will not be filing a final return; and
- all the income for the year, including income earned prior to the reorganization, will be filed on the successor entity’s partnership return.
The Department adds that where a successor entity did not retain the original entity’s EIN, the original entity’s EIN should be used to file the PTET return. The computations for the return should be based on the K-1 amounts reported under the successor entity’s EIN. An individual or trust claiming a PTET credit should file form IT-653 reporting the original entity’s EIN as the source of the credit.
Metropolitan commuter transportation mobility tax (MCTMT).
The Department advises that non-resident partners that are in an electing partnership must still continue to make MCTMT payments as there is nothing in the law that permits those payments to be reduced by anticipated PTET credits.
States with similar taxes.
The Department has added Kansas, Mississippi, Missouri, New Mexico, Utah, and Virginia to the list of states that impose a PTET substantially similar to New York’s. Other states that impose a substantially similar tax are: Alabama; Arizona; Arkansas; California; Colorado; Connecticut; Georgia; Idaho; Kansas; Louisiana; Maryland; Massachusetts; Michigan; Minnesota; New Jersey; North Carolina; Ohio; Oklahoma; Oregon; Rhode Island; South Carolina; and Wisconsin.
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