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09/01/2021
New York State issues pass-through entity tax guidance: Making an election, estimated payments, and more
New York State recently issued Technical Memorandum TSB-M-21(1)C, (1)I to set forth some additional guidance on the state’s new pass-through entity tax (PTET), adopted this past April.
TSB-M-21(1)C, (1)I, issued Aug. 25, 2021, clarified a few major open questions, including:
- How does an entity make an election?
- An election can be made through the entity’s state Online Services account for the 2021 PTE tax year by Oct. 15, 2021. Access or create an account here.
- For years 2022 and later, an election can be made through the Online Services account between Jan. 1 and March 15 of the respective taxable year.
- Estimated payments for the PTET are not required for the 2021 tax year; but if an entity wants to make an estimated payment, how can it do so?
- The state says in the memorandum that it will provide an estimated tax application by Dec. 15, 2021, so that payment can be made prior to Dec. 31, 2021.
- Are members still required to make estimated payments for 2021?
- Members of an electing PTE should continue to make their own estimated payments for tax year 2021.
- How can a qualifying member claim the PTET credit on its return?
- A new form, Form IT-653, will be available for members to be able to claim the credit.
The technical memorandum also provides detailed information and examples on how to calculate PTE taxable income for partnerships and S corporations; treatment of the PTET credit; and applicability of a resident credit for similar PTE taxes paid to other jurisdictions.
What does CohnReznick think?
Though the state has addressed the most pressing question of how to make an election, among other items, there are still many outstanding questions that we envision seeing answers to in the near future. Furthermore, although the PTE tax is structured to provide a significant benefit to individuals as a workaround to the federal $10,000 SALT deduction limitation, consult with your tax advisors immediately to evaluate whether an election is optimal based on each entity’s unique situation.
What does CohnReznick think?
Though the state has addressed the most pressing question of how to make an election, among other items, there are still many outstanding questions that we envision seeing answers to in the near future. Furthermore, although the PTE tax is structured to provide a significant benefit to individuals as a workaround to the federal $10,000 SALT deduction limitation, consult with your tax advisors immediately to evaluate whether an election is optimal based on each entity’s unique situation.
Subject matter expertise
Corey Rosenthal
JD, Principal, Practice Leader, State and Local Tax (SALT) Services
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