New York State enacted a new pass-through entity tax for tax years beginning on or after January 1, 2021. Any pass-through entities including a limited liability company treated as a partnership for federal purposes and any New York S Corporations are eligible to make an irrevocable election annually to pay the pass-through entity tax by the first estimated payment due date, March 15 for calendar year-end entities. For 2021 only, the election is due by October 15. Electing entities are required to make four equal estimated payments for a total of the lesser of 90% of the current-year tax or 100% of the prior year tax.
A tax credit is available for a direct partner or shareholder and the credit is equal to the partners’ share of the PTE tax paid. Individuals claiming a tax credit for the PTE tax paid must add back the amount of the PTE deduction for NYS.
Beginning in 2021, New York residents can claim credit for entity-level taxes paid to other states that are ‘substantially similar’ to the New York PTET on account of income derived from such other states and subject to tax under Article 22. While New York has enacted a credit for New York residents for tax paid to other states, other states may not provide such a credit. Consideration for residency of owners is a necessity.
If you need assistance with tax planning or have any additional questions, please contact your personal Sciarabba Walker contact or email info@swcllp.com.
By Svetlana Svetlichnaya, CPA