Pass-through entity tax (PTET) (2024)

Information

Election

Who can make the election

Only an authorized personmay make this election on behalf of an eligible partnershipor eligible S corporation. Tax professionals may not make this election on behalf of their clients.

The following types of businesses are not eligible to opt in:

single-member LLCs (unless they elect to be treated as an S corporation for New York purposes)
sole proprietorships
trusts
non-profit corporations
corporations that are not New York S corporations

When to make the election

An S corporation intending to file as a resident S corporation must certify, when it elects to opt in to PTET, that all its shareholders are residents of New York for purposes of Article 22.

An 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 after the due date of the entity's first PTET estimated payment.

What is the election period

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, 2022, through February 28, 2023. The partnership can make the election on January 1, 2023, for the 2023 PTET taxable year because the partnership's fiscal year ended during the 2023 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.

How to make the election

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 Servicesaccount, the authorized person will need to create one.

Toopt in to the PTET:

Log in to (or create)the eligible entity’s Business Online Services account.
Select the ≡Services menu in the upper-left corner of the Account Summary homepage.
Select Corporation tax or Partnership tax, then choose PTET web file from the expanded menu.
On the Form Selection page, choose Pass-through entity tax (PTET) annual election.

Important: The authorized person must electronically sign and attest to having the electing entity's authorization.

Create Business account

Revoking the election

The PTET election may be revoked at any time up until the due date of the first estimated payment, through the entity's Business Online Services account.

Calculations

The calculation of PTE taxable income differs between electing partnerships, electing resident S corporations, and electing standard S corporations.

For calculations related to the PTET, see Calculating the PTE taxable income, the PTET, and the credit.

Estimated payments

Both authorized persons and tax professionals may make estimated PTET payments on behalf of the entity.

To make an estimated PTET payment:

Log into the entity’s Business Online Services account.
Select the ≡Servicesmenu in the upper-left corner of the business’Account Summaryhomepage.
ChoosePTET web filefrom theCorporation taxorPartnership taxexpanded menu, then selectPass-through entity tax (PTET) estimated payment.

Entitiesmustuse 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, seeACH 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, orlegal 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:

90% of the PTET shown on the return of the electing entityfor the taxable year; or
100% of the PTET shown on the return of the electing entity for the preceding taxable year.

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 entitycannotmake estimated tax payments after filing a return.

An entity may make up to 12 estimated PTET payments during the PTET year using its Business Online Services account. Payments may be scheduled in advance up until the due date of the final estimated payment on December 15. An entity may make estimated PTET payments December 16 through December 31, but may not schedule them in advance.

No transfer of tax payments to or from PTET is allowed

An electing entitymayapply its estimated PTET paymentsonly to its New York State PTET or New York City PTET liabilities, not to any other taxes. In addition, it cannot transfer payments between related entities or different tax types, including individuals.

Example:Partnership P opts in to the PTET for 2023. P makes estimated tax payments of $500,000 through June of 2023. In July 2023, 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 to pay their own tax liabilities for 2023.

If an electing entityfails to pay on time or pays less than it owes, it is subject to penalty and interest charges based on the rulesin Article 22.Taxpayers may not apply the annualized installment method under Tax Law § 685(c)(4)to reduce or eliminate underpayment penalties.

Annual return

On or before March 15, an electing entity must file an annual PTET return using the online return application to report the information required under Article 24-A for the PTET taxable year. PTET returns are filed on a calendar-year basis. A fiscal-year taxpayer does not recompute its income on a calendar-year basis. Instead, its PTE taxable income must be computed for the fiscal year that ends within the PTET calendar year. The PTET return for an electing entity with a fiscal year is due on or before March 15 following the close of the calendar year in which its fiscal year ends.

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 Form IT-204, Partnership Return, the partnership will make its PTET election for the 2022 PTET taxable year by its due date 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.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 electing entity must file the return online through the entity’s Business Online Services account. To file an annual PTET return:

Log in to the eligible entity’s Business Online Services account.
Select the ≡Servicesmenu in the upper-left corner of theAccount Summaryhomepage.
SelectCorporation taxorPartnership tax, then choosePTET web filefrom the expanded menu.
On theForm Selectionpage, choosePass-through entity tax (PTET) annual return.

Reporting information to partners, members, and shareholders

Each electing PTET entity must provide sufficient information to its eligible partners, members, and shareholders to allow them to claim and support the PTET credit on their personal income tax returns. If the information is insufficient, otherwise eligible credit claimants may not be able to determine the proper amount of credit on their personal income tax returns.

S corporations must provide a statement to each shareholder or member that includes the shareholder’s or member's direct share of the PTET. The shareholder or member will use this information to claim the PTET credit.

Partnerships must report on Form IT-204-IP, New York Partner’s Schedule K-1, which the entity is required to provide to each partner or member, the following information:

the partner’s or member's classification as a resident or nonresident for purposes of calculating the PTE taxable income and the PTET credit; and
the partner’s or member's direct share of the PTET (the partner or member will use this information to claim the PTET credit).

Extension

The annual PTET 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 the return through its Business Online Services account.

The extension is an extension of time to file the annual return, 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.

Taxpayers who file a valid PTET extension may make additional PTET payments until the PTET annual return is filed or through April 15, whichever comes first. No PTET payments may be made after the annual return is filed.

The electing PTET entity must file the entity's extension online through the entity’s Business Online Services account. To file a PTET annual return:

Log in to the eligible entity’s Business Online Services account.
Select the ≡Servicesmenu in the upper-left corner of theAccount Summaryhomepage.
SelectCorporation taxorPartnership tax, then choosePTET web filefrom the expanded menu.
On theForm Selectionpage, chooseRequest for six-month extension to file the pass-through entity tax.

PTET credit

Who can claim the PTET credit

Eligible credit claimantsthat receive a PTET credit from an electing entity may claim the credit on their personal income tax returns.If the eligible credit claimant is atrust, 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.

Who cannot claim the PTET credit

A partner, member, or shareholder that is not subject to tax under Article 22, including but not limited to a corporate partner, isnoteligible for the PTET credit. Additionally, a partner that is itself a partnership isnoteligible for the PTET credit.

How much is the PTET credit

Each eligible credit claimant’s PTET credit is equal to its direct share of the PTET that was reported by the electing entity on the entity’s annual PTET 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 [see Tax Law § 606(kkk)].

How to claim the PTET credit

Each eligible credit claimant 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.

Addition modification to income for the PTET credit claimed

The credit claimant's New York State personal income tax return must include an addition modification to their federal adjusted gross income or federal taxable income for an amount equal to the PTET credit they are claiming. See Form IT-225-I,Instructions for Form IT-225, New York State Modifications, for more information.

Resident tax credit

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. Thepass-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 State 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 [see Tax Law § 620(b)].

Jurisdictions qualifying as substantially similar

For a list of jurisdictions with a tax that qualifies as substantially similar to New York State's PTET, seeStates with a tax substantially similar to PTET.

Addition modification to income when claiming the resident tax credit

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.

For tax years beginning prior to January 1, 2021

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 State’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.

Definitions

Authorized person: An individual who is eligible toopt in to the PTET on behalf of aneligible partnershiporeligible 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.

Electing resident S corporation: An electing S corporation that certifies at the time it elects to opt in to PTET that all of its shareholders are residents of New York State under Article 22.

Electing standard S corporation: An electing S corporation that is not an electing resident S corporation.

Eligible credit claimant:An individual, trust, or estate that:

is a direct partner, member, or shareholder of a PTET entity;
is taxable under Article 22 (personal income tax); and
receives a PTET credit from the electing PTET entity.

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 forthe 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 anineligible corporation under Tax Law 620(b)(3)(B). These corporations arenoteligible to opt in to the PTET.