The New York Department of Taxation and Finance has issued updated guidance on the elective pass-through entity tax (PTET) for eligible partnerships and S corporations. This update, released on May 29, 2024, applies to tax years beginning on or after January 1, 2021, and outlines important changes regarding PTET election, extensions, payments, and credits.
PTET Election and Extensions
The annual PTET return is generally due on March 15 after the close of the PTET taxable year. However, electing entities can request a six-month extension through their Business Online Services account. It’s crucial to remember that this extension only applies to filing the return, not to paying the tax due. All PTET must be paid by the original due date of the return to avoid penalties for late payment.
Entities with a valid PTET extension may make additional PTET payments until the annual return is filed or the extended return due date (previously April 15), whichever comes first. Payments made after the original return due date will incur penalties and interest. No PTET payments are allowed after the annual return is filed.
PTET Credit Eligibility
Eligible credit claimants who receive a PTET credit from an electing entity can claim this credit on their personal income tax returns. Only direct partners of an electing entity are eligible for the PTET credit. Trusts that are not disregarded for tax purposes can claim the credit on their fiduciary income tax returns but cannot distribute the credit to their beneficiaries.
Certain partners, members, or shareholders are not eligible for the PTET credit. This includes corporate partners and partnerships that are not subject to tax under Article 22, and these entities cannot pass the PTET credit through to their partners.
Claiming the PTET Credit
The PTET credit amount is equal to the claimant’s direct share of the PTET reported by the electing entity on its annual PTET return. If an individual receives multiple PTET credits, these are aggregated. Any excess credit amount for a taxable year is treated as an overpayment, which can be credited or refunded without interest.
To claim the PTET credit, eligible claimants must file an individual personal income tax return and attach Form IT-653 (Pass-Through Entity Tax Credit). The PTET credit cannot 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). Additionally, claimants must include an additional modification to their federal adjusted gross income or federal taxable income on their New York state personal income tax return equal to the PTET credit they are claiming.
For additional details and tax advice, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com