A technical memorandum issued by the New York Department of Taxation and Finance addresses New York’s new elective pass-through entity-level tax (PTET), which was enacted under New York’s 2021-2022 Budget Act in response to the $10,000 cap on the federal individual income tax deduction for state and local taxes.
The PTET is an optional tax that partnerships or New York S corporations may annually elect to pay on certain income for tax years beginning on or after January 1, 2021. If a partnership or New York S corporation elects to pay the PTET, partners, members, or shareholders of an electing partnership or New York S corporation who are subject to tax in New York under Article 22 (personal income tax) may be eligible for a PTET credit on their New York State income tax returns. Among other issues, the memo addresses who may make the election, the election period, how to calculate pass-through entity taxable income, how to calculate the PTET and underlying estimated payments, and how to calculate and claim the PTET credit.
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