Reminder: New York State Pass-Through Entity Tax
Client Alerts | February 17, 2022 | Hedge Funds | Private Equity Funds
This newsletter serves as a reminder regarding several deadlines and action items regarding the New York State Pass-Through Entity Tax (the “NYS PTET”).
March 15, 2022, Deadline
The deadline to elect into the NYS PTET for 2022 is March 15, 2022. The election is made on an annual basis, so an election for 2022 will only apply with respect to 2022.
The deadline to file 2021 NYS PTET tax returns (or to file extensions) is also March 15, 2022. 2021 NYS PTET should be paid by then as well.
First quarter 2022 NYS PTET estimates are due by March 15, 2022.
Other Action Items to Note
A NYS PTET election for 2022 may only be made by entities that are in existence at the election deadline. If you anticipate forming an entity after the election deadline and would like to make the election for the entity, you should consider forming the entity and making the election now.
We have heard that electing entities encountered technical difficulties making the NYS PTET elections or payments last year, so we advise that you act now rather than delay. Forms and instructions were just made available on the website of the New York State Department of Taxation and Finance.
NYS PTET elections and the preparation and filing of extensions and returns may only be made or done online. Tax return preparers will not be able to do so on behalf of taxpayers (i.e., extensions and returns must be done by an owner or agent of the entity who has the authority to bind the entity and sign tax returns).
There are still a number of open questions regarding the NYS PTET, including its deductibility for federal tax purposes and how federal tax returns should be prepared. Most tax return preparers seem to agree that the NYS PTET (and other pass-through entity taxes) are deductible above the line and without regard to whether the entity is engaged in a trade or business (e.g., a fund that is an “investor” and not a “trader” may deduct the NYS PTET as a business expense). Tax return preparers generally intend to include pass-through entity taxes on Line 13 of Schedule K-1, although this reporting is less uniform.
Please click here for our prior newsletter on the NYS PTET.
There are many issues concerning pass-through entity taxes, including the analysis of whether and to what extent electing into a tax is beneficial to a particular entity and its owners, how to prepare and file pass-through tax returns, and whether and how operating agreements and other organizational documents should be drafted or amended for an entity electing to pay such taxes. These issues and general tax issues regarding pass-through taxes will continue to evolve as we enter tax return season. If you have any questions regarding the NYS PTET or other pass-through entity taxes, please contact your primary Kleinberg Kaplan attorney or a member of our Tax Department listed to the right.