New York Pass-Through Entity Tax Changes for 2022

New York Pass-Through Entity Tax Changes for 2022

In April 2022, New York State passed its fiscal State Budget Bill which included significant changes to the Pass-Through Entity Tax. Below is a summary of changes that will take effect both this year and for 2023.

NYS PTET Extension Deadline

Subsequent legislation has now changed the date to make the 2022 PTET election from March 15, 2022 to September 15, 2022 for all eligible pass-through entities.

If you made the election for PTET in 2021 and missed the March 15th deadline for 2022, you may still opt in but will be required to pay estimates during 2022.

Changes for “S” Corporations

For 2021, the Pass-Through Entity Tax was calculated based on New York sourced income irrespective of the shareholders’ state of residence. Effective January 1, 2022, the Bill has created two types of “S” Corporations for PTET purposes: An Electing Standard “S” Corporation & An Electing Resident “S” Corporation.

  • Electing Standard “S” Corporation
    • An entity that does not certify that all its shareholders are NYS residents.
    • For these entities, the PTET calculation does not change and will still only be assessed based on New York sourced income.
  • Electing Resident “S” Corporation
    • An entity that certifies at the time of its annual PTET election that all of its shareholders are NYS residents.
    • Once made, the certification is irrevocable.
    • For these entities, effective January 1, 2022 the PTET is based on all income, gain, loss, or deduction to the extent included in the resident shareholder’s NYS personal income tax.

Since this is effective as of January 1, 2022, and that date has since passed, NYS is requiring that this certification be made by March 15, 2023. The New York State Department of Taxation & Finance will be issuing future guidance as to how this certification will be made.

Changes to 2022 PTET Estimate Payments

Date of PTET Election Estimate Payment Breakdown
On or before March 15, 2022 (Original Deadline) March 15 & June 15 2022 estimates must both equal 25% of the required annual payment
After March 15, 2022 and before June 15, 2022 One estimate payment must be made equal to 25% of the required annual payment
On or after June 15, 2022 and before September 15, 2022 One estimate payment must be made equal to 50% of the required annual payment
On September 15, 2022 One estimate payment must be made equal to 75% of the required annual payment

New York City PTET Election

Effective January 1, 2023 New York City will now allow eligible entities to make a PTET Election. The tax rate will be a flat 3.876%.

In order to be considered an eligible entity, you must be a partnership, LLC, or NYS S-Corporation where all the shareholders/members are residents of New York City. The Pass-through Entity Tax will be based on the sum of all items of income, gain, loss, or deduction to the extent included in the NYC resident’s taxable income.

The New York City PTET Credit will be an additional modification to New York State income. Because this election is not effective until January 1, 2023 there is currently no guidance out on the process for making the PTET Election for New York City.  We will monitor and send out further updates once instructions and/or guidance is released.

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