Pass-Through Entity Election Action Required

OREGON

For any pass-through entities that operate in Oregon and want to take advantage of the pass-through entity election (“PTE-E”), the second quarter estimated payments are due Thursday, June 15. Payments are based on distributive proceeds of the entity which do not include any subtractions separately stated on the entity’s Schedule K.

Fiscal year taxpayers should also be making their second quarter payments by June 15.  If you are wondering how that all works, check out our previous blog that explains the timing of the 2023 PTE-E payments.  The estimate amount due on June 15 is based on distributive proceeds of months 4 and 5 of your fiscal year.  On the example, PTEE Fiscal Year Chart Period 2 covers the months of August and September of 2022.  The balance of the estimated payments required to be paid in by June 15 includes first and second quarters.  The safe harbor amounts are 90% of the current year or 100% of the prior year’s liability.

Proposed Senate Bill 158 would provide a much anticipated legislative corrections to the current statute.  One of the changes for 2023 filings would allow the entity to apply any overpayments of tax paid at the entity level to the following year’s tax liability.  Other provisions include: 1) allowing all trusts to be considered qualified members; 2) clarifying that a member is required to addback the amount of Oregon tax deducted by the member for federal tax purposes; and 3) extending the pass-through entity election for an additional 2 years to 2025.  As of now, Senate Bill 158 was sent to Ways and Means Committee on April 10 and has not progressed further.

CALIFORNIA

The California pass-through entity tax (“PTET”) payments are different than Oregon.  An entity that anticipates making an election on a timely filed tax return, is required to make two payments.  The first payment is due June 15 and will be the greater of $1,000 or 50% of the prior year PTET liability.  When the tax return is filed (or extended), the second payment will be the remaining balance of the PTET liability.

Our State and Local Tax Team is available to assist with all of your Pass-Through Entity Election questions and calculations for Oregon as well as all other 36 jurisdictions that currently have PTET programs.  Please contact our professionals for more information at SALT@GMCO.COM.