pte - Linkenheimer LLP CPAs & Advisors

California SB 132 Extends the Pass-Through Entity Elective Tax — and Changes the Rules

On June 27, 2025, Governor Newsom signed Senate Bill 132 (the 2025-26 budget trailer bill) into law. The measure delivers several tax changes, but the headline for S-corporations, partnerships, and LLCs is a five-year extension — with new twists — for California’s Pass-Through Entity Elective Tax (PTE).

PTE Quick Refresher: The Pass-Through Entity Tax lets your S-corp, partnership, or LLC pay California tax at the entity level. Why does this matter? It converts state income taxes (limited by the federal SALT cap) into a fully deductible business expense at the federal level. With the federal SALT cap temporarily raised to $40,000 (for most taxpayers) through 2029, then reverting to $10,000 in 2030, the PTE election remains a valuable planning tool — especially for owners with significant state tax liabilities.

What SB 132 Means for Pass-Through Owners

PTE election extended through 2030: Qualifying entities may continue making the California PTE election for tax years 2026–2030, preserving valuable federal tax benefits for owners regardless of federal SALT cap changes.

June 15 prepayment no longer “all-or-nothing”: Missing or underpaying the mid-June deposit will not disqualify your election after 2025. Instead, each owner’s PTE credit gets reduced by 12.5% of any shortfall. Translation? […]

By Linkenheimer LLP|2025-07-18T22:02:29+00:00July 18th, 2025|ca, CA tax, california, New Tax Laws, News, pte|0 Comments

Q2 Estimates and PTE Payments Due June 17th

As we navigate through the second quarter of the year, it’s crucial to stay on top of your tax obligations to ensure smooth financial operations and compliance. In particular, we’d like to draw your attention to four important matters: Q2 estimate payments, the California Pass-Through Entity (PTE) elective tax payment, S-Corp estimated payments, and Form 3536 for LLC fees.

Q2 Estimate Payments: For those of you who are required to make quarterly estimated tax payments, the deadline for the second quarter is swiftly approaching. If you are self-employed, a freelancer, a sole proprietor, or have other sources of income not subject to withholding, you likely need to make estimated tax payments to cover your tax liabilities.

The due date for Q2 estimate payments is June 17, 2024, since June 15 falls on a weekend this year. Missing this deadline can result in penalties and interest charges, so it’s essential to ensure your payment is submitted on time. If you need assistance calculating your estimated tax liability or determining the appropriate payment amount, please don’t hesitate to reach out to us. We’re here to help you navigate the complexities of tax compliance and ensure […]

By Linkenheimer LLP|2024-06-13T13:15:46+00:00June 7th, 2024|payments, pte, tax deadlines|0 Comments

Tax Tips When Buying the Assets of a Business

After experiencing a downturn in 2023, merger and acquisition activity in several sectors is rebounding in 2024. If you’re buying a business, you want the best results possible after taxes. You can potentially structure the purchase in two ways:

Buy the assets of the business, or
Buy the seller’s entity ownership interest if the target business is operated as a corporation, partnership or LLC.

In this article, we’re going to focus on buying assets.

Asset purchase tax basics

You must allocate the total purchase price to the specific assets acquired. The amount allocated to each asset becomes the initial tax basis of that asset.

For depreciable and amortizable assets (such as furniture, fixtures, equipment, buildings, software and intangibles such as customer lists and goodwill), the initial tax basis determines the post-acquisition depreciation and amortization deductions.

When you eventually sell a purchased asset, you’ll have a taxable gain if the sale price exceeds the asset’s tax basis (initial purchase price allocation, plus any post-acquisition improvements, minus any post-acquisition depreciation or amortization).

Asset purchase results with a pass-through entity

Let’s say you operate the newly acquired business as a sole proprietorship, a single-member LLC treated as a sole proprietorship for tax […]

By Linkenheimer LLP|2024-05-20T16:50:11+00:00May 20th, 2024|business, pte|0 Comments

Important Reminder on Mandatory e-Pay and S-Corporation Pass-Through Entity Tax

We hope this message finds you well. As we navigate through the financial year, we would like to draw your attention to some significant updates from the California Franchise Tax Board (FTB) that might impact your business operations.

Firstly, based on the guidelines detailed on ftb.ca.gov, it is crucial to note that businesses are required to enroll in the Mandatory e-Pay program once they make an estimate or extension payment exceeding $20,000 or when they file an original tax return with a total tax liability exceeding $80,000. Once you meet this threshold, all future payments, regardless of the amount, duration, or taxable year, must be made electronically. Failure to comply can result in a 1% noncompliance penalty on the amount paid.

Moreover, as highlighted in the FTB Tax News from May 2022, the FTB reminds taxpayers that, beginning from the tax year 2021, payments made for the S-Corporation Pass-through Entity Elective Tax will count toward the Mandatory e-Pay requirement. Hence, if your payment for the S-Corporation Pass-through Entity Elective Tax causes you to meet the threshold, you must enroll in the Mandatory e-Pay program and make all future S-corporation payments electronically.

We understand […]

By Linkenheimer LLP|2023-10-09T16:47:51+00:00October 9th, 2023|pte|0 Comments