entity tax

Governor Gavin Newsom signed Assembly Bill 150 this past July. The new bill establishes an elective pass-through entity (PTE) tax framework that will allow California taxpayers to obtain relief from the current $10,000 limit on individual state and local tax deductions.

• Qualifying pass-through entities include partnerships (publicly traded partnerships aren’t included) or S Corporations.

• Qualifying entities must exclusively have partners/shareholders/members that are corporations, individuals, fiduciaries, estates, or trusts.
• For tax years beginning on or after January 1, 2021 and before January 1, 2022
  • PTE tax is due on or before the filing date of the original return. (March 15, 2022 for 12/31/2021 year-end entities)
• For tax years beginning on or after January 1, 2022 and before January 1, 2026
  • The greater of 50% of the elective tax paid in the prior year or $1,000 is due by June 15^th of the tax year.
  • The remaining PTE tax is due on or before the filing due date of the original return.
• The election must be made every year but once made, it is irrevocable.
• The tax is 9.3% of qualified net income.
• The PTE tax is in addition to other entity level taxes […]