Don’t Forget to Consider State’s Pass-Through Entity Elective Tax (PTE-E)

January 17, 2023

Don’t Forget to Consider State’s Pass-Through Entity Elective Tax (PTE-E)

The Oregon Department of Revenue is reminding taxpayers of a program established two years ago that helps alleviate the $10,000 federal cap placed on State and Local Tax Deductions. “The PTE-E tax program was created in July 2021 as a business income tax in response to the $10,000 cap on the federal State and Local Tax (SALT) deduction added in the 2017 federal Tax Cuts and Jobs Act,” according to the department. “Qualifying members of an electing PTE are eligible for a credit equal to 100 percent of the member’s distributive share of the PTE-E tax paid. This is an elective, not mandatory, tax.” For more information, the department is directing taxpayers to this webpage, where then can find the answer to such questions as:

How can I find out more about PTE-E?
How do I make a PTE-E payment?
Can I transfer payments from one entity to another?
Does owner residency factor into the PTE-E tax calculation?

For answers to more question, go to BusinessAlternative.IncomeTax@dor.oregon.gov. Some Risk NFIB supported the federal Tax Cuts and Jobs Act but warned its members that Oregon’s workaround the SALT caps were not without some risk. Shortly after the workaround (Senate Bill 727) passed, NFIB Oregon State Director Anthony Smith said, “It could significantly benefit many NFIB member businesses by effectively reducing their federal tax liability, but it’s not without some risk. The challenge with SB 727 is that it creates a new tax that didn’t exist prior to its passage – and to address a temporary problem (all personal income tax provisions of the TCJA automatically expire at the end of 2025, which is why we have been focused nationally on making the 20% pass-through deduction for QBI permanent). Once a tax is on the books, it rarely goes away. SB 727 passed with an automatic two-year sunset, but we’ll be watching this one closely in future sessions.”