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The NYC PTET is an optional tax that city partnerships or city resident New York S corporations may annually elect to pay on certain income for tax years beginning on or after January 1, 2022.
If an eligible city partnership or eligible city resident S corporation (electing entity) elects to pay the NYC PTET, its partners, members, or shareholders subject to tax under Article 30 may be eligible for an NYC PTET credit on their New York State income tax returns.
The tax is imposed under Tax Law Article 24-B, which was enacted in 2022.
Only an authorized person may make this election on behalf of an eligible city partnership or eligible city resident S corporation. Tax professionals may not make this election on behalf of their clients.
An authorized person may make this election on behalf of an eligible entity when electing to opt in to the New York State PTET and:
The following types of businesses are not eligible to opt in:
An S corporation intending to file as a city resident S corporation must certify, when it elects to opt in to the NYC PTET, that all its shareholders are city resident individuals.
Eligible entities may opt in on or after January 1 but no later than March 15. The election is irrevocable after March 15.
The election to opt in to the NYC PTET must be made online on an annual basis together with the New York State PTET election.
An electing entity that is a calendar-year taxpayer for federal purposes must use a calendar-year basis to elect, file, and pay the NYC PTET. An electing entity that is a fiscal-year taxpayer must elect, file, and pay the NYC PTET for the calendar year in which its fiscal year ends.
Example: A city partnership’s fiscal year is March 1, 2022, through February 28, 2023. The city partnership can make the election on January 1, 2023, for the 2023 NYC PTET taxable year because the city partnership's fiscal year ended during the 2023 calendar year.
If an electing entity has more than one tax year within a calendar year, it can make only one election for the NYC PTET during each calendar year. The entity must have the same election period for the NYC PTET as it does for the New York State PTET.
An authorized person can opt in to the NYC PTET on behalf of an eligible entity through the entity's Business Online Services account.
To opt in to the NYC PTET, an eligible entity must make the NYC PTET election at the same time it opts in to the New York State PTET using the same online application.
To opt in to the NYC PTET:
Important: The authorized person must electronically sign and attest to having the electing entity's authorization.
The calculation of PTE taxable income differs between electing partnerships and electing New York S corporations.
For calculations related to the PTET, see Calculating the NYC PTE taxable income, the NYC PTET, and the credit.
Entities must use the same online Web File application to make both New York State and NYC PTET estimated payments.
To make an estimated NYC PTET payment:
Entities must use the online Web File application and pay by ACH debit when making PTET payments. They cannot pay by check or other methods. To ensure ACH debit payments are successful, see ACH debit block information.
An electing entity must use the online Pass-Through Entity Tax (PTET) Estimated Payment application to pay estimated tax on the amount of the NYC PTET calculated for the current taxable year. Estimated payments are due on or before March 15, June 15, September 15, and December 15 in the calendar year prior to the year in which the return is due. If the due date of the estimated payment falls on a Saturday, Sunday, or legal holiday, the payment is due on the next business day.
Each quarterly payment should be an amount equal to at least 25% of the required annual payment for the taxable year. The required annual payment is the lesser of:
If the entity did not opt in to the NYC PTET for the preceding year, the required annual payment is 90% of the NYC PTET reported on the annual PTET return for the taxable year.
Note: An electing entity cannot make estimated tax payments after filing a return.
An electing entity may apply its estimated NYC PTET payments only to its NYC PTET or New York State PTET liabilities, not to any other taxes. In addition, it cannot transfer payments between related entities or different tax types, including individuals.
Example: Partnership P opts in to the NYC PTET for 2023. P makes estimated tax payments of $500,000 through June of 2023. In July 2023, P determines the partnership will incur a loss for the year and will not owe any NYC PTET. P would like to transfer the estimated payments to the estimated tax accounts of its partners, B and C. However, P is not allowed to transfer funds from the partnership’s NYC PTET account to its partners. P must file a PTET return by the filing due date and claim a refund of all overpaid tax amounts. Partners B and C may not claim any of P’s payments as their own estimated tax payments. B and C must independently make estimated tax payments to pay their own tax liabilities in full for 2023.
If an electing entity fails to pay on time or pays less than it owes, it is subject to penalty and interest charges based on the rules in Article 22. Taxpayers may not apply the annualized installment method under Tax Law § 685(c)(4) to reduce or eliminate underpayment penalties.
On or before March 15, an electing entity must Web File an annual PTET return using the online return application to report the information required under Article 24-B for the NYC PTET taxable year. PTET returns are filed on a calendar-year basis. The entity reports Article 24-A PTET and Article 24-B NYC PTET on the same PTET return.
An electing entity must use the same calendar year or fiscal year for both Article 24-A and Article 24-B purposes.
If the due date of the return falls on a Saturday, Sunday, or legal holiday, the return is due on the next business day. An electing entity may make an online request by March 15 for a six-month extension of time to file its annual PTET return. Penalties and interest will apply for late filing of the return or late payments based on the rules under Article 22. An electing entity, and certain responsible persons, will be liable for any unpaid tax due under Article 24-B [see Tax Law § 873(c)].
The electing entity must file the return online through the entity’s Business Online Services account. To file an annual PTET return:
On its return, the electing entity must identify all the entity’s Article 30 partners, members, or shareholders that are eligible to claim NYC PTET credits.
The Web File application allows the electing entity to manually enter information for up to 100 eligible credit claimants. If the entity has more than 100 eligible credit claimants, it must upload a data file containing the information. The data file must be in a comma delimited format with a .txt or .csv extension.
The electing entity must include the following information for each eligible credit claimant:
The Web File application allows filers to save their work and come back later to complete the return. It is important for the electing entity to report accurate information. The entity cannot change any of the reported information once the return is submitted. If the entity omits any information for an owner or submits incorrect information, some or all credit claimants may not be allowed to claim their NYC PTET credits.
The Tax Commissioner may permit the filing of amended PTET returns in appropriate circumstances. Taxpayers must request permission in writing to file an amended return. For instructions, see Frequently asked questions about PTET: Filings and notices.
Overpayments cannot be carried forward to future years and will automatically be reviewed and processed as a refund. A physical check will be issued for the refund amount and sent to the electing entity’s address on record.
Each electing NYC PTET entity must provide sufficient information to its eligible partners, members, and shareholders to allow them to claim and support the NYC PTET credit on their personal income tax returns. If the information is insufficient, otherwise eligible credit claimants may not be able to determine the proper amount of credit on their personal income tax returns.
S corporations must provide a statement to each shareholder or member that includes the shareholder’s or member’s direct share of the NYC PTET. The shareholder or member will use this information to claim the NYC PTET credit.
Partnerships must report the partner’s or member’s direct share of the NYC PTET on Form IT-204-IP, New York Partner’s Schedule K-1, which the entity is required to provide to each partner or member. The partner or member will use this information to claim the NYC PTET credit.
The annual PTET return is generally due on March 15 after the close of the PTET taxable year. However, the electing entity can request a six-month extension of time to file the return through its Business Online Services account. The PTET extension applies to both the PTET and NYC PTET; there is no separate extension for the NYC PTET.
The extension is an extension of time to file the annual return, not an extension of time to pay any tax due. The electing entity must pay all the NYC PTET by the original due date of the return, or penalties for failure to pay taxes due are applicable.
The electing NYC PTET entity must file the entity's extension online through the entity’s Business Online Services account. To file a PTET extension:
Eligible credit claimants that receive a NYC PTET credit from an electing entity may claim the credit on their personal income tax returns. If the eligible credit claimant is a trust, other than a trust that is disregarded for tax purposes, it is allowed a NYC PTET credit on the trust's fiduciary income tax return, but it is not permitted to distribute any NYC PTET credit it receives to its beneficiaries.
A partner, member, or shareholder that is not subject to tax under Article 30, including but not limited to a corporate partner, is not eligible for the NYC PTET credit. Additionally, a partner that is itself a partnership is not eligible for the NYC PTET credit.
Each eligible credit claimant’s NYC PTET credit is equal to its direct share of the NYC PTET that was reported by the electing entity on the entity’s annual PTET return. If the claimant receives more than one NYC PTET credit, the credits are aggregated. If the amount of the NYC PTET credit allowable for any taxable year exceeds the tax due for the year, the excess is treated as an overpayment, to be credited or refunded without interest [see Tax Law § 1310(g)].
Each eligible credit claimant must file an individual personal income tax return and attach Form IT-653, Pass-Through Entity Tax Credit, to claim the NYC PTET credit.
The credit claimant's New York State personal income tax return must include an addition modification to their federal adjusted gross income or federal taxable income for an amount equal to the NYC PTET credit they are claiming. See Form IT-225-I, Instructions for Form IT-225, New York State Modifications, for more information.
Authorized person: An individual who is eligible to opt in to the NYC PTET on behalf of an eligible city partnership or eligible city resident S corporation. For city partnerships, authorized person includes any member, partner, owner, or other individual with authority to bind the entity and sign returns under Tax Law § 653. For city resident New York S corporations, authorized person includes any officer, manager, or shareholder of the New York S corporation who is authorized under the law of the state where the corporation is incorporated or under the S corporation’s organizational documents to make the election, and who represents to having that authorization under penalty of perjury.
Direct partner, member, or shareholder: Any member, partner, or shareholder that is issued a federal Schedule K-1 by the electing entity based on the member’s, partner’s, or shareholder’s direct ownership interest in the electing entity. A federal Schedule K-1 issued to an entity that is disregarded for tax purposes, such as a single-member limited liability company, is treated as if issued directly to the individuals or entities that include the disregarded entity’s activity on their income tax returns.
Electing resident S corporation: An electing S corporation that certifies at the time it elects to opt in to the New York State PTET that all its shareholders are residents of New York State under Article 22.
A partnership is eligible to make the election even if it has partners that are not eligible for the NYC PTET credit, including, but not limited to, corporate partners.
Eligible city resident S corporation: Any New York S corporation (including an LLC treated as an S corporation for New York State and federal income tax purposes) as defined by Tax Law § 208.1-A that has elected to participate in the NYS PTET and:
A federal S corporation that does not have nexus to New York State is considered an ineligible corporation under Tax Law § 620(b)(3)(B). These corporations are not eligible to opt in to the NYC PTET.
Standard S corporation: An S corporation that is not a resident S corporation. A standard S corporation is not eligible to opt in to the NYC PTET.
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