Elective Pass-Through Entity Tax

Legislative Changes

• Information About the Pass-Through Entity Tax (SB 151)

SB 151 (2023 Regular Legislative Session) creates an elective pass-through entity tax retroactive to Tax Year 2022. This new pass-through entity tax is meant to comply with the provisions of IRS Notice 2020-75.

The elective pass-through entity tax is a tax imposed directly upon the income of the entity, defined as the resident pass-through entity owners’ income plus the apportioned nonresident pass-through entity owners’ income. The pass-through entity tax is filed and paid instead of the nonresident withholding due with PTE-100. Any entity that elects to pay the pass-through entity tax will no longer be obligated to file the PTE-100.

For calendar year taxpayers, the election is due on or before March 15th. Under Administrative Notice 2023-01, a special rule applies to Tax Year 2022 that requires the election be made between June 8 and September 15, 2023.

Forms and Filing

Effective September 1, 2023, paper EPT-100ELF Forms are no longer required. To request an Elective Pass Through Entity Account, taxpayers should log on to their MyTaxes account and, under their Pass-Through Entity account select the option that says ‘Request Elective Pass Through.’ After answering the appropriate questions, the EPT account will be created instantly. You will then be able to file, pay, and ask EPT questions through MyTaxes

Following this change, the filing of an Elective Pass Through Entity Return will be treated as the taxpayer election for the tax year.

Reminder:

• For Tax Year 2022, the return filed by September 15, 2023 (or by the extended due date), will indicate your election.
• For Tax Year 2023 and forward, the return filed by March 15, 2024 (or by the extended due date), will indicate your election.

EPT-100: (Return) For calendar year taxpayers, the return is due on or before March 15th and any allowable extension is through September 15th. Under Administrative Notice 2023-01, a special rule applies to Tax Year 2022 that requires the return be filed between June 8 and September 15, 2023. The EPT-100 can only be filed online via MyTaxes.

• Instructions for the filing of the EPT-100 return as well as a spreadsheet of information taxpayers will have to import can be found here:
• EPT-100 Instructions
• EPT-100 Import Spreadsheet

EK-1: (Schedule) Every S Corporation or Partnership required to pay tax on Non-Resident shareholders/partners must provide the EK-1 (Schedule of WV Partner/Shareholder/Member/Beneficiary Elective Pass-through Entity Income Credit) to each shareholder/partner on or before the date it files its West Virginia Elective Pass-Through Entity Tax Return ( EPT-100). The S Corporation or Partnership is required to submit all income information as it relates to the individual shareholders/partners of the S Corporation or Partnership on the Partner Reports when filing their annual Elective Pass Through Entity tax return. Individual taxpayers must enclose the EK-1 supplied by the S Corporation or Partnership when filing their IT-140 West Virginia Personal Income Tax Return.

Individuals claiming the income credit for Tax Year 2022 should list the total amount of income credit on the RECAP schedule Line 1. Taxpayers who have already filed will need to file an amended IT-140 return with all the supporting schedules.

Payments

If you are unsure whether you will file the PTE-100 or EPT-100 in an upcoming year, estimated payments should be made on your PTE account. This is only if you are undecided on which form you will be filing.

If you know you will be filing the EPT-100, you should make payments to that account.

• For calendar year taxpayers, estimated payments are due under the following schedule:
• For Tax Year 2022
  • No estimated payments are due provided the liability is paid in full by either the individual pass-through entity owners or the pass-through entity by April 18th 2023.
• For Tax Year 2023
  • First three quarters: September 15th
  • Final Quarter: December 15th
• For Tax Year 2024 and beyond:
  • First Quarter: April 15th
  • Second Quarter: June 15th
  • Third Quarter: September 15th
  • Fourth Quarter: December 15th

For Tax Year 2022, an extension of time has been granted until April 18, 2023 to pay the entity level tax due as a nonresident withholding payment. However, this extension requires that the pass-through entity receives agreement from the partners to later apply the nonresident withholding tax payments as entity level tax payments and certifies the same upon the filing of the entity level tax return. Payment can be made on our web portal at MyTaxes.

If a nonresident withholding payment is not made by April 18, 2023 by agreement of all partners, a conditional extension of time has been granted until September 15, 2023. This conditional extension of time requires that all pass-through entity owners have paid their income tax due by April 18, 2023, without regard to the expected tax credit for the entity level tax.

Frequently Asked Questions

How do I file an extension for Tax Year 2022?

An extension on the filing of the EPT-100 return for Tax Year 2022 can be granted for 30 or 60 days as the return must be filed in 2023. To request an extension, Taxpayers should send a message to the Tax Division online using their EPT account on MyTaxes.

I submitted the EPT-100ELF but don’t see my account on MyTaxes yet, how can I find it?

The Tax Account Administration is still processing the EPT-100ELF forms that have been received. Your account may not have been created yet. Taxpayers should continue to check back on MyTaxes to see if the Elective Pass-Through Entity account has been added. Once the account has been added, taxpayers will be able to see any payments they had transferred over as well as the EPT-100 return for filing.

Can I sign the EPT-100ELF electronically?

Yes, an electronic signature is acceptable when submitting the EPT-100ELF.

Can I revoke my election to file the EPT-100?

You may only revoke the election to file an EPT-100 if you have not yet filed the return. If you made the election and have filed the EPT-100, you are bound by the election and cannot revoke it for that tax year.

What third-party vendors can I use to file my EPT-100?

Currently, the EPT-100 is available for filing only on MyTaxes. Please log in to your MyTaxes EPT account in order to file.

How can I have my CPA file for me? (Third-Party Account Access)

MyTaxes offers and encourages a feature that allows a taxpayer to grant a third party (tax preparer, accountant, etc.) access to one or more of their accounts. The taxpayer will also determine the type of access a third party is granted (File and Pay, File only, Pay only or View only).

A third party, that has been granted access by multiple taxpayers, will only require one single logon to access the various accounts for their multiple clients.

Submitting a request for third party access will send your username and email information to the first party, so access may be granted to your logon.

• The following provides instructions for a third party to request access to a client's accounts:
• Select Manage My Profile
• Select the More tab
• Select the Request Third Party Access link, in the Third Party Access section
• Select Id Type and enter Taxpayer Id
• Submit

Note: If the customer indicated on our request is found, they will be sent a notice in MyTaxes asking them to grant your logon third party access. Once third party access is granted, you will receive a notice indicating which accounts you have been granted access, including the access type.

I filed my PTE-100 but now I want to file the EPT-100, do I need to amend?

Yes. Taxpayers who had filed their 2022 PTE-100 return should amend and then file the EPT Return when it becomes available after making the EPT-100ELF election.

The taxpayer should amend the PTE-100 following the usual amendment procedures. General information on amending a PTE can be found in the Instructions.

Here is what the instructions state:

Changes Made by the IRS to Federal Return

Any S Corporation or Partnership whose reported income or deductions are changed or corrected by the Internal Revenue Service or through renegotiation of a contract with the United States is required to report the change or correction to the West Virginia State Tax Division. This report must be made within 90 days of the final determination by filing an RAR Amended Return and attaching a copy of the revenue agent’s report detailing such adjustments.

Pass-Through Amended Returns

• An S Corporation or Partnership that filed an amended return with the Internal Revenue Service must file an amended return with the West Virginia State Tax Division within 90 days of filing the amended federal return.
• File Form PTE-100, completing all appropriate lines and checking the Amended box under “RETURN TYPE” on page 1. Because West Virginia now uses barcodes on tax forms, it is important to use the appropriate forms for the tax year being amended. Example: You are amending a tax return for the period ending 12-31-2020; be sure to use the 2020 PTE-100 forms.
• NOTE: Tax forms from different years may have different line numbers; read the line instructions carefully.
• Any amount paid with the original return should be entered on the estimated and extension payments line of the return on page 2.
• If you received a refund or had an amount credited on the original return, enter that amount on the Overpayment previously refunded or credited (amended return only) line of the return on page 2.
• Attach all schedules previously submitted and make any appropriate amended changes.

Amended Returns filed for the purpose of obtaining a refund of an overpayment must be filed within three years of the due date of the return (with regard to an extension of me to file), or two years from the date the tax was paid, whichever expires later. If your Amended Return has a balance due, send the payment along with the tax return.

How will the credit flow through to individuals in a tiered partnership?

Tiered partnerships are eligible to file the EPT election. After an EPT Return has been filed and any amounts due paid, the electing entity should issue an EK-1 to their partners. Individual partners will need to include the EK-1 with their IT-140 when they file to claim the income credit. The income credit is claimed on the Recap Schedule. Taxpayers should remember that only individuals are eligible to take an EPT credit.

How should the EK-1 be issued when there are trust beneficiaries eligible to take the credit but their trust is not required to file a return?

The EPT entity will issue the EK-1 to the trust who would be listed on the EK-1 already. The trust would then provide EK-1's to the beneficiaries who would receive their percentage of the credit.

When the entity listed in “Organization Name” submits the EK-1 for information purposes, the entity must check the “From Partner Report” box and include the “PARTNER/SHAREHOLDER/MEMBER/BENEFICIARY” on either the Resident partner Report or Nonresident Partner Report.

Do nonresident shareholders need to file individual WV returns? Is the Nonresident Composite (IT-140NRC) still needed?

An electing PTE may not file a composite return on behalf of its nonresident owners. If a nonresident owner’s only West Virginia source income is through an electing PTE that fully pays the tax, that nonresident owner is not required to file a West Virginia nonresident return, but may do so at the election of the nonresident owner.

What if my question is not answered here?

If your question is not answered here, please log in to MyTaxes and ask the question via your EPT account, or contact Taxpayer Services toll-free at 1 (800) 982-8297 or (304) 558-3333 or via email at TaxHelp@WV.Gov.