Elective Pass Through Entity Tax Prior Year Information

Elective Pass Through Entity Tax

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.

Tax Year 2022 Information

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

An extension of time was granted until April 18, 2023 to pay the entity level tax due as a nonresident withholding payment. However, this extension required that the Pass Through Entity received agreement from the partners to later apply the nonresident withholding tax payments as entity level tax payments and certified the same upon the filing of the entity level tax return.

If a nonresident withholding payment was not made by April 18, 2023 by agreement of all partners, a conditional extension of time was granted until September 15, 2023. This conditional extension of time required that all Pass Through Entity owners had paid their income tax due by April 18, 2023 without regard to the expected tax credit for the entity level tax.

For Tax Year 2022, no estimated payments were due provided the liability was paid in full by either the individual Pass Through Entity owners or the Pass Through Entity by April 18th 2023.