The New Pass-Through Entity Elective Tax

Since the Tax Cuts and Jobs Act (TCJA) was passed in 2018, individual taxpayers have been limited to a maximum of $10,000 itemized deduction for state income tax. As a response to this, many states have created provisions where a pass-through entity (partnership or S-corporation) can pay the tax on behalf of its owners. This gives the company a full deduction for the taxes related to the pass-through income.

The Oregon Legislature created the PTE-E tax in Senate Bill 727 during the 2021 session. The PTE-E allows S corporation shareholders and partners in a partnership to avoid the $10,000 state and local tax itemized deduction limitation on their personal return enacted during 2018 with the federal Tax Cut and Jobs Act. The S corporation or partnership can make the election if all the member/owners are individuals, or pass-through entities that are owned entirely by individuals.

Qualifying S corporations and partnerships expecting to file the new Oregon Pass-through Entity Elective (PTE-E) tax must first register through Revenue Online at www.oregon.gov/dor. If you have already registered you do not need to do this again.

To register, businesses will need their legal name, FEIN, mailing address and:

  • Their current Revenue Online login and password, or

  • A valid email address to create a Revenue Online account.

Registration does not mean the business is making the election. The election to pay the PTE-E tax is made when the return is timely filed.

Estimated payments

PTEs must first register to make their required estimated payments. Estimated payments can be made through Revenue Online beginning June 6, 2022. The second quarter payment is due June 15, 2022 and includes the first quarter payment. Interest on underpayment of estimated tax will not be assessed for the first quarter if the payment is included with a timely made second quarter payment.

Please visit the department’s PTE-E tax webpage for more information and answers to frequently asked questions (FAQs).

If you expect to have a state tax liability related to your pass through entity income, Sherwood Tax can assist you in calculating the quarterly payments.

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