What is Pass-through entity tax (PTET)?
In short
A pass-through entity tax (PTET) is a state income tax that a partnership or S corporation elects to pay at the entity level. The entity deducts it federally, which works around the cap on individuals' state and local tax deductions.
Key takeaways
- Owners generally receive a state credit or exclusion for the tax paid.
- The Internal Revenue Service confirmed in Notice 2020-75 that the payments are deductible by the entity.
- Each state sets its own election rules and deadlines.
Where it's tested
TCP: Multi-Jurisdictional & International Basics — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company's only activity in a state is sending sales representatives to solicit orders for tangible goods, which are approved and shipped from outside the state. What protection does Public Law 86-272 provide?