State Pass-Through Entity Taxation Regimes: Analyzing Tax Consequences and Caveats of PTE Elections

A live 110-minute CPE webinar with interactive Q&A


Thursday, April 22, 2021

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

Early Registration Discount Deadline, Friday, March 26, 2021

or call 1-800-926-7926

This webinar will discuss states' pass-through entity (PTE) taxation regimes, when and how to elect PTE taxation in applicable states, and analyze the ultimate taxation of owners to mitigate taxes paid.

Description

Surprisingly, the IRS announced proposed regulations will be issued allowing a federal tax reduction for payment of PTE taxes (Notice 2020-75). This recently condoned treatment is already in place in at least 10 states. Some states, including Texas and Connecticut, have mandatory PTE taxes, while others, like Louisiana and New Jersey, provide an election for payment of tax at the entity level.

Many states are implementing PTE taxes in response to the 2017 Tax Act, which added a $10,000 cap on deductible state and local taxes paid by individuals. On Jan. 5, 2021, a bill was introduced in California, allowing flow-through entities to elect taxation at the entity level.

Enabling taxpayers to deduct taxes paid above $10,000 can provide massive tax savings for individuals with state and local taxes exceeding the threshold and holding interests in partnerships, LLCs, S corporations, and occasionally, trusts. Many state guidelines incorporate a deduction that flows through as a non-separately stated item which can have disparaging results. In states with elective PTE taxes, nonresidents and partners in no- or low-tax brackets may be subjected to tax that they would not otherwise be obligated to pay.

In Louisiana, where PTE taxes are elective, once made, the election is binding for future years. Revocation requires filing a consenting application for termination with Louisiana's Department of Revenue. SALT tax practitioners must understand the tax regimes in states where PTE taxes are mandatory and analyze the tax consequences to owners in states where it is elective. Each state's method has its own nuances that must be understood to maximize overall tax savings.

Listen as our panel of SALT veterans explains PTE taxation methods, examples of common PTE taxation scenarios, and key caveats to consider before electing PTE treatment in states where payment of the tax is elective.

READ MORE

Outline

  1. Background
  2. Mandatory PTE taxation
  3. Elective PTE taxation
  4. Specific state taxation regimes
  5. Analyzing the impact of PTE taxation on owners
  6. Best practices

Benefits

The panel will cover these and other critical issues:

  • Recent California PTE taxation legislation
  • Steps SMLLCs and self-employed taxpayers might take to take advantage of PTE level taxation
  • How to best handle differing tax results for partners
  • The impact of a PTE tax election on composite returns
  • The income tax credit offered in some states as opposed to a tax deduction

Faculty

Smith, Scott
Scott Smith

National Technical Practice Leader - State & Local Tax
BDO USA

Mr. Smith sets BDO's policies and positions on technical SALT issues, as well as thought leadership, brand...  |  Read More

Spengler, Richard
Richard W. Spengler, CPA
Managing Director
BDO USA

Mr. Spengler's main area of focus is state income and franchise taxes with significant experience in the design and...  |  Read More

Live Webinar

Buy Live Webinar
Early Discount (through 03/26/21)
CPE credit processing is available for an additional fee of $39. CPE processing must be ordered prior to the event.
See NASBA details.

Live Webinar & CPE Processing

$236

Buy Live Webinar & Recording
Includes special savings of $200 (through 03/26/21)

Live Webinar & Download

$294

Other Formats
— Anytime, Anywhere

Early Discount (through 03/26/21)

Download

48 hours after event

CPE Not Available

$197