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State Taxation of S Corporations: Varying State Treatment, Composite Returns, PTE Elections, Recent Developments

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Friday, May 31, 2024

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This webinar will review how states tax Subchapter S corporations. Our panel of S corporation experts will review recent S corporation developments by state and discuss common ways states tax S corporation income, filing composite returns, and state pass-through entity elections as they apply to S corporations.

Description

Although practitioners are familiar with federal treatment of S corporation status, state treatment of S corporations varies dramatically. Most states recognize the federal S corporation election; however, New York requires a separate Subchapter S election. New Jersey only recently agreed to recognize a valid federal S corporation election for state purposes.

Not all states allow flow-through treatment of S corporation income. The Louisiana Department of Revenue explains, "Technically, an S Corporation is a pass-through entity but Louisiana income tax law does not recognize Subchapter S corporation status. An S corporation is required to file income tax in the same manner as a C corporation." However, in certain cases, some or all of an S corporation's Louisiana income can be excluded from the corporate return and taxed to the shareholders.

Most states have adopted a pass-through entity tax workaround to circumvent the SALT cap that includes S corporations. Some states tax the S corporation itself. Other states provide a credit to shareholders to offset the tax paid. S corporations and shareholders need to understand when making PTE elections in specific states is beneficial. The nuances of SALT taxation of Subchapter S corporations are complex. SALT practitioners and S corporation shareholders need to grasp the ramifications of S corporation status in various states to minimize taxes paid by these entities and their owners.

Listen as our panel of flow-through experts highlights the significant difference in S corporation treatment in specific states.

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Outline

  1. State taxation of S corporations
  2. States' methods of treating Subchapter S status
  3. States recognition, or non-recognition, of the federal S corporation election
  4. Nonresident treatment of shareholders by states
  5. Privilege, excise, and other taxes imposed on S corporations
  6. Pass-through entity treatment by states
  7. Composite returns
  8. Recent developments in state taxation of S corporations
    1. New Jersey's new opt-in/opt-out regime
    2. Other developments

Benefits

The panel will cover these and other critical issues:

  • States that do not recognize the federal Subchapter S election
  • Varying state methods for taxing S corporation income
  • New Jersey's recent recognition of federal S corporation status and its opt-in/opt-out rules
  • State PTE workarounds for S corporations

Faculty

Kim Buresh
Kim Buresh
Director
Andersen

Ms. Buresh has over 12 years of experience in state and local tax. She provides corporate and high net worth clients...  |  Read More

Damin, John
John Damin
Managing Director
BDO USA

Mr. Damin is a Managing Director whose primary focus is in state and local income/franchise tax. His state tax...  |  Read More

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