June 24, 2021
Thursday, July 15 | The new elective state pass-through entity taxes: A survey of the latest developments (1 pm ET)
The 2017 federal Tax Cuts and Jobs Act imposed a $10,000 annual limitation on the amount of state and local taxes (SALT) individuals can deduct in computing federal income taxes (the “cap”). An important exception to this cap is the retention of the deduction for SALT “… paid or accrued … in carrying on a trade or business.” While C corporations, whose income can only be derived from the provision of a “trade or business” are unaffected by the cap, it applies to individual owners of businesses organized as pass-through entities (PTEs) (e.g., partnerships, S corporations and certain limited liability companies ? each a PTE) since SALT is generally assessed at the individual, and not the entity, level.
As a workaround to the cap, some states, starting with Connecticut in 2018, enacted new taxes on PTEs that shifted the direct burden of PTE taxation from the owners to the entities and provided a credit against or an exclusion of the distributive share of PTE income subject to such tax from the related direct state income taxes on the owners. In response to a perceived ambiguity as to whether the IRS would respect the SALT cap workarounds, in November 2020 the US Treasury Department issued Notice 2020-75, indicating its intention to issue proposed regulations clarifying that a PTE computing non-separately stated taxable income or loss for federal income tax purposes could deduct these state PTE taxes imposed on its net income and that its individual owners’ SALT deductions would not be limited by the cap.
Following the release of Notice 2020-75, many states have enacted, or are considering enacting, similar entity-level PTE taxes. During this webcast, EY panelists will:
Please join us for this 75-minute, interactive webcast. We welcome and encourage you to ask questions.
Date: Thursday, 15 July 2021
Time: 1:00–2:15 p.m. EDT New York; 10:00–11:15 a.m. PDT Los Angeles
Registration: View archive here.
CPE credit offered: 1.4. Recommended field of study: Taxes. Learning objective: Understand the history of the state PTE-level tax workaround to the SALT deduction limitation; identify differences in the various state provisions and describe how making a state PTE-level tax election could affect your business; and explain federal and industry issues and considerations in making a state election to have the PTE taxed at the entity level. This intermediate level, group internet-based course has no prerequisites or advanced preparation. Final CPE award to be based on content, polling and length of participation. See CPE FAQ for more information.
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