Following New York State, New York City Enacts
Pass-Through Entity Tax (NYC PTET)
New York City has enacted an NYC pass-through entity tax (NYC PTET) that is similar to the New York State PTET, with some differences, effective for tax years beginning on or after January 1, 2023.
The annual NYC PTET election may be made by an “eligible city partnership” or an “eligible city resident S corporation;” once made, it is irrevocable. An “eligible city partnership” means any partnership as provided for in IRC Section 7701(a)(2) that has an NYS partnership return filing obligation under Tax Law Section 658(c)(1), where at least one partner or member is a city resident individual. An “eligible city resident S corporation” means any New York S corporation that is subject to tax under Tax Law Section 209 that has only city resident individual shareholders.
Any eligible city partnership that makes the NYS PTET election may make the NYC PTET election for the same taxable year. Any eligible city resident S corporation that makes the NYS PTET as an “electing resident S corporation” may make the NYC PTET election for the same taxable year. The NYC PTET election must be made by the due date for, and in the same manner, as the NYS PTET election.
The NYC PTET is imposed at a flat rate of 3.876% (the highest NYC personal income tax rate). The base includes all items of income, gain, loss, or deduction to the extent they have included in the city taxable income of a partner, member, or resident shareholder of the electing city taxpayer. Credit is available to resident partners, members, or shareholders against their personal income tax equal to their direct share of the NYC PTET.
The NYC PTET is in addition to the New York City Unincorporated Business Tax on partnerships, and the NYC General Corporation Tax on S corporations.
If you’re not yet familiar with the PTET, please click on the links below to articles that we have written on it:
The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.