Pass Through Entities Tax

Oregon Salt Cap Workaround for Pass-Through Entities:

Beginning January 1, 2022, businesses taxed as partnerships and S corporations can elect to pay Oregon tax at the business level, referred to as PTE-E tax.

This allows a bypass of the $10,000 state and local tax (SALT) limitation brought about with the 2017 Tax Cuts & Jobs Act.

The election is made annually with each timely filed business tax return. If made, the company pays the Oregon taxes on behalf of its owners, as long as all owners are individuals or other pass-through entities. Grantor trusts qualify.

Unfortunately, single-member LLCs and sole proprietorships do not qualify for the new PTE-E tax.

Are estimated required for for PTE-E?

Yes, estimated payments are required, with the first payment being due June 15, 2022. Payments should be made via Oregon Revenue Online; however, registration doesn’t begin until June 6th. So mark your calendars now.

How is the PTE-E Tax Calculated?

The tax imposed on the entity is based on the company’s total distributive proceeds. The first distributive proceeds up to $250,000 are taxed at 9%. The amount exceeding $250,000 is taxed at 9.9%.

If the business makes the election, then each member of the entity is given a credit against their Oregon income taxes equal to the member’s pro rata share of tax paid by the entity. If the member’s credit ends up exceeding their Oregon income taxes, then the excess is refunded to the member.

Looking for more information? Frequently asked questions can be found here.

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Sarah Shaw, CPA

Sarah has expert knowledge in tax and the construction industry, and loves nothing more than to assist clients in navigating the ever-changing tax and accounting worlds.

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