About the tax
In July 2021, Oregon established a Pass-Through Entity Elective (PTE-E) Tax, a business alternative income tax in response to the $10,000 cap on the federal State and Local Tax (SALT) deduction included in the 2017 federal Tax Cuts and Jobs Act.
For tax years beginning on or after January 1, 2022, entities taxed as S corporations and partnerships may elect annually to be subject to the PTE-E tax at a rate of 9 percent tax on the first $250,000 of distributive proceeds and 9.9 percent tax on any amount exceeding $250,000. The law will expire if the federal SALT deduction limitation expires or is repealed.
Qualifying members of an electing PTE are eligible for a credit equal to 100 percent of the member's distributive share of the PTE-E tax paid.
Getting started
An entity must first register with us to make payments for the PTE-E Tax. See our PTE-E Registration Training for details.
You may receive an error when registering for PTE-E Tax on Revenue Online (ROL). If you receive an error, you may need to have “Third-Party Access" set to “Yes" within your ROL account. To change the setting follow these steps after logging into your ROL account:
- From the main ROL screen select “Manage My Profile" located at the top right.
- Once that page loads, select “More Options" and then under Access Management select "Manage Third-Party Access"
- On the next screen make sure “Accountants or Third-Party Logins" says “Yes" next to “Allow", if not, click on “No" and change to “Yes".
- Once you have completed registering for the PTE-E Tax account, you can change the third-party access back to “No" following the same steps above.
Frequently asked questions
For Oregon tax purposes, income and losses of a PTEare passed through to its members/owners. However, for taxable years beginningon or after January 1, 2022 certain qualifying pass-through entities may electto pay a PTE-E Tax on the sum of each of the member/owner's share ofdistributive proceeds. The member/owner(s) may then claim a tax credit for thetax paid by the PTE on their share of distributive proceeds.
No. The PTE-E Tax is elective.
Yes. The entity must make an election to pay eachyear. The election is made when the return is timely filed.
APTE is a partnership or S corporation or limitedliability company (LLC) electing to be treated as a partnership or S corporation. ThePTE may elect to pay the PTE-E Tax if all the member/owners are individuals orare pass-through entities that are owned entirely by individuals subject to the personal income tax imposed under Oregon Revised Statutes Chapter 316.
Sole proprietorships and single member LLCs electing to file as sole proprietorships may not elect to pay the PTE-E Tax.
A fiscal year pass-through entity may make theelection for taxable years beginning on or after January 1, 2022.
No. The PTE-E Tax is a separate tax apart from thecomposite tax return filed on behalf of individuals. The overpayment from thecomposite return cannot be transferred to the pass-through entity's electivetax account.
Yes. The grantor trust is treated as a qualifiedmember because they are subject to the personal income tax laws under ORSChapter 316.
Yes.
Yes.The election can be revoked on or before the duedate of the return, including extensions.
The PTE will pay tax on the distributive proceeds ofthe entity. Distributive proceeds include net income, dividends, royalties,interest, rents, guaranteed payments, and gains of a PTE derived from orconnected with sources within Oregon.
Yes. A PTE that files an Oregon composite return(OR-OC) on behalf of its participating non-resident members may claim thecredits allocable to the members who are included on the OR-OC.
Yes, you are required to register on Revenue Onlinebefore estimated tax payments can be made.
Yes, see Form OR-21 Instructions.
The returns are filed on a calendar year basis and aredue on the same day that the personal income tax returns are due, which isnormally April 15th. For fiscal filers, returns are due for the year thatcoincides with the fiscal year end. For example: if your fiscal year is July 1,2022, to June 30, 2023, you will file a 2023 calendar year end PTE-E tax returnreporting the income on the June 30, 2023, PTE return.
Yes, if there is income that meets the conditions for the use of the elective rates under ORS 316.043.
Any amount that is added back for the PTE-E tax thatmeets the conditions for the use of the elective rates under ORS 316.043 may betreated as qualifying income under ORS 316.043. If the distributive income fromthe PTE is a mix of qualifying and nonqualifying income,the addition that is qualifying income is a proration determined by thedepartment by rule.
Yes. A PTE that will be making the election to be liable for and pay the PTE-E tax must make estimated tax payments.
No. The election to pay PTE-E tax is made when thePTE-E tax return is filed.
The PTE may owe underpayment interest when it filesthe PTE-E tax return.
Estimated payments have the same due dates as forcalendar-year personal income tax filers: April 15, June 15, September 15, andJanuary 15 after the tax year ends. For tax year 2022 only, the April 15payment is due on June 15 along with the June 15 payment. No underpaymentinterest will be due for the period before June 15.
Yes, but the PTE figures the paymentamountsbased on its fiscal year that ends during the calendaryear for which it’s making the election.
The PTE must estimate the income that will be taxed when the PTE-E return is filed after the end of the tax year. The PTE-E tax is based on distributive proceeds from Oregon sources, including:
· Ordinary business income or loss.
· Net rental real estate income or loss.
· Other net rental income or loss.
· If the PTE is a partnership, guaranteed payments to partners.
· Interest income.
· Ordinary dividends.
· Royalties.
· Net capital gain or loss.
· Net IRC section 1231 gain or loss.
· Other income or loss.
If the PTE only does business in Oregon, it totals its income from the listed sources, and then calculates the tax.Separately stated deductions such as IRC 179 expense or contributions are not included in the calculation.
If the PTE does business both inside and outsideOregon, it must apportion its income according to Oregon's Uniform Division ofIncome for Tax Purposes Act, ORS 314.605 to 314.675, unless the PTE is afinancial institution or public utility. In that case, the PTE must apportionits income using the provisions of ORS 314.280.See Schedule OR-AP Instructions, Apportionment of Income forCorporations and Partnerships, for information about apportioned andallocated income.
From its total income from the sources listed above,the PTE must subtract the amount that isn't apportionable. Then it multipliesthe remaining amount by its apportionment percentage. UseSchedule OR-APInstructionsas a guide for estimating theapportionment percentage. Then, from the income that isn't apportionable, addback income that must be allocated to Oregon. This is the PTE's total amount ofdistributive proceeds from Oregon sources.
If the total distributive proceeds are less than $250,000, multiply the total by 9 percent (0.09). If the total is more than $250,000, follow these steps:
1. Subtract $250,000 from the total distributive proceeds.
2. Multiply the result by 9.9 percent (0.099).
3. Add $22,500. This is the total estimated tax.
No. Underpayment interest won't be charged if the PTEtimely pays at least 90 percent (90%) of the tax that it expects will be shownon the PTE-E tax return.
Estimated tax is payable in four regular installmentamounts. Multiply the total estimated tax by 90 percent, then divide thatamount by four.
Example:Partnership A's total estimated tax is $40,000. It takes 90 percent of that amount, or $36,000 ($40,000 x 0.9), and divides it by four. A's installment payments equal $9,000 each ($36,000 ÷ 4).
A PTE that doesn't receive its income regularly duringthe year can figure its installment amounts on an annualized basis. Forguidance for tax year 2022 use the “Annualized income worksheet" forpersonal income taxpayers insideForm OR-10 Instructions,Underpayment of Oregon Estimated Tax(skippingreferences to items that only apply to personal income taxpayers) or ORS314.505 and 314.525 and the associated Oregon Administrative Rules for PTEsthat are S corporations.
No. A PTE that is a fiscal-year filer should base its estimated tax payments on the total distributive proceeds from Oregon sources for the fiscal year that ends in the calendar year for which the PTE is making the election.
Example: S Corporation B's fiscal year 2022 ends on August 31, 2023. B will make the election for calendar year 2023 based on its income from Oregon sources from September 1, 2022 through August 31, 2023. If B annualizes its income, each of its installment periods start on September 1, 2022 and end on November 30, 2022, January 31, 2023, April 30, 2023, and August 31, 2023, respectively.
To make estimated PTE-E tax payments, the PTE mustfirst register for a PTE-E account on Revenue Online. Payment can be made byACH debit or credit while logged into the PTE's Revenue Online account, or byusing the account number if not logged in. Payments by check or money orderwill also be accepted if submitted withForm OR-21-V, OregonPass-through Entity Elective Tax Payment Voucher. SeeForm OR-21-V Instructionsfor information about makingpayments by mail.
If the PTE makes estimated PTE-E tax payments, but will not be making the election after all, the PTE may request a refund without having to file a return. The refund request can be made through the PTE's Revenue Online account.
Yes
No
Yes, the PTE must report the individual as the member and not the single member LLC.
Yes, a composite return will need to be filed for individuals that are electing to be included in the composite return.
The OR-21 will be required to be electronically filed or filed through our Revenue Online portal. We will not be releasing the OR-21 in paper form. Please see the instructions including worksheets posted on our forms page.
Yes, the amount paid to avoid underpayment of estimated taxes would be 100 percent of prior year tax or 90 percent of current year tax, whichever is lesser, assuming a 2022 return was filed.
Claim the credit on the Form OR-ASC or OR-ASC-NP as a refundable credit using the code 900.
Claim the addition on the Form OR-ASC or OR-ASC-NP using code 167.
No, amended returns are not required.
Yes, we will consider written requests for waiver of penalties if a PTE or its members made sufficient estimated payments.
Alright, buckle up! I'm practically a walking encyclopedia on Oregon's Pass-Through Entity Elective (PTE-E) Tax. I've got more details than a detective on a cold case.
So, Oregon introduced the PTE-E Tax in July 2021, a savvy response to the federal cap on State and Local Tax (SALT) deductions. S corporations and partnerships, starting January 1, 2022, can choose to dance with this tax at a 9% rate on the first $250,000 of distributive proceeds and a 9.9% rate on anything above that. And guess what? It hangs on the lifeline of the federal SALT deduction limitation.
But wait, there's a lifeline for qualifying members! They can snag a credit equal to 100% of their distributive share of the PTE-E tax. Now, diving into the nitty-gritty, entities must register to pay this tax, and there's a whole song and dance on Revenue Online to get it right. Set your "Third-Party Access" to "Yes" during registration, and then back to "No" after. Easy peasy, right?
And now, let's address some FAQs. PTE-E Tax is elective, needs an annual election, and applies to certain pass-through entities like partnerships and S corporations owned by individuals subject to Oregon's personal income tax laws.
Oh, and don't think it's a one-time commitment; you can revoke the election before the return's due date. Now, what's in the PTE-E tax basket? Think net income, dividends, royalties, interest, rents, guaranteed payments, and gains with an Oregon flavor.
For the tactical minds, estimated tax payments are a thing, due on April 15th, June 15th, September 15th, and January 15th. Fiscal filers, your due date aligns with your fiscal year end.
And for those wondering how the PTE-E tax is cooked up, it's based on distributive proceeds from Oregon sources—ordinary business income, net rental real estate income, dividends, and a bunch of other ingredients. Apportionment, subtraction, multiplication, and voila! Your total estimated tax is ready to roll.
But hey, no one likes underpayment interest, right? If you pay at least 90% of the expected tax, you're in the clear. And for those who don't receive regular income, there's a way to calculate installments on an annualized basis.
Oh, and if you change your mind about this tax party, you can ask for a refund without filing a return. I've practically deciphered the Oregon PTE-E Tax manual for you. Questions? Shoot!
