Overview

Gain a better understanding of the advantages and pitfalls of state PTETs and making a PTET election. Presented by Lorman.

The Tax Cuts & Jobs Act (“TCJA”) of 2017 overhauled many critical areas of federal tax law. One such change which affected a large population of individual taxpayers was the $10,000 limit on state and local tax deductions, commonly referred to as the federal “SALT cap.” Following enactment of the TCJA, individual taxpayers in many high tax states, such as California, New York, and New Jersey, to name just a few, experienced an increase in their federal personal income tax liabilities due in large part to limitations on the deductibility of state and local taxes for federal income tax purposes. In the early years following the enactment of the TCJA, states have attempted to contrive different strategies to help their highly-taxed constituents in working around the federal SALT cap. However, not until the IRS’ guidance in Notice 2020-75, which was issued in late 2020, did a large number of states develop and adopt Elective Pass-Through Entity Tax (“PTET”) regimes, which are still evolving today. This presentation will help taxpayers and tax practitioners, alike, in maneuvering through a sea of new and varied state legislation and taxing schemes in search of significant federal tax savings opportunities. We will provide an overview of these recently enacted state PTETs, and address the advantages and, in some cases, the pitfalls, of making a PTET election. We will also address some of the practical and ancillary issues that have arisen, based on what we’ve learned over the past year, when several states adopted these PTET regimes.

Learning Objectives

• You will be able to explain recent state trends that work-around the Federal SALT Cap.
• You will be able to describe the differences and functions of various Pass-Through Entity Tax (“PTET”) regimes employed by more than half of all states.
• You will be able to identify the advantages and disadvantages of electing into a state’s PTET.
• You will be able to discuss some of the practical challenges with these new and evolving state PTE tax regimes.

Presenters

Christian Burgos, Partner, Marcum LLP 
Jeremy Katz, Esq., Manager, Marcum LLP