Oregon PTE

For our partnerships and S-corporations that are considering taking the elective Pass-Through Entity (PTE) tax, we recommend that you review the information provided by the Oregon Department of Revenue available here. There you will find a FAQ including qualifications, information on registration starting on June 6, 2022, tax rates, and more. Below is a brief introduction of the tax provided by the Oregon Department of Revenue.

“In July 2021, Oregon established an elective Pass-Through Entity Tax (PTE-E), a business alternative income tax in response to the $10,000 cap on the federal State and Local Tax (SALT) deduction added 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 The law will expire if the federal SALT deduction limitation expires or is repealed.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 state tax credit equal to 100 percent of the member's distributive share of the PTE-E tax paid.”

The result of this would be that the state income tax would be paid and deducted by the entity and the deduction would be passed through to the members as a part of taxable income without the $10,000 SALT cap at the individual level. The cash distributions from entity to owner would be reduced by the individual state income tax now being paid by the entity.

If you have any questions about this election you may contact our office.