Oregon Administrative Rules › Chapter 150 - DEPARTMENT OF REVENUE › Division 314 - INCOME TAXATION GENERALLY GENERAL PROVISIONS › Section 150-314-0522 - Pass-through entity elective tax: Electing entities using a fiscal year; when addition and credit claimed by member

Current through Register Vol. 63, No. 7, July 1, 2024
(1) The pass-through entity elective tax
			 (PTE-E tax) program is available on a calendar-year basis for tax years
			 beginning on or after January 1, 2022 and before January 1, 2026.
(2) Partnerships and S corporations (and
			 limited liability companies (LLCs) electing to be taxed as partnerships or S
			 corporations) that use a fiscal year other than a calendar year for accounting
			 purposes under section 441 of the Internal Revenue Code
			 may elect to be liable for and pay the PTE-E tax for the calendar year that
			 includes the last day of the electing entity's fiscal year, provided that the
			 electing entity's fiscal year begins on or after January 1, 2022 but before
			 January 1, 2026.
Example 1: Sunbrook Farms, Inc., an S corporation, uses a
				fiscal year beginning May 1 and ending April 30 for accounting purposes.
				Sunbrook may elect to pay the PTE-E tax for the 2023, 2024, 2025, or 2026
				calendar years. If it makes the election for calendar year 2023, it will
				calculate the PTE-E tax based on its income for the fiscal year that begins May
				1, 2022 and ends April 30, 2023. If Sunbrook makes the election for calendar
				year 2026, it will calculate the PTE-E tax based on its income for the fiscal
				year that begins May 1, 2025 and ends April 30, 2026.
Example 2: Willows LLC, which elects to be taxed as a
				partnership, uses a fiscal year beginning August 1 and ending July 31. Willows
				wants to make the PTE-E tax election for calendar year 2022, for its fiscal
				year ending in 2022. Because its 2022 tax year begins before January 1, 2022,
				the election is not available. Willows must wait until calendar year 2023 to
				make the election for its fiscal year that begins after January 1, 2022 and
				ends in 2023.
Example 3: Watson and Creek, a partnership, wants to make the
				PTE-E tax election. The partnership has been using a fiscal year beginning
				April 1 and ending March 31 for accounting purposes. In 2022, a change in
				partners holding a majority interest requires Watson and Creek to adopt a
				different tax year. As of January 1, 2023, the partnership will use a calendar
				year for accounting purposes. The partnership has a short tax year for 2022
				that begins April 1, 2022 and ends December 31, 2022. Watson and Creek can make
				the PTE-E tax election for calendar year 2022 because their short tax year
				begins after January 1, 2022 and the last day of the short tax year is included
				in calendar year 2022.
(3)
			 A personal income taxpayer who is a member of an electing entity, or of an
			 entity that is a member of an electing entity, will report the taxpayer's
			 distributive share of the following items on the personal income tax return
			 filed for the tax year of the taxpayer that includes the last day of the
			 electing entity's fiscal year:
(a) The
			 addition for PTE tax deducted under section
			 164 of the Internal Revenue Code
			 on a federal return filed by the electing entity for the entity's fiscal
			 year.
(b) The credit against tax
			 due under ORS chapter 316 for the PTE-E tax paid by the electing entity for the
			 calendar year for which it makes the election.
Example 4: Rebecca is a shareholder in Sunbrook Farms, Inc.,
				the S corporation from Example 1. Sunbrook elects to pay the PTE-E tax for
				calendar year 2026. On her 2026 Oregon personal income tax return, Rebecca will
				report her distributive share of income from Sunbrook's 2026 fiscal year in the
				usual manner. She will report an addition for her share of the PTE-E tax
				deducted by Sunbrook on its federal return for fiscal year 2026. Rebecca will
				also claim the credit for her share of the PTE-E tax paid by Sunbrook for
				calendar year 2026.