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 The law will expire if the federal SALT deduction limitation expires or is repealed.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.
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 PTE
are passed through to its members/owners. However, for taxable years beginning
on or after January 1, 2022 certain qualifying pass-through entities may elect
to pay a PTE-E Tax on the sum of each of the member/owner's share of
distributive proceeds. The member/owner(s) may then claim a tax credit for the
tax 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 each
year. The election is made when the return is timely filed.
A PTE is a partnership or S corporation or limited
liability company (LLC) electing to be treated as a partnership or S corporation. The
PTE may elect to pay the PTE-E Tax if all the member/owners are individuals or
are 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 the
election for taxable years beginning on or after January 1, 2022.
No. The PTE-E Tax is a separate tax apart from the
composite tax return filed on behalf of individuals. The overpayment from the
composite return cannot be transferred to the pass-through entity's elective
Yes. The grantor trust is treated as a qualified
member because they are subject to the personal income tax laws under ORS
Yes. The election can be revoked on or before the due
date of the return, including extensions.
The PTE will pay tax on the distributive proceeds of
the entity. Distributive proceeds include net income, dividends, royalties,
interest, rents, guaranteed payments, and gains of a PTE derived from or
connected 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 the
credits allocable to the members who are included on the OR-OC.
Yes, you are required to register on Revenue Online
before estimated tax payments can be made.
The returns are filed on a calendar year basis and are
due on the same day that the personal income tax returns are due, which is
normally April 15th. For fiscal filers, returns are due for the year that
coincides 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 return
reporting 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 that
meets the conditions for the use of the elective rates under ORS 316.043 may be
treated as qualifying income under ORS 316.043. If the distributive income from
the PTE is a mix of qualifying and nonqualifying income,
the addition that is qualifying income is a proration determined by the
department 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 the
PTE-E tax return is filed.
The PTE may owe underpayment interest when it files
the PTE-E tax return.
Estimated payments have the same due dates as for
calendar-year personal income tax filers: April 15, June 15, September 15, and
January 15 after the tax year ends. For tax year 2022 only, the April 15
payment is due on June 15 along with the June 15 payment. No underpayment
interest will be due for the period before June 15.
Yes, but the PTE figures the payment amounts based on its fiscal year that ends during the calendar
year 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.
· 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 outside
Oregon, it must apportion its income according to Oregon's Uniform Division of
Income for Tax Purposes Act, ORS 314.605 to 314.675, unless the PTE is a
financial institution or public utility. In that case, the PTE must apportion
its income using the provisions of ORS 314.280. See Schedule OR-AP Instructions, Apportionment of Income for
Corporations and Partnerships, for information about apportioned and
From its total income from the sources listed above,
the PTE must subtract the amount that isn't apportionable. Then it multiplies
the remaining amount by its apportionment percentage. Use Schedule OR-AP
Instructions as a guide for estimating the
apportionment percentage. Then, from the income that isn't apportionable, add
back income that must be allocated to Oregon. This is the PTE's total amount of
distributive 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 PTE
timely pays at least 90 percent (90%) of the tax that it expects will be shown
on the PTE-E tax return.
Estimated tax is payable in four regular installment
amounts. Multiply the total estimated tax by 90 percent, then divide that
amount 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 during
the year can figure its installment amounts on an annualized basis. For
guidance for tax year 2022 use the “Annualized income worksheet" for
personal income taxpayers inside Form OR-10 Instructions,
Underpayment of Oregon Estimated Tax (skipping
references to items that only apply to personal income taxpayers) or ORS
314.505 and 314.525 and the associated Oregon Administrative Rules for PTEs
that 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 must
first register for a PTE-E account on Revenue Online. Payment can be made by
ACH debit or credit while logged into the PTE's Revenue Online account, or by
using the account number if not logged in. Payments by check or money order
will also be accepted if submitted with Form OR-21-V, Oregon
Pass-through Entity Elective Tax Payment Voucher. See Form OR-21-V Instructions for information about making
payments 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, 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.
An electing PTE that deducted PTE-E tax on its federal return for the election year must report a refund of PTE-E tax on its federal return for the refund year. The refund is reported as “other income" in the owners' separately stated items on Form 1065, Schedule K, line 11 (if the PTE is a partnership) or on Form 1120-S, Schedule K, line 10 (if the PTE is an S corporation), using Code J, “Recovery of tax benefit item." See the instructions for Form 1065 or Form 1120-S for more information.
The PTE will report each owner's distributive share as “other income" on Schedule K-1, box 11 (partner) or box 10 (S corp shareholder), also using Code J. It will be up to each owner to determine whether they received a tax benefit from the refunded PTE-E tax and how much to include in their federal income.
Your distributive share of the PTE's refund should appear on Schedule K-1 as “other income" in box 11 (if you're a partner) or box 10 (if you're an S corporation shareholder), using Code J. Code J means that the reported amount is a “recovery of a tax benefit item." It should be reported to you separately from your distributive share of the PTE's ordinary business income. This is because you may or may not have benefited from the deducted PTE-E tax on your own federal return.
The amount of the refund you include in your federal income depends on whether you received a tax benefit from the refunded PTE-E tax. Follow IRS guidance or ask your tax professional to determine the amount to include in your federal income. The tax benefit recovery amount will be reported as “other income" on Form 1040, 1040-SR, or 1040-NR, Schedule 1, line 8z.
See the instructions for Schedule K-1 and your federal return for details. You can find information about recoveries of federal tax benefit items in IRS Publication 525. For an overview of Oregon's tax benefit doctrine, see Publication OR-17.
Yes, if you previously reported an addition for PTE-E tax deducted on the PTE's federal return.
An electing PTE deducts the Oregon PTE-E tax on its federal return, which reduces an owner's share of the PTE's business income. Oregon income taxes can't be deducted on an Oregon return, however, so an owner is required to report their share of the deducted PTE-E tax as an Oregon addition. The PTE reports an owner's share of the addition for deducted PTE-E tax on Schedule OR-21-K-1. On the owner's Oregon return, the addition is reported on Schedule OR-ASC or Schedule OR-ASC-NP using code 167.
If you've already reported an addition for PTE-E tax deducted by the PTE that received a refund, then you've already paid Oregon tax on your share of the refund. For this reason, you can subtract the amount you're now including as “other income" from the recovery of a tax benefit on your federal return. Report the subtraction on Schedule OR-ASC, section B or Schedule OR-ASC-NP, section D. Use code 387.