BILL NUMBER: S8115B
SPONSOR: SKOUFIS
 
TITLE OF BILL:
An act to amend the tax law, in relation to the timing of annual tax
elections
 
PURPOSE:
This bill would amend the tax law to allow a taxpayer to make the PTET
election by September 15 of the tax year to which the election applies.
Current law requires the election to be made by March 15 of the tax
year.
 
SUMMARY OF PROVISIONS:
Section 1 of the bill modifies Tax Law § 861 to change the date for
making the state-level PTET election from March 15 to September 15
applicable to tax years beginning on or after January 1, 2024.
Section 2 of the bill modifies Tax Law § 864 to require that if a
taxpayer makes this election on or after March fifteenth and before June
fifteenth, the taxpayer must pay twenty-five percent of the required
estimated payment at the time of election. If an election is made on or
after June fifteenth and before September fifteenth, the taxpayer must
pay fifty percent of the required estimated payment at the time of
election. Additionally, this section permits the use of the annualized
income installment method for the computation of estimated payments.
Sections 3 and 4 of the bill modify Tax Law § 868 and § 871 to extend
the adjustments being made to the state-level PTET election to the City
PTET election.
Section 5 provides the effective date.
 
JUSTIFICATION:
This legislation will allow an eligible taxpayer to make the pass
through entity tax (PTET) election by September 15 of the tax year to
which the election applies, rather than by March 15 as the law now
requires, allowing existing taxpayers more time to assess the impact of
the election, and allowing unincorporated businesses created after March
15 of a tax year to take advantage of the PTET program for that year.
The PTET was adopted at the state level in 2021 to provide a mechanism
to restore federal deductibility of state taxes on business income paid
under the personal income tax, such as for Sub-S corporations, partner-
ships and LLCs. Since then, this program has benefitted nearly 100,000
mostly small unincorporated businesses.
This limited amendment to the statute gives taxpayers more time to
assess and make this annual election, and provides access to the program
to businesses created after March 15 of a given tax year. Additionally,
the bill would permit the use of the annualized income installment meth-
od for the computation of estimated payments which is the same method
applied to personal income tax estimated payments. In doing so, this
legislation more closely reflects the approach taken by the majority of
states, as thirty of thirty-three states with a PTET mechanism provide
longer election periods than does New York.
 
LEGISLATIVE HISTORY:
New legislation.
 
FISCAL IMPLICATIONS:
The PTET was designed to be revenue neutral to the state, and this
legislation will have no impact on total state revenues. The legislation
would provide a modest financial benefit to the state based on the tech-
nical components of how the tax works. Specifically, the tax rate appli-
cable to many flow-through entities is higher than the personal income
tax rate payable by the underlying owners of the entity. This tax over-
age is ultimately refunded to the partners, but the State essentially
gets an interest-free loan from PTET participants.
 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to taxable years
beginning on or after January 1, 2024.

Statutes affected:
S8115: 864 tax law, 864(b) tax law, 871 tax law, 871(b) tax law