The New York PTE tax follows several other states in availing itself of the IRS’ guidance in Notice 2020-75, which permits the use of PTE tax regimes like New Jersey and Connecticut previously.

With the new PTE tax in place, eligible entities that elect to be taxed at the entity level will now be able to provide their owners with a credit equal to such owners’ appropriate share of the tax paid by the PTE, and therefore avoid the $10,000 SALT deduction limitation.

An eligible entity will elect to pay tax at the business level and the individual partners or shareholder will be entitled to a credit on their personal income tax returns. The credit will be equal to the PTET tax paid by the entity. Rates are 6.85% and then increasing as the entity’s income exceeds $2,155,000. The credit will be refundable. For nonresidents, it will be based on allocable income and for residents on all income (with some exceptions