PA DOR Response to NJ SALT Work-Around Pass-Through Entity Tax
PA DOR Response to NJ SALT Work-Around Pass-Through Entity Tax
On November 2, 2020, Herbein posted NJ SALT Work-Around Pass-Through Entity Tax, a blog regarding the new NJ Pass-Through Entity Tax. This legislation allows pass-through entities to pay income tax at the entity level on behalf of its owners in lieu of the owners paying tax on the income of the pass-through entity on their personal income tax returns.
In response to our blog, the Pennsylvania Department of Revenue (PA DOR) contacted Herbein to inform us of their position on whether Pennsylvania residents may claim a PA resident tax credit for NJ income taxes paid at the entity level.
The PA DOR will allow a Pennsylvania resident to take a resident credit for the NJ pass-through entity tax paid by S Corporations and Limited Liability Companies (LLCs) filing as S Corporation for federal income tax purposes.
However, the PA DOR will NOT allow a resident credit for the NJ pass-through entity tax paid by partnerships or LLCs filing as partnerships for federal income tax purposes.
More details on the PA DOR’s position on entity level taxes paid by pass-through entities can be found here: https://revenue-pa.custhelp.com/app/answers/detail/a_id/3618.
Please contact your Herbein advisor if you have any questions regarding this matter.
Article contributed by Michele Burkins. Contact the author at info@herbein.com.
