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1065 states

Enter a pass-through entity tax (PTET) credit for a 1065 return

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Federal 1040 Schedule A limits the itemized deduction for state income taxes paid to $10,000. However, some states let partnerships pay state taxes on behalf of a partner. The partnership can then take an itemized deduction on Form 1065 for state income taxes paid that's not subject to the $10,000 limit. As a result, the amount of federal income that passes through from the entity reflects an itemized deduction for the entire amount of state taxes paid. The overall taxable income that the individual taxpayer reports on Form 1040 is then less than if the partnership had not paid taxes on behalf of the Individual.
States that allow these pass-through entity tax (PTET) credits provide a means to calculate a tax at the partnership level using:
  • a separate tax form (similar to a composite return), or
  • fields within the main return designed to calculate a tax.
The state's K-1 (or equivalent) will include reporting information required to prepare the partner's tax return.

State-specific entry

Alabama
Go to the
ALGen
 screen and mark the
Elect to pay tax at the entity level (Form EPT)
 checkbox.
Arkansas
  1. Select
    File
    , then
    Client Properties
    .
  2. On the Arkansas tab, mark the
    AR1100PET Pass-Through Entity Tax
     checkbox.
Taxes are calculated, reported, and paid on the AR1100PET, and the amount paid passes through to the AR K-1.
note
When you file an AR1100PET, you can't also file forms AR1050, AR1000CR, or AR941PT.
Arizona
Go to the
AZGen
 screen and mark the
Partnership elects to pay tax at the entity level
 checkbox. Taxes are calculated, reported, and paid on Form 165.
To exclude a partner from the PTET calculation, mark the
Opt-out of pass-through tax election
 checkbox on the Arizona tab in Partner Data Entry.
California
Go to the California tab in Partner Data Entry and mark the
Electing pass-through entity tax
 checkbox for qualified electing partners.
Form 3804 is attached to Form 565/568.
Payment is made on Form 3893. You can make 2 estimates using this voucher.
Colorado
Go to the
COGen
 screen and mark the
SALT Parity Election
 field.
Tax is calculated, reported, and paid on Form DR 0106.
Georgia
Go to the
GAGen
 screen and mark the
Partnership elects to pay tax at the entity level
 field.
Tax is calculated, reported, and paid on Form 700.
Hawaii
Go to the
HIGen
 screen and mark the
Partnership elects to pay tax at the entity level
 field.
Tax is calculated, reported, and paid on Form N-20.
Idaho
Go to the
IDGen
 screen and mark the
Elect to be affected business entity
 field.
Go to the Non Calculating folder and complete Form ABE.
Tax is calculated on Form 65 and PTE-12 and paid with Form 65.
Illinois
Go to the
ILGen
 screen and mark the
Pass-through entity tax election
 field.
Tax is calculated on Schedule Band reported and paid on Form IL-1065.
Schedule K-1-P(3) doesn't print when PTET is elected.
Indiana
Go to the
INGen
 screen and mark the
Elect to file and pay pass-through entity tax
 field.
For tax year 2023, tax is calculated on Schedule PTET and reported and paid on Form IT-65.
Review the PTET instructions on Indiana's website (included in the Form IT-65 instructions).
Kansas
Go to the
KSGen
 screen and mark the
Elect to be subject to tax at the entity level
 field.
Tax is calculated, reported, and paid on Form K-120S.
Kentucky
  1. Select
    File
    , then
    Client Properties
    .
  2. Go to the Kentucky tab and mark the
    740-PTET pass-through Entity Tax
     checkbox.
Tax is calculated, reported, and paid on Form 740-PTET.
note
This form is separately filed, as are the estimates and extension.
PTET taxes paid is reported to partners on Form PTET-CR.
Massachusetts
  1. Select
    File
    , then
    Client Properties
    .
  2. Go to the Massachusetts tab and mark the
    Entity Level Tax
     checkbox.
Form 63D-ELT needs to be e-filed separately.
Michigan
Michigan requires election, filing, and payment to be done through their online portal, Michigan Treasury Online (MTO).
The state added fields to Composite Form 807 to report the flow-through entity tax (FTET) information that was calculated and reported in the MTO portal. UltraTax CS won't calculated FTET, but we added fields to the
MIAdj
 screen to report the FTET information as filed in the MTO portal.
Minnesota
Go to the
MNGen
 screen and mark the
Electing to file and pay tax at entity level
 field.
Tax is calculated on Schedules PTE and PTE-RP, then reported and paid on Form M3.
Missouri
  1. Select
    File
    , then
    Client Properties
    .
  2. Go to the Missouri tab and mark the
    MO-PTE Tax Return
     checkbox.
Tax is calculated, reported, and paid on Form MO-PTE.
note
You can't file composite return Form MO-1040 if PTET is elected.
Mississippi
Go to the
MSGen
 screen and select
1-Electing PTE
 in the
Electing/Removing pass-through entity
 field.
Tax is calculated on Form 84-122 and reported and paid on Form 84-105.
Montana
Go to the
MTGen
 screen and mark the
Partnership elects to pay tax at the entity level
 field.
Tax is calculated, report, and paid on Form PTE.
Nebraska
Go to the
NEGen
 screen and mark the
Partnership electing or previously elected to pay tax at the entity level
 field.
Tax is calculated on Schedule PTET and reported and paid on Form 1065N.
Nebraska also allows PTET for prior tax years 2018 through 2022 to be included on the current year return. At this time, 1065-NE only allows the prior year PTET to be included on the prior year return when the current year return elects PTET.
New Mexico
Go to the
NMWith
 screen and mark the
Elect entity level tax
 field.
To exclude a partner from the PTET calculation, go to the New Mexico tab in Partner Data Entry and mark the
Opt-out of entity level tax election
 checkbox.
Tax is calculated, reported, and paid on Form PTW-D (41367).
New York
New York requires election, filing, and payment to be done through their online portal, the NYS tax department's Online Services portal.
  1. Select
    File
    , then
    Client Properties
    .
  2. Go to the New York tab and mark the
    Pass Through Entity Tax Return
     checkbox.
Income and tax is calculated on the Computation of PTE Taxable Income Worksheet, to be used for the preparer/taxpayer to manually enter into the NYS Online Services portal.
New York City
New York City requires election, filing, and payment to be done through the NYS tax department's Online Services portal.
  1. Select
    File
    , then
    Client Properties
    .
  2. Go to the New York tab and mark the
    Pass Through Entity Tax Return
     checkbox for both the state and the city.
Income is taxed and calculated on the Computation of New York City PTE Taxable Income Worksheet. Only NYC resident individual partners are included. Taxes are reported with code B53 on NYS Form IT-204 (lines 144a-f) and IT-204-IP (lines 47a-f), Other flow-through credit bases and information.
North Carolina
Go to the NCGen screen and mark the Partnership making election to be a taxed partnership field.
Tax is calculated, reported, and paid on Form D-403.
note
  • Only Individual, Estate, Trust, Grantor Trust, and Exempt Org partners (residents and nonresidents) are subject to PTET tax.
  • Tax paid on behalf of nonresident partners will continue to calculate for all other partner types as applicable.
  • Only partnerships with Individual, Estate, Trust, Grantor trust, Exempt Org and passthrough partners are eligible to file PTET. If other partners exist, UltraTax CS will still calculate but an FYI diagnostic will display saying the election is not permitted.
Ohio
  1. Select
    File
    , then
    Client Properties
    .
  2. Go to the Ohio tab and mark the
    IT 4738 PTET
     checkbox.
Form IT 4738 is filed separately, as are the estimates and extensions for the form.
note
  • If you file Form IT 4738, you can't file Forms IT 1140 or IT 4708.
  • Estimates and extensions for Form IT 4738 aren't supported for e-filing.
Income is passed to partners on the existing Form IT-K1.
To calculate the extension payment voucher Form PTE-UPC for Form IT 4738, go to the
OHPTEPmt
 screen and enter the extension amount in the
Balance due on extension (Force)
 field.
Oregon
  1. Select
    File
    , then
    Client Properties
    .
  2. Go to the Oregon tab and mark the
    PTE-E Tax Return
     checkbox.
  3. Go to the
    ORPTE
     screen and mark the
    Election to pay PTE-E tax on behalf of all members
     field.
Oregon requires Form OR-21 be e-filed, but the estimates and extensions are not required to be e-filed.
South Carolina
  1. Go to the
    SCGen
     screen and mark the
    Active Trade/Business Income for electing Partnership Screen Ad
    j field.
  2. Go to the
    SCAdj
     screen and enter active trade or business amounts.
    note
    Amounts here are reported on Form I-435, Column C. UltraTax CS automatically fills in Columns A and B.
Tax is calculated on Schedule I-435 and reported, paid, and filed with Form SC1065.
Utah
Utah requires that the pass-through entity file and pay SALT tax on or before the last day of the taxable year using the Utah Taxpayer Access Point (TAP) website.
The pass-through entity then reports the amount of SALT tax paid on Form TC-65, Schedules N, K, and K-1.
UltraTax CS won't calculate SALT tax. We added fields to the
UTCredit
 screen to report the SALT tax information filed/paid on the UT TAP website.
Virginia
Go to the VAGen screen and mark the Elect to pay Virginia income tax at the entity level for the taxable year field.
Virginia requires that Form 502PTET be electronically filed and paid.
You can't file Form 502 if you file Form 502PTET.
West Virginia
West Virginia requires online filing using the West Virginia MyTaxes website.
Entities electing to pay the pass-through entity tax (Form EPT-100) are no longer obligated to file Form PTE-100. Electing entities are required to provide Schedule EK-1 to all partners on or before the date Form EPT-100 is filed online.
UltraTax CS won't calculated PTET, but you can manually enter the amounts from the online EPT-100 calculation and filing.
  1. Go to the WVGen screen and mark the Pass-through entity level tax filed through WV portal field.
  2. Use the fields in the Schedule EK-1 Information data entry section to enter the income and tax paid for resident and nonresident partners. Special allocation is required for these fields.
When the Pass-through entity level tax field through WV portal is marked, all WV forms are turned off except for the Schedule EK-1 and a single-page filing instruction.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1065 Partnership
  • State: Alabama,Arizona,Arkansas,California,Colorado,Georgia,Hawaii,Idaho,Illinois,Indiana,Kansas,Kentucky,Massachusetts,Michigan,Minnesota,Mississippi,Missouri,Montana,Nebraska,New Mexico,New York,North Carolina,Ohio,Oregon,South Carolina,Utah,Virginia,West Virginia

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