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 The law will expire if the federal SALT deduction limitation expires or is repealed.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.
Getting started
If you plan to participate in the PTE-E Tax, you must first register with us to make payments through Revenue Online (ROL).
Estimated payments are due April 15, June 15, September 15, and January 15 after the tax year ends. If you do not make estimated payments the PTE may owe underpayment interest when it files the PTE-E Tax return (Form OR-21). Be sure you select the correct payment type when making your payment. Select “Estimated Payment – Apply to upcoming tax due."
To participate in the PTE-E Tax, you must elect annually by filing the Form OR-21 by the due date including extensions. Returns are due by April 15, or by the extension due date October 15, if requested. Returns filed after the due date will not be accepted. If no return is filed, no election has been made and qualifying members will not receive a credit.
Returns can only be filed electronically either through ROL or an approved software vendor. Your software vendor must be approved by the department for electronic filing. You can see the approved list here. If your software vendor does not support Form OR-21, you will have to file via ROL. Paper returns will not be accepted. Please ensure in your software that an electronic return is submitted by the due date.
If you are unable to file online or electronically, please email us to see if you qualify for an exception.
Entities who elect to participate must file returns before issuing the OR-21-K-1 to members to claim the credit on their individual returns. If the OR-21-K-1s are issued prior to filing the entity return the department may disallow the credits on the individual returns.
If you have made estimated payments and you decide not to elect to participate or you don't file a return by the due date, including extensions, you will need to make an online request for the department to refund your estimated payments through ROL. If your payment type was not correctly selected when you made the payment (Estimated Payment – Apply to upcoming tax due) your request may take longer to process.
Our style on the page is to use the PTE acronym after first reference to the entity, so we don't have to spell it out here.
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 by filing the Form OR-21 return by the due date, including extensions.
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
tax account.
Yes. The grantor trust is treated as a qualified
member because they are subject to the personal income tax laws under ORS
Chapter 316.
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, generally April 15, and October 15 for extension filers. 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. Returns filed after the due date, including the extension, will not be accepted.
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 participate in the PTE-E Tax is made when the PTE-E Tax return (Form OR-21) is filed by the due date including extensions.
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.
· Royalties. · 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.
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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
allocated income.
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).
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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.
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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 in accordance with federal guidance.
Your distributive share of the PTE's refund should appear on Schedule K-1 as ordinary income.
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.
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. Report the subtraction on Schedule OR-ASC, section B or Schedule OR-ASC-NP, section D. Use code 387.