On Friday, August 5th, the Ohio Department of Taxation (ODT) released initial guidance on Ohio’s new elective pass-through entity (PTE) tax. As we reported in June, Ohio Governor Mike DeWine signed into law Senate Bill 246, which allows a PTE to elect into an entity-level tax. In response to the provision in the 2017 federal Tax Cuts and Jobs Act that capped the federal itemized deduction for state and local taxes at $10,000, close to 30 states have now enacted an entity-level tax for PTEs as a “SALT cap” workaround.
According to a Tax Alert, the ODT has begun the development of a new PTE tax form, IT 4738, for tax year 2022. This new form and additional information will soon be available on the ODT’s website. The Tax Alert also includes information on making the election, calculating the tax, submitting estimated payments, and the effect of the election on the PTE’s owners.
There are still many questions to be answered regarding the elective PTE tax, so we anticipate additional guidance over the next few months.
It is important to note that the new PTE tax is elective; it is not mandatory. Therefore, businesses should first assess if filing the new IT 4738 will be beneficial. If you have questions or would like to discuss if your business will benefit from filing this return, please contact Sara Goldhardt or John Petzinger from GBQ’s State and Local Tax team.
Article written by:
Sara Goldhardt, CPA
Director, State & Local Tax Services
John Petzinger, CPA
Manager, State & Local Tax Services