May 21, 2024

Upcoming Deadline Alert: First Payment for California Elective Pass-Through Entity Tax for 2024

By Christian J. Burgos, CMI, J.D., LL.M., National Co-Leader - State & Local Tax

Upcoming Deadline Alert: First Payment for California Elective Pass-Through Entity Tax for 2024 State & Local Tax

As your trusted advisors, we want to remind you about the deadline for making the first mandatory payment for California’s elective pass-through entity (PTE) tax for the 2024 tax year. As you may know, California has implemented an elective PTE tax to provide a state tax benefit by circumventing the federal $10,000 limitation on state and local tax (SALT) deductions.

Key Points to Remember

  • First Mandatory Payment Due: The deadline to make the first payment for the 2024 tax year is fast approaching. This year, the due date falls on a weekend – June 15, 2024, is a Saturday—so the actual deadline shifts to the following Monday, June 17, 2024. Important Note: Missing this deadline could result in disqualification from the election.

    Determining Your Payment: The initial payment requirement may vary, generally representing the greater of $1,000 or 50% of your elective tax from the previous year. Calculating the amount involves specific criteria that our tax specialists are well-equipped to navigate with you.
  • Payment Options: Payments may be made either using the Franchise Tax Board’s online Web Pay application or using FTB Form 3893, Pass-Through Entity Elective Tax Payment Voucher. Please note that the elective tax payment cannot be combined with the entity’s other tax payments.
  • Considering the PTE Tax?: If you’re contemplating the PTE tax election for 2024, give us a call, and let’s analyze the potential benefits given your entity’s and owners’ tax situation. Our goal is to optimize your financial position while ensuring you reap any available tax credits, which can be carried over for up to five years.

Action Required

To avoid potential penalties and interest for late payment, we urge all electing entities to prepare and remit the first installment by the specified deadline. If you need assistance in calculating your payment, making the election, or have any other questions regarding the California PTE tax, please do not hesitate to reach out to our team of State and Local Tax (SALT) specialists.

We are here to help ensure you take advantage of all available tax planning opportunities while remaining compliant with state requirements.