Georgia Expands PTET Eligibility

By Kenneth H. Bridges, CPA, PFS June 2023

The Tax Cuts and Jobs Act enacted in late 2017 placed a $10,000 per year limit on individuals’ deduction for state and local taxes (SALT) on Schedule A as itemized deductions. As I discussed at greater length in previous articles, in response, most states with an individual income tax (including Georgia) enacted legislation (typically referred to as “passthrough entity tax election” or “PTET election”) permitting S-corps and partnerships to elect an entity level tax in lieu of the income being taxed at the level of the individual owners; thus providing a workaround to the $10,000 limit. The IRS effectively blessed this in Notice 2020-75.

Georgia’s PTET election rules (first effective for 2022) initially provided that to be eligible for the election the entity had to be either an S-corp or a partnership 100% owned and controlled by persons eligible to be S-corp shareholders. Accordingly, partnerships and LLCs which had other entities as members were not eligible to make the election.

Legislation signed into law in May 2023 removes this ownership restriction, such that all passthrough entities are eligible to make the PTET election for tax years 2023 and forward.

Kenneth H. Bridges, CPA, PFS is a partner with Bridges & Dunn-Rankin, LLP, an Atlanta-based CPA firm.

This article is presented for educational and informational purposes only, and is not intended to constitute legal, tax or accounting advice. The article provides only a very general summary of complex rules. For advice on how these rules may apply to your specific situation, contact a professional tax advisor.