H 102 ENTITY-LEVEL TAX INCOME & PAYMENT

Rep Micaela L Cadena-Lara

Actions: [2] HCEDC/HTRC-HCEDC [4] DP-HTRC [6] DP/a [8] PASSED/H (68-0) [11] STBTC-STBTC [14] DP [17] PASSED/S (28-0) SGND BY GOV (Mar. 8) Ch. 46.

Scheduled: Not Scheduled

 House Bill 102 (HB 102) creates the Entity-level Tax (ELT) and provides an option for pass-through businesses to pay ELT instead of withholding. HB 102 exempts income subject to ELT from state income taxes and corporate taxes.  

    House Bill 102 (HB 102) creates the Entity-level Tax (ELT) and allows pass-through entities (PTE) (i.e., sole proprietorships, partnerships, limited liability companies, s-corporations, companies that file individual tax returns not corporate returns) to pay a tax at the entity level for a taxable year. The ELT rate is equal to the higher of the individual or corporate income tax rate.
   PTEs will file annually on a return determined by the Taxation and Revenue Department (TRD). Estimated ELT payments will be made at the same time and amounts as withholding. 
   HB 102 applies to tax years beginning 2022.
 

 If HB 102 is not passed, PTEs will continue to be limited to a $10,000 federal tax deduction of state taxes. ELT is deductible as a necessary business expense and not limited to the cap. Treatment of income will remain the same under state income and corporate tax structures. 

 02/07/2022 House Taxation and Revenue Committee (HTRC)

HTRC modified HB 102 (HB 102 HTRCa) by adding clarifying language to the tax return filing state to be no later than the original or extended due date of the entity’s federal partnership or S Corporation return for the taxable year.