Senate Enrolled Act 2: Taxation of Pass-Through Entities (SEA 2) enacting a pass-through entity tax for Indiana has been signed into law by Gov. Holcomb with a retroactive date of Jan. 1, 2022. The bill was fast tracked through the Statehouse to allow CPAs, already midway into tax season, as much time as possible to assist clients during tax season, while allowing taxpayers the greatest opportunity to benefit from the work around. 

The INCPAS advocacy team worked with elected officials and multiple stakeholders to ensure clear guidance and a timely implementation.

A few items of note on PTET:

• There are 29 states (and 1 locality) that have enacted a PTE tax — all of which are effective in 2022 or earlier.
• There is a strong desire among the Indiana business community and legislature to enact with a retroactive effective date of Jan. 1, 2022.
• The election is optional, unlike CT where the election is mandated.
• There are Safe Harbor provisions that waive penalties during the initial implementation.

Recorded Resource

In case you missed the live In the Know session, we recorded this event for you to watch. While watching the recording now does not count for CPE, there is a lot of great information to take away.

• [Recording] INCPAS In the Know: Indiana's Pass-Through Entity Tax — Discussing the Pros, Cons & Challenges (March 2)
• [Slides] INCPAS In the Know: Indiana's Pass-Through Entity Tax — Discussing the Pros, Cons & Challenges (March 2)

Quick Links

• INCPAS Open Forum member discussions (use your incpas.org login)
• General Assembly: Legislative summary of bill, authors, votes and committee reports
• [PDF] SEA 2
• IRS Notice 2020-75: Forthcoming regulations deductibility of payments by partnerships and S corporations for certain state and local income taxes
• AICPA: Map of states with enacted or proposed PTET and links to states' legislation and tax authorities' information and guidance
• Indiana Department of Revenue: PTET resource page
  For 2022, DOR will begin accepting elections after March 31, 2023, using the composite return which will be repurposed to include residents vs. non-resident only.

FAQs

More questions on PTET? Post them on the INCPAS Open Forum.

• DOR: SEA 2 PTET FAQs
• INCPAS: SEA 2 PTET FAQs
  
• AICPA: List of taxpayer and practitioner considerations for whether to elect into a state PTE tax
• AICPA: State-level PTE implementation issues

Templates

• Client Letter: Sample text to send clients (opens as a Word document)

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