Iowa Pass Through
Entity Tax (PTET)

On May 11, 2023, Gov. Kim Reynolds signed into law House File 352, providing for a pass-through entity (PTE) tax election retroactively effective for tax years beginning on or after Jan. 1, 2022. The tax will remain in effect as long as the federal government maintains the cap on the personal income tax deduction for state taxes under federal section 164(b)(6).

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When the pass-through entity elects and pays the PTET, its owners receive a percentage of the PTET as a refundable tax credit. The election is made each year and is irrevocable. The PTET election is scheduled to expire in the same tax year that the individual limitation on the state and local tax (SALT) deduction expires (currently 1/1/26). If that SALT deduction limitation is extended by Congress in the future, the Iowa PTET election will automatically be extended for the same period.
 

The eligible entities are only business entities that are taxed as a partnership or S corporation for federal and Iowa income tax purposes and that are required to file a federal and Iowa partnership income tax return or a federal and Iowa S corporation income tax return. This may include an S corporation, general partnership, Limited Liability Company (LLC), Limited Liability Partnership (LLP), or Limited Partnership (LP). A publicly traded partnership, a trust, a single-member LLC, or another entity treated as a disregarded entity for federal and Iowa tax purposes is not eligible to make its own PTET election.

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This client advisory is for general information purposes only and does not cover the Pass Through Entity Tax in its entirety. It does not constitute tax or legal advice, and may not be used and relied upon as a substitute for tax or legal advice regarding a specific issue or problem. Advice should be obtained from a qualified tax practitioner licensed to practice in the jurisdiction where that advice is sought. Information provided here does not constitute a formal agreement for Basepoint Tax & Accounting to meet your compliance and reporting requirements in regards to the Pass Through Entity Tax.

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Please contact us to help analyze your options under PTET. 

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