Pass-Through Entity Tax Equity Act of 2019
– General Information
HB 2665 enacted the Pass-Through Entity Tax Equity Act of 2019, hereinafter called Act, (68 O.S. § 2355.1P-1 et seq.) which allows certain pass-through entities (PTE), those required to file either an Oklahoma partnership income tax return or an Oklahoma S corporation income tax return, to elect to pay income tax at the entity level, effective for tax year 2019 and subsequent tax years. Oklahoma income or losses that the electing PTE included in computing its tax will not be allocated to a partner, member or shareholder of the electing entity.
The tax rate for the electing PTE will be the highest marginal individual income tax rate, currently five percent (5%), of the electing pass-through income that is distributed to individuals, trusts or estates. The tax rate for the electing PTE will be six percent (6%) of the income distributed to a corporation.
Oklahoma Tax Commission Form 586 is used to notify the Oklahoma Tax Commission that a qualifying entity is electing, or revoking the election, to become an electing PTE. For tax year 2019, the Form 586 must be filed no later than June 28, 2019.
The election to become an electing PTE has priority over and revokes any election to file a composite Oklahoma partnership return or the requirement of an S corporation to report and pay tax on behalf of a nonresident shareholder for the same tax year. An election made by one electing PTE is not binding on any other electing PTE. Each electing PTE must make its own election.
This election is binding until revoked by the electing PTE or by the Oklahoma Tax Commission (OTC). The electing PTE may revoke the election by completing Part 2 of (OTC) Form 586. If the amount of tax required to be paid by the PTE pursuant to the provision of this Act is not paid when due, the OTC may revoke the PTE's election effective for the first year for which the tax is not paid.
The OTC will issue an acknowledgement letter for all pass-through entities that have elected to become an electing PTE. Each electing PTE must provide their shareholders, members, or partners a copy of the OTC acknowledgement letter and advise the shareholder, member, or partner of the requirement to attach a copy of the acknowledgement letter to their Oklahoma income tax return.
Each electing PTE must attach a copy of the OTC acknowledgement letter to their Oklahoma income tax return.