Pass-Through Entity Tax FAQs

The below FAQs are for informational purposes only, are not intended to state a policy of DOR, and do not themselves establish any taxpayer requirements. DOR continues to work on the implementation of the SALT Parity Act (Section 143.436, RSMo). In the future, these FAQs will be updated with further information.

About the Missouri pass-through entity tax:

Beginning with tax years ending on or after December 31, 2022, a S corporation or partnership (pass-through entity) can annually elect to become an affected business entity required to pay the pass-through entity tax. Qualifying members of an electing pass-through entity are eligible for a credit equal to the member’s pro rata share of the pass-through entity tax paid. (Section 143.436, RSMo)

Who is allowed to file a Form MO-PTE and become subject to the pass-through entity tax?

Only a partnership or an S corporation, as defined in Section 143.436, RSMo, may elect to become subject to the pass-through entity tax. See below.

Partnership: The same meaning as provided in 26 U.S.C. Section 7701(a). The term "partnership" shall include a limited liability company that is treated as a partnership for federal income tax purposes.

S corporation: A corporation or limited liability company that is treated as an S corporation for federal income tax purposes.

How do I elect to become an affected business entity that is subject to the pass-through entity tax?

The S corporation or partnership will elect to become an affected business entity by making a selection on a timely filed Form MO-PTE.

Will an election to become an affected business entity be revocable?

No. If an election to become an affected business entity has been made for a tax year, the election will be irrevocable for that tax year.

How will I file a pass-through entity return?

The Form MO-PTE will be used to report the S corporation or partnership's income subject to the pass-through entity tax.

Who is responsible for signing the MO-PTE return?

The MO-PTE return should be signed by:

  • An officer, manager, or member of the electing entity who is authorized to make the election; or
  • Each member of the entity who is a member at the time the return is filed.

In addition to the options listed above, a MO-PTE that has a tax year that ends on or after August 28, 2024, can be signed by:

  • The affected business entity representative for the tax year.

If a partnership or S corporation elects to file a MO-PTE return, should it still file a MO-1065 or MO-1120S?

The filing of the MO-PTE does not substitute for a partnership filing its MO-1065 or an S corporation filing its MO-1120S. A partnership that has a partner that is a Missouri resident, or that has any income derived from Missouri sources, generally must file a Form MO-1065, regardless of whether it files a Form MO-PTE. The Department generally directs S corporations that have a shareholder that is a Missouri resident, or any income derived from Missouri sources to file a Form MO-1120S, regardless of whether it files a Form MO-PTE.

The election of a partnership or S corporation to become subject to the pass-through entity tax does not relieve a partner or shareholder from making his, her, or its applicable partnership or S corporation adjustments, including any applicable addition modification due to state and local income taxes deducted on federal Form 1065 or Form 1120S.

When will the MO-PTE return be due?

The MO-PTE return will be due by the fifteenth day of the fourth month following the end of the S corporation's or partnership’s tax year, unless a filing extension is approved.

What is the tax rate for pass-through entity tax?

The pass-through entity tax rate is equal to the highest rate used to determined individual income tax.

Tax year ending Rate
December 31, 2022 5.3%
December 31, 2023 4.95%
December 31, 2024 4.8%

How will members claim their share of the tax credit paid by the pass-through entity?

The member will attach Form MO-TC to their Missouri return. The member will include a copy of all reports provided to the member by any pass-through entity for that tax year under Section 143.436.7, RSMo.

Each partnership and S corporation who elects to become an affected business entity is required to provide a report to each of their members identifying the member’s pro rata share of the tax paid. What information needs to be included in the report from the pass-through entity to the member?

  • FEIN of the affected business entity
  • Member’s name, SSN or FEIN (if the member is a business entity),
  • Membership percentage
  • Amount of members pass-through entity tax credit
  • In regards to affected business entities who are trusts, a grantor letter or Form K-1, which identifies the owner of the trust.

Is a pass-through entity required to make estimated tax payments?

No. A pass-through entity is not required to make estimated tax payments of the pass-through entity tax.

How can a pass-through entity make anticipated pass-through entity tax payments?

A pass-through entity is not required to make estimated tax payments of the pass-through entity tax. If the pass-through entity would prefer to make an early payment of its anticipated tax liability, it can submit its payment on the Form MO-PTEAP.

Can I submit my payment electronically?

No. You must submit your payment with Form MO-PTEV or MO-PTEAP with a check, money order, or cashier’s check to PO Box 3080, Jefferson City, MO 65105-3080.

Can an out-of-state partnership or S corporation that does business in Missouri elect to become an affected business entity that will be required to pay the pass-through entity tax?

Yes.

I am a nonresident individual who is a member of a pass-through entity electing to become an affected business entity for the tax year. The only income I received from Missouri for that tax year is from this pass-through entity. Will I be required to file a Missouri income tax return for that tax year?

I am a resident individual who is a member of a partnership or S corporation that derived income from another state. The partnership or S corporation paid a pass-through entity tax to the other state on that income. That other state’s pass-through entity tax is substantially similar to Missouri’s pass-through entity tax. Will I receive a credit for my pro rata share of the pass-through entity tax paid to the other state?

Yes. Under Missouri statute (Section 143.436.9, RSMo) the member is allowed a credit for the pro rata share of such a tax paid to another state as long as the tax in the other state is substantially similar to Missouri’s pass-through entity tax. This credit is subject to the same limit as the Missouri resident credit. The member will attach Form MO-CR to their Missouri individual income tax return.

If a pass-through entity uses a cash basis accounting method for federal tax purposes, and the pass-through entity makes an anticipated payment of Missouri pass-through entity tax on or before the end of the pass-through entity’s tax year 2022, may the pass-through entity deduct this anticipated payment of Missouri pass-through entity tax on its federal return for tax year 2022? What if the pass-through entity instead uses an accrual basis accounting method for federal tax purposes?

These questions are in regards to when an item is deductible for federal income tax purposes, which is better directed to the Internal Revenue Service. Taxpayers interested in requesting an Internal Revenue Service private letter ruling may wish to consult IRS Revenue Procedure 2022-1.

Please be aware that, for Missouri tax purposes, the partnership or S corporation’s liability for the pass-through entity tax does not arise and is not fixed until at least the pass-through entity has made a valid election to become an affected business entity for the pass-through entity’s tax year and that tax year has closed.

How will an affected business entity report its income or loss if it is a member of another affected business entity?

The member of an affected business entity, when calculating its net income or loss on the Form MO-PTE, will either subtract its distributive share of income or add its distributive share of loss to the extent that income or loss was derived from or connected with Missouri. See Section 143.436.5, RSMo.

Can a pass-through entity claim a miscellaneous tax credit?

Yes. However, miscellaneous tax credits generally reduce the tax liability rather than constituting tax paid, and therefore generally do not qualify as payments for purposes of calculating the PTE Credit.

The tax credit will be reported on Form MO-TC and will be attached to Form MO-PTE along with the applicable tax credit certificate.

An S corporation is an affected business entity and files a MO-PTE return. One of the S corporation’s stockholders is an electing qualified subchapter S trust (QSST). The electing QSST’s sole income beneficiary is a resident individual who has made the QSST election regarding the S corporation stock of the affected business entity. The sole income beneficiary is treated as the owner of the QSST assets for income tax purposes. Can the sole income beneficiary of the electing QSST claim a tax credit for the electing QSST’s share of the pass-through entity tax paid by the affected business entity?

Yes. The sole income beneficiary would file a Form MO-TC along with his or her Form MO-1040 to claim the PTE tax credit, as well as a document or statement that details the amount of the PTE tax credit.

Can a pass-through entity electing to file and pay a MO-PTE return be allowed a qualified business income deduction under 26 U.S.C. Section 199A?

Yes, for tax years ending before August 28,2024. The pass-through entity will calculate the IRC § 199A deduction as though it (the pass-through entity) was allowed to take the deduction on the federal level. For example, the income figures (e.g. the net capital gain, the taxable income as that term is used in IRC § 199A) of the partnership or S corporation itself are used in preparing the pro forma federal Form 8995 or 8995-A to be attached to the Form MO-PTE. Generally, the same limitations found in 26 U.S.C. Section 199A that apply when computing the federal qualified business income deduction for individuals will also apply to the affected business entity. When determining threshold amount(s) based on filing status, the single threshold is used, not the joint threshold. The filing status of the shareholders, partners, or members is not used or referenced for this purpose.

I am an S-Corporation that files the Form INT-2, Bank Franchise Tax Return, and that paid the pass-through entity tax during the relevant income period. Can I claim the pass-through entity tax as income taxes paid on the Form INT-2?

When completing the INT-2, Section 148.031, RSMo, generally requires that the S corp be treated as a C corp when determining what other federal and state taxes were due. C corps can’t be subject to the pass-through entity tax. Therefore, S corps can’t claim pass-through entity tax as a credit on the INT-2.

Can a member of an affected business entity make an opt-out election, to not have tax imposed on the pass-through entity with respect to that member’s allocable items, for the tax year ending December 31, 2023?

No. For a 2023 calendar-year filer, no opt-out election can be made even if the affected business entity has a valid extension to file the original MO-PTE on or after August 28, 2024. The opt-out election is only applicable to affected business entities whose tax year ends on or after August 28, 2024.

House Bill 1912, that was signed into law and effective on August 28, 2024, modified the calculation of the PTE tax by changing the subtraction of the federal qualified business income deduction to a subtraction for the Missouri business income deduction. Does the change to the deduction apply to the 2023 tax year?

The deduction change is not applicable to 2023 MO-PTE returns that were filed before August 28, 2024. The deduction change is applicable if the original 2023 MO-PTE return was filed on or after August 28, 2024, with a valid extension of time to file.

If the affected business entity has already filed an original 2023 MO-PTE on or after August 28, 2024, the entity would file an amended MO-PTE to adjust the deduction amount. The affected business entity will calculate its new deduction amount using Schedule PTE-BD Missouri Business Income Deduction and will attach it to the amended Form MO-PTE.

The Schedule PTE-BD Missouri Business Income Deduction is currently under development and is anticipated to be released by the end of December 2024. If the pass-through entity wishes to complete their return prior to the release of the Schedule PTE-BD, the pass-through entity can attach an explanation and supporting schedules with their calculation of the Missouri Business Income Deduction to the return.

When the affected business entity files and amended MO-PTE return, this could impact the SPA tax credits calculated and claimed by the members. If an amended MO-PTE return validly results in an increase or decrease in the member’s calculated tax credit, the pass-through entity will be required to report the change to the affected member(s) and the member may need to file an amended return to adjust the tax credit amount claimed on their individual income tax return.

If you still have questions, please check out other Business Tax FAQs.

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