17673: IL - Pass-Through Entity Tax Election and Credit (PTE)

Starting in 2021, Illinois S Corporations and Partnerships can elect to pay the tax liability of its members via the pass-through entity tax. 

S Corp or Partnership Return 

To make this election go to the IL > INFO screen and check the box that says Check this box if you elected to file and pay Pass-through Entity tax (item L in the scorp or item I in the partnership).

When this box is checked, the following occurs:

• The election is applied to all the shareholders or partners.
• IL Schedule K-1-P, line 53a for each shareholder/partner reflects the amount paid by the entity.
  • The shareholder/partner can claim a tax credit on their individual income tax return.
• An IL PTE Income Worksheet is produced in the return.
  • The PTE income that is calculated on this worksheet (line 14 for S Corp or line 15 for partnerships) flows to Line 60 of the main IL1120 or IL1065.
  • When there are amounts on line 60 and 61, line 59 must be blank.

Per IL Guidelines:

"PTE tax is an amount equal to 4.95 percent (.0495) of the taxpayer’s calculated net income for the taxable year paid by a partnership (other than a publicly traded partnership under Section 7704 of the Internal Revenue Code) or subchapter S corporation who elects to pay the tax for taxable years ending on or after December 31, 2021, and beginning prior to January 1, 2026.

PTE tax credit is the distributive share of the credit allowed as a result of a partnership or S corporation having elected to pay the PTE tax. PTE tax credit is

• reported to you on Schedule(s) K-1-P and K-1-T, and
• reported by you
  • to IDOR on Form IL-1065 or Form IL-1120-ST, Schedule B, Column K and
  • to your partners and shareholders on Schedule K-1-P, Line 53a."

Individual Return

In a 1040, the PTE is entered on the IL > K1s tab > K-1P screen > ILK1P page 2 tab > line 53a. 

Pass-Through Withholding VS PTE- Pass-Through Entity Tax

The pass-through withholding and the pass-through entity tax are different. The Pass-Through Withholding is the tax that the IL S Corp or Partnership pays on behalf of its non-resident members. This is shown on the shareholders/partners K1P line 55. See the instructions for details.