Introduction
Massachusetts provides two elective pass-through entity (PTE) excises for entities taxed as S corporations and partnerships, and certain trusts. These excises are the chapter 63D PTE excise and the chapter 63E PTE excise.
The chapter 63D excise is an excise equal to 5% of a PTE’s income that is attributable to qualified members and subject to tax under chapter 62. The chapter 63E PTE excise is an excise equal to 4% of the sum of each qualified member’s share of the PTE’s distributive income that is (i) subject to tax under chapter 62 and (ii) in excess of the surtax threshold pursuant to G.L. c. 62, § 4(d). A PTE can elect to pay the chapter 63D PTE excise or the chapter 63E PTE excise, or both.
The chapter 63D PTE excise has been in effect since 2021. The chapter 63E PTE was enacted by recent legislation, St. 2026, c. 101, and applies to taxable years beginning on or after January 1, 2026. Both PTE excises will expire if the federal SALT deduction limitation expires or is repealed.
Qualified members of an electing PTE are eligible for a credit equal to 90% of the member’s distributive share of the chapter 63D excise paid by the PTE. Qualified members are also eligible for a credit equal to 90% of the portion of the chapter 63E excise paid by the PTE that is attributable to them. To elect the chapter 63D excise or the chapter 63E excise, or both, a PTE must file Form 63-ELT electronically. The chapter 63D excise and the chapter 63E excise must be paid electronically. To claim the credit for their respective share of PTE excise paid, members must file their income tax return and all required schedules electronically. Taxpayers should consult their tax advisors to determine whether they might benefit from an election by a PTE.
For tax years beginning on or after January 1, 2021, and before January 1, 2026:
PTEs can elect to pay only the chapter 63D PTE excise. The election must be made by filing Form 63D-ELT electronically, along with the entity’s income tax return and all schedules.
For tax years beginning on or after January 1, 2026:
PTEs can elect to pay the chapter 63D PTE excise, the chapter 63E PTE excise, or both. The election for either excise must be made by filing Form 63-ELT electronically, along with the entity’s income tax return and all schedules.
Frequently Asked Questions
This page will be updated as needed with new frequently asked questions and will include the date of the update for easy reference.
PTE Eligibility
Who is eligible to make an election to pay the chapter 63D PTE excise or the chapter 63E PTE excise?
Only an eligible pass-through entity can make an election to pay the chapter 63D excise and/or the chapter 63E excise. “Eligible pass-through entity” is defined as an S corporation under section 1361 of the Internal Revenue Code (Code), a partnership under section 7701 of the Code or a limited liability company that is treated as an S corporation or partnership under those Code sections. In addition, a trust can make the election with respect to income that passes through the trust to beneficiaries that are subject to tax on that income under the Massachusetts personal income tax. Accordingly, the following entities may elect to be subject to the excise:
- Partnerships, including limited liability companies that are treated as partnerships for federal income tax purposes, but excluding publicly-traded partnerships;
- S corporations, including limited liability companies that are treated as S corporations for federal income tax purposes; and
- Trusts, to the extent that they have income that is taken into account by beneficiaries for Massachusetts personal income tax purposes.
Sole proprietorships and single-member limited liability companies that are disregarded for federal income tax purposes cannot elect to be subject to either the chapter 63D PTE excise or the chapter 63E PTE excise because they are not pass-through entities.
What is a qualified member of an eligible PTE?
A qualified member is a natural person, estate or trust that is subject to the Massachusetts personal income tax and that is a shareholder, partner or beneficiary of an electing PTE. A qualified member may be a resident, nonresident or part-year resident.
Can a grantor trust be an eligible PTE or a qualified member of an eligible PTE?
A grantor trust cannot be an eligible PTE. If a trust is a grantor trust then the grantor is treated as the owner of the grantor trust’s assets, the grantor trust is disregarded as a separate tax entity, and all income of the grantor trust is taxed to the grantor. Where a grantor trust owns an interest in an eligible electing PTE, the grantor is treated as a qualified member where the grantor would be a qualified member if he or she held the ownership interest in the PTE directly.
Can an out-of-state eligible PTE with income subject to tax in Massachusetts make an election to pay the chapter 63D PTE excise or the chapter 63E PTE excise?
Yes. An out-of-state eligible PTE can elect to pay the chapter 63D PTE excise, and/or the chapter 63E PTE excise, even if it is not otherwise required to file in Massachusetts. The out-of-state eligible PTE must make the election on a timely filed Form 3, Form 355S or Form 2, and must complete the relevant form, including all schedules. In addition, the out-of-state eligible PTE must file Form 63-ELT.
Do nonresident members still need to file Massachusetts returns if the PTE pays the chapter 63D PTE excise or the chapter 63E PTE excise?
Where the PTE pays the chapter 63D PTE excise, a nonresident member is not required to file a personal income tax return on their own account if (i) they participate in the filing of a nonresident composite return or returns that report all of the nonresident’s Massachusetts source income and (ii) they are not subject to the surtax. Nonresident members that have Massachusetts source income not reported on a nonresident composite return must file personal income tax returns to report and pay any personal income tax due and / or claim the credit for the chapter 63D PTE excise whether or not they are subject to the surtax.
Where the PTE pays the chapter 63E PTE excise, nonresident members must file personal income tax returns to report and pay any personal income tax due and / or claim the credit for the chapter 63E PTE excise.
Note that all members subject to the surtax must file a return on their own account regardless of whether or not they participate in the filing of a nonresident composite return.
Can a Nonresident Composite Return (“Form NRCR”) filer claim the PTE Credit?
A PTE filing Form NRCR on behalf of its participating nonresident members may claim the sum of all PTE credits allocable to those members with respect to payments of the chapter 63D PTE excise only. The credit for the chapter 63E PTE excise cannot be claimed on a nonresident composite return. If a nonresident individual’s taxable income exceeds the surtax threshold pursuant to MGL c. 62, § 4(d), adjusted for inflation, that individual must file Form 1-NR/PY to report and pay the 4% surtax and to claim any associated credit for the chapter 63E PTE excise, even if they otherwise participate in the nonresident composite return.
Can a trust that files Form 2 be an eligible PTE?
Yes, a trust filing Form 2 can be an eligible PTE and make the chapter 63D and/or chapter 63E election if it has income that flows through to its beneficiaries that is reported on MA Schedule 2K-1 for Massachusetts personal income tax purposes.
Can a disregarded entity be an eligible PTE?
No. A disregarded entity cannot be an eligible PTE because it is not a partnership, an S corporation, or a trust for Massachusetts tax purposes.
Can a general partnership be an eligible PTE?
Yes, so long as the general partnership also meets the qualifications for the PTE election.
Can a single member LLC that is a disregarded entity for federal purposes be an eligible PTE?
No. A disregarded entity cannot be an eligible PTE because it is not a partnership, an S corporation, or a trust for Massachusetts tax purposes.
Credit Eligibility and Allowance
How much of the chapter 63D PTE excise or chapter 63E PTE excise credits is allowed to qualified members for the chapter 63D PTE excise or chapter 63 PTE excise paid?
A qualified member is eligible for the chapter 63D PTE excise or chapter 63E PTE excise credits equal to 90% of the member’s share of the amount of the chapter 63D PTE excise or chapter 63E PTE excise actually paid by the PTE.
Is the owner of a disregarded entity eligible to receive the chapter 63D PTE excise or chapter 63E PTE excise credit?
Yes. A disregarded entity cannot itself receive the chapter 63D PTE excise or chapter 63E PTE excise credits because a disregarded entity is not a qualified member subject to tax under chapter 62. But the chapter 63D PTE excise and chapter 63E PTE excise credits are available to an owner of a disregarded entity where the owner would be a qualified member if it held the ownership interest in the PTE directly
Is a general partnership eligible to receive the chapter 63D PTE excise or chapter 63E PTE excise credits?
No. A general partnership cannot receive the chapter 63D PTE excise or chapter 63E PTE excise credits because a general partnership is not a qualified member subject to tax under chapter 62.
Is a trust that is a member of an electing eligible PTE bound by the PTE’s elections with respect to its share of the PTE’s income? If so, how does the trust apply the 90% credits?
A trust that is a member of an electing eligible PTE will be bound by the PTE’s elections with respect to its share of the PTE’s income. The trust cannot opt out. The trust’s share of PTE income will be included in the chapter 63D PTE excise tax base and the trust will receive a credit equal to 90% of its share of the chapter 63D PTE excise paid by the PTE. For the chapter 63E PTE excise, the trust’s share of PTE income in excess of the surtax threshold pursuant to G.L. c. 62, § 4(d) is included in the chapter 63E PTE excise tax base and the trust will receive a credit equal to 90% of its share of the chapter 63E PTE excise paid by the PTE. The trust will be permitted to claim the credits itself or assign the credits to its beneficiaries, provided that the aggregate amount of credits claimed by the trust and its beneficiaries cannot exceed 90% of the chapter 63D PTE excise and/or chapter 63E PTE excise paid by the PTE that is attributable to the trust.
How does a qualified member know the amount of chapter 63D PTE excise or chapter 63E PTE excise credits to claim?
A PTE must report the amount of chapter 63D PTE excise and/or chapter 63E PTE excise paid at the entity level and the amount of such excises that is allocated to each of its qualified members on Schedule K-1. Qualified members must use the amounts shown on the K-1 in determining their credits, which is their share of the chapter 63D PTE excise and/or chapter 63E PTE excise paid.
In what taxable year may a qualified member claim the chapter 63D PTE excise or chapter 63E PTE excise credits?
A qualified member may claim the chapter 63D excise and/or chapter 63E excise credits against the member’s personal income tax due under chapter 62 for the taxable year in which the electing eligible PTE’s taxable year ends. For example, where the PTE has a fiscal year ending in March of 2027, a qualified member with a calendar tax year would claim the credits for the chapter 63D PTE excise and/or the chapter 63E PTE excise on the member’s 2027 tax return.
What happens if the chapter 63D PTE excise or chapter 63E PTE excise credits (or the sum of the two) exceed a qualified member’s personal income tax liability?
The chapter 63D PTE excise and chapter 63E PTE excise credits are refundable if they are claimed against the personal income tax imposed under chapter 62. Any excess credits are treated as an overpayment. The qualified member may request a refund subject to general refund procedures set out in chapter 62C, § 37.
Election
Are the chapter 63D PTE excise and chapter 63E PTE excise mandatory?
No. The chapter 63D PTE excise and chapter 63E PTE excise and their related administrative provisions apply to a PTE only if the PTE elects to be subject to either excise. A PTE can elect to be subject to either or both of the excises. The elections must be made on an annual basis, on an original tax return.
Is the election to pay the chapter 63D PTE excise or chapter 63E PTE excise revocable?
No. Once the election is made for a particular tax year with respect to either excise, it is irrevocable for that year, and it is binding on all qualified members of the PTE for that year.
How and when does an eligible PTE make an election to pay the chapter 63D PTE excise or the chapter 63E PTE excise?
The elections are made annually by a PTE on its timely filed Form 3, Form 355S (Schedule S), or Form 2 and is confirmed by submitting Form 63-ELT. An S corporation that is a financial institution may make the elections on Schedule S of its timely filed Form 63-FI. The elections may not be made on an amended return. Form 63-ELT must be filed on or before the due date of the PTE’s tax return, taking into account valid extensions. Once the elections are made, they are irrevocable. Qualified members cannot opt out of either election.
Can a PTE that uses a 52-53 week tax year that begins in the last week of calendar year 2025 make an election to be subject to the chapter 63E PTE excise for the 2026 tax year?
For purposes of making the Chapter 63E PTE excise election only, 52-53 week tax years that begin in the last week of December 2025 will be treated as beginning on January 1, 2026 and ending on December 31, 2026. Eligible PTEs that use such tax years can make the election and report the chapter 63 PTE excise using 2026 forms and schedules.
How does an S corporation that is a member of a combined group filing a combined return on Form 355U make the election and pay the chapter 63D PTE excise or chapter 63E PTE excise?
The filing and payment of the chapter 63D PTE excise or the chapter 63E PTE excise by an S corporation is not impacted by the S corporation’s inclusion in a group filing a combined report (Form 355U). An S corporation must separately make the elections to pay the chapter 63D PTE excise or chapter 63E PTE excise when filing Form 355S or Form 63-FI, and submit Schedules S and SK-1. The election is made on line 23 of the Schedule S. S corporations, including one that is the principal reporting company, that are members of the same combined group can each choose whether to make the elections. Each electing S corporation is responsible for separately determining and paying any chapter 63D PTE excise or chapter 63E PTE excise that may be due and the payments must be separate from any payment of the corporate excise tax due under G.L. chapter 63.
Including and Reporting Taxable Income
What is included in the eligible PTE's income subject to tax under the chapter 63D PTE excise or the chapter 63E PTE excise?
Income taxable under the chapter 63D PTE excise is the sum of the distributive shares of income subject to Massachusetts personal income tax of each qualified member.
Income taxable under the chapter 63E PTE excise is the sum of each qualified member’s share of the PTE’s distributive income that is subject to tax under chapter 62 and that is in excess of the surtax threshold pursuant to G.L. c. 62, § 4(d), adjusted for inflation.
Are guaranteed payments included in the income subject to the chapter 63D PTE excise or the chapter 63E PTE excise?
Yes. Guaranteed payments are included in the distributive income that a PTE reports to members and are included in the members’ distributive income subject to the personal income tax. Therefore, guaranteed payments are included in the PTE’s income subject to the chapter 63D PTE excise or the chapter 63E PTE excise.
How does an electing eligible PTE report the income of nonresident or part-year resident qualified members for purposes of the Massachusetts Schedule K-1?
The electing eligible PTE must report on Schedule K-1 the amount of each qualified member’s share of the chapter 63D PTE excise or chapter 63E PTE excise paid by the PTE, whether the member is a resident or nonresident of the Commonwealth. The PTE must also provide each qualified member with a Massachusetts Schedule K-1 reporting amounts of PTE income or loss derived from or connected with Massachusetts sources.
Filing
Is Form 63-ELT required to be filed electronically?
Yes. A PTE that elects to pay the chapter 63D PTE excise, the chapter 63E PTE excise, or both, is required to first make the election(s) on its Form 3, Form 355S or Form 2, then file Form 63-ELT and make tax payments electronically. The filing of Form 63-ELT and payment of the associated tax may be done through MassTaxConnect. Taxpayers may also file Form 63-ELT and make payments due with a return using third party software.
When is Form 63-ELT due?
Form 63-ELT is due at the same time as a PTE’s Form 355S, Form 3 or Form 2. The actual due date depends on the type of PTE that has made the elections to pay the chapter 63D PTE excise or the chapter 63E PTE excise and the PTE’s tax year.
- The Form 355S corporate return and the Form 3 partnership return are both generally due on March 15 for calendar year filers.
- The Form 2 Fiduciary return is generally due on April 15 for calendar year filers.
- For fiscal year filers, Form 355S and Form 3 are generally due on the 15th day of the third month following the close of the tax year.
- For fiscal year filers, Form 2 is generally due on the 15th day of the fourth month following the close of the tax year.
Can I amend my chapter 63D PTE excise or chapter 63E PTE excise election after filing?
No, the election to pay either the chapter 63D PTE excise or the chapter 63E PTE excise is irrevocable for the tax year once made on the original return. Amendments to change or revoke the election are not permitted.
Excise Calculation
Once an election is made, how are the chapter 63D PTE excise and chapter 63E PTE excise calculated?
The following is an example of the calculations:
- Partnership LMNO does business in Massachusetts with 80% apportionment.
- Partnership net income for 2026 is $6,165,180.
- Partner L is a Massachusetts resident individual with a 50% ownership interest.
- Partner M is a Massachusetts resident individual with a 15% ownership interest.
- Partner N is a nonresident individual with a 25% ownership interest.
- Partner O is a nonresident partnership with a 10% ownership interest.
Chapter 63D PTE excise Calculation:
The chapter 63D PTE excise would be calculated as follows:
- Determine the partners subject to tax in Massachusetts under chapter 62. Here it would be partners L, M, and N.
Determine the amount of taxable income allocable to each partner.
Calculate the allocable income for each qualified partner:
For Partner L (Massachusetts resident):
Allocable income = $6,165,180 × 50% = $ 3,082,590
For Partner M (Massachusetts resident):
Allocable income = $6,165,180 × 15% = $924,777
For Partner N (nonresident):
Allocable income before Massachusetts apportionment = $6,165,180 × 25% = $1,541,295
Income apportioned to Massachusetts = $1,541,295× 80% = $1,233,036
Partner O is not a qualified member as defined under Chapter 63D or Chapter 63E, and its share of income is not taken into account under either PTE excise.
Apply the 5% chapter 63D PTE excise to the allocable income for each qualified partner:
For Partner L (Massachusetts resident): $3,082,590 × 5% = $154,129.50
For Partner M (Massachusetts resident): $924,777 × 5% = $46,238.85
For Partner N (nonresident): $1,233,036 × 5% = $61,651.80
Partnership LMNO’s chapter 63D excise is the sum of those amounts, or $262,020.15
Chapter 63E PTE excise calculation:
For tax years beginning on or after January 1, 2026, if the PTE makes an election under Chapter 63E, an additional 4% excise is imposed at the entity level on each qualified member’s distributive share of income subject to chapter 62 that exceeds the surtax threshold set forth in M.G.L. chapter 62, section 4(d), as adjusted for inflation.
The 2026 surtax threshold pursuant to M.G.L. chapter 62, section 4(d), as adjusted for inflation, is $1,107,750.
Determine the partners subject to tax in Massachusetts under chapter 62.
In this example, this includes Partners L, M, and N.
Calculate the allocable income for each qualified partner:
For Partner L (Massachusetts resident):
Allocable income = $6,165,180 × 50% = $3,082,590
Excess income above the surtax threshold= $3,082,590 − $1,107,750 = $1,974,840
For Partner M (Massachusetts resident):
Allocable income = $6,165,180 × 15% = $924,777
Excess income above the surtax threshold= $924,777 − $1,107,750 = $0
For Partner N (nonresident):
Allocable income before Massachusetts apportionment = $6,165,180 × 25% = $1,541,295
Partner O is not a qualified member as defined under Chapter 63D or Chapter 63E, and its share of income is not taken into account under either PTE excise
Income apportioned to Massachusetts = $1,541,295× 80% = $1,233,036
Excess income above the surtax threshold=$1,233,036 − $1,107,750 = $125,286
Partner O is not a qualified member as defined under Chapter 63D or Chapter 63E, and its share of income is not taken into account under either PTE excise.
Multiply the members’ total income subject to chapter 62 that exceeds the surtax threshold in M.G.L. c. 62, section 4(d) by 4%:
For Partner L (Massachusetts resident), the excess is $1,974,840
For Partner M (Massachusetts resident), the excess is : $0
For Partner N (nonresident), the excess is $125,286
The total excess is $2,100,126. The chapter 63E PTE excise is 4% of that amount, which is $84,005.04.
*Note: In both examples above, neither the chapter 63D PTE excise nor the chapter 63E PTE excise applies to Partner O, because Partner O is not a qualified member. Its un-apportioned 10% share of the $6,165,180 income flows up to its own return, and Partner O may make its own election to be subject to the chapter 63D PTE excise or chapter 63E PTE excise.
If a PTE makes an election to pay the chapter 63D PTE excise or the chapter 63E PTE excise (or both), the entity’s income is taxed at 5% or 4%, respectively (or both), regardless of whether the income is Part A, B, or C income under G.L. chapter 62. The statutory rates that apply to each class of income must nevertheless, as relevant, be applied on the return of each qualified member.
Is there a limitation on the use of capital losses to offset other items of income in calculating the chapter 63D PTE excise or the chapter 63E PTE excise?
Yes. Capital gains and losses must be netted against each other. Net capital gain is included in income subject to the chapter 63D PTE excise and the chapter 63E PTE excise. Net capital losses cannot be used to offset items of income when calculating either excise.
Can losses determined under the chapter 63D PTE excise or the chapter 63E PTE excise be carried forward?
No. Losses determined under the chapter 63D PTE excise or the chapter 63E PTE excise cannot be carried forward by the PTE as there is no provision that allows for such carryforwards in either chapter 63D or chapter 63E.
What information other than the information shown on the Massachusetts K-1 does the PTE need to calculate the chapter 63D PTE excise or the chapter 63E PTE excise?
It depends. If an eligible PTE has qualified members that are corporations, the PTE needs to know the portion of its income attributable to such corporations because this income is not subject to the chapter 63D PTE excise or the chapter 63E PTE excise. If the PTE has qualified members that are nonresidents, it needs to know its Massachusetts apportionment percentage. Income attributable to nonresidents is subject to the chapter 63D PTE excise or the chapter 63E PTE excise only to the extent that it is apportioned to Massachusetts using the PTE’s Massachusetts apportionment percentage for the tax year.
PTE Payments, Withholding and Penalties
Are PTEs required to pay both the chapter 63D PTE excise or the chapter 63E PTE excise and PTE withholding tax on the same income?
There is no requirement for duplicative payments under the chapter 63D PTE excise or the chapter 63E PTE excise in the Massachusetts withholding rules. Entities’ required PTE withholding and members’ required estimated tax payments are determined with regard to the chapter 63D PTE excise or the chapter 63E PTE excise credits available to members. Thus, payments of estimated chapter 63D PTE excise or chapter 63E PTE excise, which result in the credits, reduce the required amount of PTE withholding or estimated tax.
How do I make payments for 63 Entity Level Tax?
You will need a MassTaxConnect account as an existing business and must be registered for an entity-level excise (Corporate, Financial Institution Excise, Partnership, or Fiduciary). If you’re not registered on MassTaxConnect, please complete the registration first.
If you are not yet registered for 63 Entity Level Tax:
- Log in to your MassTaxConnect account.
- Select “More.”
- Go to the Access panel.
- Choose “Add an Account.”
- Select “63 Entity Level Tax” and complete the registration process.
Once your registration has been processed:
- Navigate to the “Summary” tab.
- Locate the “63 Entity Level Tax” panel.
- Select “Make a Payment.”
- Choose the appropriate payment type from the drop-down menu.
- Enter the required payment information and submit your payment.
If you are already registered for 63 Entity Level Tax:
- Navigate to the “Summary” tab.
- Locate the “63 Entity Level Tax” panel.
- Select “Make a Payment.”
- Choose the appropriate payment type from the drop-down menu.
- Enter the required payment information and submit your payment.
How do I make payments for the chapter 63D PTE excise and the chapter 63E PTE excise?
For tax years beginning on or after January 1, 2021, and before January 1, 2026, payments for the chapter 63D PTE excise must be made electronically using MassTaxConnect. The annual return should be filed using Form 63D-ELT.
For tax years beginning on or after January 1, 2026, payments for the chapter 63D PTE excise and the chapter 63E PTE excise must be made electronically using MassTaxConnect. One payment is sufficient to cover both excises if both elections are made for the taxable year. The annual return should be filed using Form 63-ELT.
Are estimated payments required for the chapter 63D PTE excise or the chapter 63E PTE excise?
Yes. As with other taxpayers, an electing eligible PTE must make estimated tax payments if the PTE’s required annual payment is $400 or greater. This requirement applies to both the chapter 63D PTE excise and the chapter 63E PTE excise. Estimated payments are due for a taxable year even though the chapter 63D PTE excise or chapter 63E PTE excise elections for the taxable year cannot be made until the return is filed. In general, estimated payments for calendar year filers are due on April 15, June 15, September 15, and January 15 (the due dates for fiscal year filers are adjusted based upon their fiscal year).
A PTE’s required estimated payments will be equal to the lesser of:
- 80% of the chapter 63D PTE excise and the chapter 63E PTE excise ultimately determined to be due on the PTE’s current year Massachusetts Form 63-ELT; or
- 100% of the chapter 63D PTE excise and the chapter 63E PTE excise shown on the PTE’s prior year Massachusetts Form 63D-ELT, (or Form 63-ELT, as applicable), if the PTE made the chapter 63D PTE excise or the chapter 63E PTE excise elections for the prior year and filed a prior year return that covered a 12-month period.
For tax years beginning on or after January 1, 2026, if a pass-through entity elects to be subject to the chapter 63D PTE excise or the chapter 63E PTE excise, are separate payments required, and what are the requirements for making estimated or extension payments on MassTaxConnect?
No. For tax years beginning on or after January 1, 2026:
- If a pass-through entity has made an election for the chapter 63D PTE excise or the chapter 63E PTE excise, or both, only one payment is required through MassTaxConnect.
- When submitting an estimated or extension payment, the taxpayer must provide a breakdown of the payment amount attributable to each excise.
- The single payment is made through the 63 Entity Level Tax account on MassTaxConnect, and the required allocation between the chapter 63D PTE excise and chapter 63E PTE excise is provided at the time of payment.
Do penalties apply to underpayments of the chapter 63D PTE excise or the chapter 63E PTE excise?
Yes. If 80% of the excise that is ultimately determined to be due for a taxable year is not paid by the due date, an addition to tax or underpayment penalty, calculated at the rate provided in section 14 of Chapter 62B, is due on the amount of the underpayment from the due date of the required estimated tax payment until the due date of the return (April 15th if the electing pass-through entity is a trust, March 15th if the electing pass-through entity is a Partnership or an S Corporation.) PTEs must calculate any underpayment and resulting penalty using Form M-2210. If a penalty is due, enter the penalty on Form 63D-ELT or Form 63-ELT and submit Form M-2210. Form M-2210 must be submitted to claim any penalty exception to which the PTE may be entitled. See Form 63D-ELT or Form 63-ELT and Form M-2210 instructions.
For tax year 2026, the underpayment penalty will be waived for the first and second quarters only if the entity has elected the chapter 63E PTE excise, regardless of whether the entity has elected only the chapter 63E PTE excise or has also elected the chapter 63D PTE excise. The waiver does not apply if the entity has elected only the chapter 63D PTE excise. Penalties otherwise apply to underpayments of both excises.
If a qualified member of a PTE has made estimated income tax payments for a tax year, can such payments be applied to the PTE’s chapter 63D PTE excise or chapter 63E PTE excise?
No. Estimated income tax payments for a given tax year, which are made by a qualified member, cannot be applied to the chapter 63D PTE excise or chapter 63E PTE excise due from the PTE. The burden is on the PTE to pay the excise and such excise is separate from the personal income tax liabilities of its qualified members. Please see FAQ on estimated payments.
If a PTE has made estimated income tax payments for a tax year but later determines not to make the election, can such payments be refunded to the PTE?
Yes. A PTE that makes estimated income tax payments for a tax year can seek a refund if it does not make the election with its return for that year. The PTE must file its tax return for the tax year but must not check the applicable box to make the chapter 63D PTE excise or chapter 63E PTE excise election. The PTE must then send an e-message through MTC to DOR explaining that it did not make an election for the tax year and requesting a refund of the estimated payment made. DOR will then review the PTE’s return and confirm that the PTE (1) did not elect to pay the chapter 63D PTE excise or chapter 63E PTE excise and (2) did not purport to pass on any chapter 63D PTE excise or chapter 63E PTE excise credits to members on its Schedule K-1s. DOR will then process a refund of the estimated payments to the PTE.
Does a PTE’s failure to pay any amount of corporate excise, personal income tax, chapter 63D PTE excise or chapter 63E PTE excise prior to the original due date of the PTE’s 355S, 63FI, Form 3 or Form 2 affect the validity of a chapter 63D PTE excise or chapter 63E PTE excise election made on those returns?
A PTE’s failure to pay any amount of corporate excise, personal income tax, chapter 63D PTE excise or chapter 63E PTE excise prior to the original due date of the PTE’s 355S, 63FI, Form 3 or Form 2 will not affect the validity of an election made on such a return, so long as the return is filed within 6 months of the original due date. However, because the chapter 63D PTE excise and chapter 63E PTE excise are due on the original due date of the PTE’s 355S, 63FI, Form 3 or Form 2, there will be an underpayment of the chapter 63D PTE excise and/or chapter 63E PTE excise under these circumstances. Interest and penalties will apply to the underpayment of the chapter 63D PTE excise and/or chapter 63E PTE excise starting on such original due date as provided in chapters 62B and 62C.
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