These mechanisms have not been expressly disallowed by the IRS to date. Other states, including Connecticut, 3 Louisiana, 4 Oklahoma, 5 Rhode Island 6 and Wisconsin 7 enacted PTE tax regimes in order to shift the imposition of the tax on PTE income from the owner to the PTE. Several states responded by enacting various workaround mechanisms in an effort to mitigate the impact of the limitation on their residents, some of which have already been disallowed by the Internal Revenue Service (IRS). The TCJA imposed a $10,000 limitation on the amount of SALT that individuals may deduct for federal income tax purposes, beginning with the 2018 tax year. The legislation establishes four tiers of tax rates depending on the distributive proceeds of the PTE. 2 Corporate members are also given a credit against New Jersey Corporation Business Tax (CBT) liability. 1 Effective immediately, the legislation allows New Jersey pass-through entities (PTEs) to pay tax at the entity level and permits owners of the PTE to obtain a corresponding tax credit against their personal income tax liability in an effort to circumvent the $10,000 state and local tax (SALT) deduction limitation implemented by the Tax Cuts and Jobs Act of 2017 (TCJA). Phil Murphy signed legislation creating the Business Alternative Income Tax (BAIT), an elective entity-level tax on pass-through businesses for tax years beginning on or after Jan.
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