During this webinar, we discussed how to potentially mitigate the impact of the state and local tax (SALT) cap at the federal level. New York State has joined the list of states that have enacted an elective pass-through entity tax in an effort to do just that. We also dove into the possibility of changing residency to a low-tax or no-tax state. With state tax rates on the rise in some places and the realization that remote work is doable, many individuals are contemplating making a move. To succeed in making a change like this, one must be aware of the technical rules and be willing to significantly adjust one’s life. We talked through all these considerations.

1. August 11, 2021
High Net Worth Webinar Series
Growing Wealth & Preserving Your Legacy
SALT Thoughts:
Pass-Through Entity Taxes &
Residency Changes

2. Our Presenters
Partner
State and Local Tax
New York City
Patrick Daly, CPA
Partner
State and Local Tax
White Plains
Eugene Ruvere, CPA, MST

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P a s s- Thr ou g h Entity Taxes
State - Specifics
Residency Chan ge s
Domicile
Statutor y Residency
Concludin g Thou g hts
Other States - Recent
Adoptio ns
Concludin g Thou g hts
Agenda

4. Polling Question #1
Are you interested in receiving CPE?
a. Yes
b. No
c. I’m just here because I’m a member of the Pat Daly fan club
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5. into
Pass-Through Entity Tax
Background
• 2018 Tax Cuts & Jobs Act - $10,000 SALT deduction cap.
• Cap applies to individual taxpayers, but not business entities paying entity-level
taxes.
• Significant tax ramifications for pass-through entity owners in high income tax
states.
• Pass-Through Entity Tax Work-Around
• More than a dozen states have enacted (and counting).
• Mandatory vs. elective considerations.
• IRS Notice 2020-75
• Provided IRS-approval for federal deductibility of state pass-through entity taxes.
• Approval regardless of deduction or credit mechanism that may be available to partners,
members and shareholders.
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6. into
Background continued
• Ramifications for cash vs. accrual taxpayers – apparent requirement for tax
payments made during the tax year
• Financial statement implications
• Common Issues
o Utilization of tax credits
o Allowance for composite returns and availability of credit if composite filed
o Non-resident withholding/cash flow
o Credit for tax paid in resident state
o Add-back
o Allocations when dealing with pass-through entity owners who may be exempt
o Tiered structures
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7. into
New York
• Elective Pass-Through Entity Tax (“PTET”)
o The PTET applies to tax years beginning on or after 1/1/21.
o PTEs must make irrevocable election to be subject to the PTET annually by
the 1st quarterly payment due date of the tax year (generally March 15th).
o The 2021 election is due October 15, 2021.
o Electing PTEs may apply for an extension of up to six months to file.
o Once a PTET return has been filed, it can only be amended if authorization is
received.
o An electing pass-through entity becomes liable for payment of the PTET
upon making the election.
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8. into
New York continued
• Elective Pass-Through Entity Tax
o Quarterly estimated payments of 25% of the required annual payment due by March 15, June
15, September 15 and December 15.
o The annual payment of estimated tax required to avoid penalties and interest is the lesser of
90% of the PTET shown on the entity’s return for the taxable year or 100% of the PTET shown
on the entity’s return for the preceding taxable year.
o For tax year 2021, individual members, partners or shareholders should continue making
estimated income tax payments at the individual level.
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9. into
New York continued
• Elective Pass-Through Entity Tax
o Differing tax base computations for partnerships/LLCs versus S corporations.
o Based on income subject to personal income tax so no tiered entities in computation.
o PTET base of an electing partnership/LLC is the sum of:
• The resident partners/members’ un-apportioned flow-through income and
• The nonresident partners/members’ apportioned flow-through income.
• Note that partnerships/LLCs use a 3-factor evenly-weighted formula with charges for services
being sourced to NYS when performed by or through an office of the business located within
NYS.
o PTET base for S corporations is equal to NYS source income of the business with no difference in
calculation for resident and nonresident partners.
• Note that S corps use a single sales factor apportionment formula with market sourcing.
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10. into
New York continued
• Elective Pass-Through Entity Tax
o PTE owners are entitled to a refundable tax credit in the amount of PTET paid by an electing
entity on their share of taxable income.
o NYS residents entitled to a credit for tax paid for their share of any pass-through entity tax
substantially similar to NYS.
o NYS taxpayers should add back the amount of the above-referenced PTET credits to NYS
taxable income.
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11. into
Elective Pass-Through Entity Tax
New York continued
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PTE Taxable Income up to $2m 6.85%
PTE Taxable Income over $2m, but under $5m 9.65%
PTE Taxable Income over $5m, but not over $25m 10.30%
PTE Taxable Income over $25m 10.90%

12. New York PTE Tax –
Calculation Example 1
Partnership – New York
Resident Individual
Partner
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New York PTE Tax Calculation Examples
For Discussion Purposes Only
37% Federal Effective Rate NY Resident
Partnership - All Operations in New York 40% Interest in PTE
Federal Income Tax
Taxable Income before PTE Deduction (PTE-Level) 15,000,000
PTE Deduction (PTE-Level) 1,456,500
Taxable Income (PTE-Level) 13,543,500
Distributive Share (PTE Owner-Level) 5,417,400
Other Income (PTE Owner-Level) 500,000
Federal Taxable Income (PTE Owner-Level) 5,917,400
Federal Income Tax Due (PTE Owner-Level) 2,189,438
Net Federal Savings to PTE-Owner 215,562
New York Income Tax - PTE Owner
Federal Taxable Income 5,917,400
New York Modifications 750,000
PTE Tax Add-Back 582,600
New York Taxable Income 7,250,000
New York Tax 651,164
PTE Credit 582,600
Resident Credit -
Remaining NY Tax Due 68,564

13. New York PTE Tax –
Calculation Example 2
Partnership – Virginia
Resident Individual
Partner
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New York PTE Tax Calculation Examples
For Discussion Purposes Only
37% Federal Effective Rate VA Resident
Partnership - All Operations in New York 40% Interest in PTE
Federal Income Tax
Taxable Income before PTE Deduction (PTE-Level) 15,000,000
PTE Deduction (PTE-Level) 1,456,500
Taxable Income (PTE-Level) 13,543,500
Distributive Share (PTE Owner-Level) 5,417,400
Intangible Income (stocks, bonds, etc.) 500,000
Federal Taxable Income (PTE Owner-Level) 5,917,400
Federal Income Tax Due (PTE Owner-Level) 2,189,438
Federal Savings to PTE-Owner 215,562
Net Detriment in Light of Resident Credit Issue (139,064)
New York Income Tax - PTE Owner
Federal Taxable Income 5,417,400
State Modifications 750,000
PTE Tax Add-Back 582,600
New York Taxable Income 6,750,000
New York Tax 599,664
PTE Credit 582,600
Resident Credit -
Remaining NY Tax Due 17,064
Foregone VA Resident Credit 354,626

14. New York PTE Tax –
Calculation Example 3
S Corporation – New York
Resident Shareholder
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New York PTE Tax Calculation Examples
For Discussion Purposes Only
37% Federal Effective Rate NY Resident
S Corporation - All Operations in New York, but 40% Interest in PTE
only 50% Receipts Factor for Apportionment
Federal Income Tax
Taxable Income before PTE Deduction (PTE-Level) 15,000,000
PTE Deduction (PTE-Level) 684,000
Taxable Income (PTE-Level) 14,316,000
Net Pro Rata Share (PTE Owner-Level) 5,726,400
Intangible Income (stocks, bonds, etc.) 500,000
Federal Taxable Income (PTE Owner-Level) 6,226,400
Federal Income Tax Due (PTE Owner-Level) 2,303,768
Net Federal Savings to PTE-Owner 101,232
New York Income Tax - PTE Owner
Federal Taxable Income 5,726,400
State Modifications 750,000
PTE Tax Add-Back 273,600
New York Taxable Income 6,750,000
New York Tax 599,664
PTE Credit 273,600
Resident Credit -
Remaining NY Tax Due 326,064

15. Polling Question 2
Do you think you or someone you know will take advantage of a
pass-through entity tax opportunity?
a. Yes
b. No
c. Still need to think about how it applies
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16. into
New Jersey
• Pass-Through Business Alternative Income Tax (“PBAIT”)
took effect in 2020.
• Pass-through entities may elect to pay an entity-level tax
on New Jersey source income.
• Return due date of 3/15 or 15th day of third month after
year-end; also deadline for making PBAIT election.
• Owners of PTEs receive refundable income tax credits for
tax paid by entity based on income allocation (not
refundable for CBT taxpayers).
• Tiered partnership claims credit for tax paid on its behalf
on NJ CBT-1065.
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17. • Tax imposed on NJ source income—using schedule NJ-NR-A; 3-factor evenly-
weighted apportionment formula with services sourced based on where performed
(even for S corps, despite the fact that normally they use single sales factor
apportionment with market sourcing).
• The tax base may include net income, dividends, royalties, interest, rents,
guaranteed payments, and gains of a PTE, provided NJ source.
• Legislation calls for consolidated/combined option for PTEs which are commonly-
owned.
• Refundable credit from the tax passed through to an estate or trust may be used by
the estate/trust or allocated to beneficiaries.
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New Jersey continued

18. New Jersey continued
• Estimated tax payments: 4/15, 6/15, 9/15, 1/15.
• No penalties for 2020 due to lack of forms/guidance.
• Nonresident withholding still applicable even if election made - cash flow issue.
• Credit for PBAIT paid should be available on composite return.
• If election made, tax must be paid on behalf of all members, even those which
are tax-exempt.
• Potential issue with Pennsylvania resident credit.
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19. into
New Jersey continued
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Sum of Each Members Share of Distributive Proceeds Tax Rate
First $250,000 5.675%
Amount of $250,00 but not over $1 million ($14,187.50 plus
6.52% of excess over $250,000)
6.52%
Amount over $1 million but no over $5 million ($63,087.50
plus 9.12% of excess over $1 million)
9.12%
Amount over $5 million ($427,887.50 plus 10.9% of the
excess over $5 million)
10.9%

20. into
Connecticut
• Mandatory pass-through entity tax imposed since tax year 2018.
• 6.99% entity-level tax.
• Two potential methods for computing tax base:
o CT-source income; or
o CT-source income + resident portion of unsourced income.
• Tax credit available on individual owner’s return for 87.5% of tax
computed on owner’s share of income.
• In tiered partnership context, subtraction of previously taxed
income at lower tier level.
• Commonly-owned (80%) pass-through entities can elect to file a
combined PE tax return.
• Estimated payments: 4/15, 6/15, 9/15, 1/15.
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21. into
California
• Recently-passed elective tax for tax years 2021-2025 or until the
SALT deduction returns uncapped at the individual level.
• 9.3% tax on CA-source income for nonresidents and all income
regardless of source for residents.
• CA uses single sales factor apportionment with market sourcing.
• Non-refundable tax credit available to owners/partners for PTE
tax paid with 4-year carry-forward.
• Election shall be made on a timely filed tax return, including
extension.
o No election available for an entity with partnership or multi-member LLC
owners/partners etc.
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22. into
California continued
• For 2021 tax year, tax to be paid by original due date (don’t forget the IRS
guidance though).
• For subsequent years, the PTE shall remit either 50% of the elective tax paid
during the prior taxable year, or $1,000, whichever is greater.
• The remaining balance of the tax due shall be due on or before the original due
date, without regard to any extensions.
• Failure to make the first payment due on June 15th will disqualify the pass-
through entity from the elective tax for the taxable year.
• Questions surrounding utilization of credit on composite filing and nonresident
withholding.
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23. • Maryland
• Massachusetts
• Rhode Island
• Additional states to follow
depending on what happens in DC
Other Significant
States/
Recent Adoptions
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24. Pass-Through Entity Taxes -
Concluding Thoughts
• Opportunity should be there for many pass-through entity owners.
• Focus on make-up of residency of owners of PTE.
o No resident credit issue for owners in no income tax states like FL, TN, TX, etc.
o Possible resident credit issue for owners in states without PTE tax regimes.
• Weigh added compliance costs (e.g., administrative costs of electing in and
navigating new tax regime; no composite allowed in states like MD).
• Consider cash flow impact of required withholding and estimated payments.
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25. Changing Residency - Objectives
• Providing a solid understanding of state/city personal income tax concepts such
as:
o Domicile
o Statutory residency
o Nonresident state-sourced income
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26. Polling Question #3
If you could move to a state that has no personal income tax,
which one would it be?
a. Florida
b. Nevada
c. Texas
d. One of the other ones
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27. Key Concepts - Domicile
• Domicile - An individual’s permanent residence or “true home.”
• “Domicile” and “residence” are often used synonymously but have distinctly different
meanings.
• An individual may have many residences BUT can have only one domicile.
• Once established, an individual’s domicile remains as such until there is “clear and
convincing” evidence that the individual intended to give up his or her old domicile and
has in fact established a new domicile.
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28. Changing Domicile
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• Take off (terminate old domicile)
• Land (establish new domicile)

29. Changing Domicile continued
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• Changing domicile does NOT necessarily require selling home in “old domicile”

30. Determining Domicile
• Home – Comparison of size, fair market value and usage, as well as community ties in the
involved jurisdictions.
• Active Business Involvement – Analysis of taxpayer’s active business participation, if any,
and where it takes place.
• Time - Not simply a 183-day test.
• Near and Dear Items - Location of cherished possessions.
• Family – General focus is spouse and minor children with some weight to location of
extended family (siblings, grandchildren, etc.).
• Other – Window-dressing items such as driver’s license, voter registration, car
registrations, etc.
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31. New York Statutory Residency Test
• Three Key Points to Statutory Resident Test
o What does “maintain a permanent place of abode” mean?
o What does “substantially all” mean?
o What is a “day” for this purpose?
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32. Non-Resident
• Non-Resident – An individual who is not a domiciliary or statutory resident but
derives income from “in-state” sources.
• Income from in-state sources can include:
o Wages for services performed within state
o Convenience vs. necessity rule for days worked at home (New York and Pennsylvania are
primary states with rule)
o Deferred compensation and stock options
o Flow-through entity income
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33. Changing Domicile in COVID-19
Environment
• Simple Test – If your “life” substantially reverts back to what and where it was
pre-COVID, it will likely be VERY difficult to convince the historical domicile state
that the intent was to change domicile, regardless of the amount of time spent in
the proposed “new domicile.”
• From the NYS Department of Tax website:
o Your New York City domicile does not change until you can demonstrate with clear and
convincing evidence that you have abandoned your city domicile and established a new
domicile outside New York City. Even if you live in a location outside of the city for a period of
time, if it’s not the place you attach yourself to and intend to return to, it’s not your domicile.
Your domicile will still be New York City and you will still be considered a New York City
resident.
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34. Example #1
• Mary has been filing as a NYC resident for 15+ years.
• She maintains a 6 BR home in Westchester County, NY and a 2 BR apartment in
New York City close to her job.
• Each year before 2020 she spent greater than 183 days in NYC; because of COVID
she will be under 184 days in NYC for 2020 and possibly 2021 as well.
• Her children are in high school in Westchester.
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35. Polling Question #4
Is Mary a New York City resident in 2020?
a. Yes
b. No
c. I need more information to figure that out
d. Even with more information I’ll still have no idea
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36. Example #2
• John (and his family’s) primary home was in New Jersey for 10+ years.
• His place of work was in NYC during that same period, with his W-2 being his primary income
source.
• John is fed up with the property taxes and state personal income tax rates; COVID triggers a
desire to move to Wyoming, but he wants to maintain his home in NJ.
• His employer is willing to let him work remotely from Wyoming but there is no plan to open an
office in Wyoming.
• His children will start school in Wyoming in fall 2021.
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37. Concluding Thoughts
• Apply the state/city residency and income-sourcing rules to your personal facts.
• Have a conversation with a trusted state tax advisor before taking a leap.
• Ensure the residency change is worth your while (i.e., the tax savings are meaningful to you).
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38. Questions?
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39. Disclaimer
These materials provided by Citrin Cooperman & Company, LLP, are intended to provide general
information on a particular subject or subjects and are not an exhaustive treatment of such
subject(s) and are not intended to be a substitute for reading the legislation. Any advice contained
in this communication, including attachments and enclosures, is not intended as a thorough, in-
depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. The materials are
being provided with the understanding that the information contained therein should not be
construed as legal, accounting, tax or other professional advice or services. Before making a
decision or action that may affect you or your business, you should consult with Citrin Cooperman &
Company, LLP, or another qualified professional advisor. The materials and the information
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40. Thank You
For Participating!