Pass-through entity elective tax: Estimated tax; interest on underpayment of estimated tax; waiver of underpayment interest for individual members.

# (1)

(1) Definitions.

(a) "PTE-E tax" means the pass-through entity elective tax that may be paid by an electing pass-through entity pursuant to 2021 Oregon Laws Chapter 589, as amended by 2022 Oregon Laws Chapter 82.

(b) "Electing entity" means a pass-through entity that elects or plans to elect to pay the PTE-E tax.

(c) "Distributive income" means the income of an electing entity from Oregon sources that will be distributed to members and used to calculate the PTE-E tax.

(d) "Calendar year" means a twelve-month year beginning on January 1 and ending on December 31.

(e) "Tax year" means the twelve-month year that an electing entity uses for accounting purposes. A tax year may be a calendar year or a year that ends in a month other than December.

(f) "Required annual payment" means the total amount of required estimated PTE-E tax to be paid by an electing entity for the tax year for which an election will be made.

(g) "Required installment payment" means the amount of the payment that is due for each of the four payment periods for the calendar year for which the election will be made.

(h) "Installment period" means the portion of the tax year consisting of the following months:

(A) The first installment period consists of the first three months of the tax year.

(B) The second installment period consists of the fourth and fifth months of the tax year.

(C) The third installment period consists of the sixth, seventh, and eighth months of the tax year.

(D) The fourth installment period consists of the ninth, tenth, eleventh, and twelfth months of the tax year.

(i) "Payment period" means the portion of the calendar year consisting of the following months:

(A) The first payment period is January, February, and March.

(B) The second payment period is April and May.

(C) The third payment period is June, July, and August.

(D) The fourth payment period is September, October, November, and December.

(j) "Underpayment" means the excess of the required installment amount over the amount paid on or before the due date for that installment.

(k) "Underpayment period" means the period of time that runs from the date a required installment payment was due to the earlier of the due date of the PTE-E tax return (without extensions) or, with respect to any portion of the underpayment, the date the underpaid amount is paid.

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(2) Electing entities must make payments of estimated PTE-E tax if the tax to be shown on the electing entity's return will be $1,000 or more.

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(3) The due dates for making estimated payments of PTE-E tax are the same as the due dates for making estimated payments of personal income tax under ORS 316.579(2), for the calendar year for which the election will be made.

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(4) The amount of estimated PTE-E tax to be paid is calculated using the sum of the electing entity's distributive proceeds from Oregon sources for the tax year that ends during the calendar year for which the election will be made.

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(5) To determine the amount of estimated PTE-E tax to be paid, the electing entity must first determine the required annual payment, then determine the amount of the required installment payments.

(a) The required annual payment is the lesser of:

(A) Ninety percent of the PTE-E tax shown on the return for the calendar year for which the election is made; or

(B) One hundred percent of the tax shown on the electing entity's PTE-E tax return for the prior year, if the election to pay PTE-E tax was made for the prior calendar year and the prior tax year consisted of 12 months.

(b) The required installment payment amount is the lesser of the amounts determined using the regular installment method or the annualized income installment method.

(A) Regular installment method: Each regular installment payment is 25 percent of the required annual payment.

(B) Annualized income installment method: The required annualized income installment payment is the "applicable percentage" of the required annual payment, minus the amount of any required installments for prior periods of the same year. The applicable percentages are:

(i) 22.5 percent for the first installment period;

(ii) 45 percent for the first and second installment periods;

(iii) 67.5 percent for the first, second, and third installment periods; and

(iv) 90 percent for the first through fourth installment periods.

(c) If an electing entity uses the annualized income installment method to determine a required installment payment, the difference between that amount and the amount that would have been due if the regular installment method had been used must be added to the regular installment payment for the subsequent period.

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(6) An electing entity that uses a tax year other than a calendar year for accounting purposes calculates the required annual payment and required installment payments using the installment periods of its tax year.

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(7) Interest on an underpayment of estimated tax will accrue at the rate established under ORS 305.220 on any unpaid portion of a required installment payment for the underpayment period.

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(8) Estimated tax payments may be refunded upon request by an electing entity that makes one or more estimated PTE-E tax payments but ultimately does not elect to be liable for and pay the PTE-E tax. The refund request shall contain information and be in the form prescribed by the Department of Revenue.

# (9)

(9) Interest shall be computed at the rate established under ORS 305.220 on a refund of estimated PTE-E tax payments starting 45 days after the date the return or request for refund is filed, or 45 days after the due date of the return (without extension), whichever is later.

# (10)

(10) If an electing entity pays at least 90 percent of the tax shown on the PTE-E tax return before the return is filed, an individual member of the electing entity (or of an entity that is a member of the electing entity) who does not make estimated payments of personal income tax on the member's share of distributive proceeds from the electing entity may request that interest on such underpayment be waived in the manner prescribed by the department.