PTE taxes were enacted by states as a work around to the annual federal $10,000 limitation on state and local tax deductions for individual taxpayers. These state taxes are paid by the PTEs with the payments passing through to the partners as a personal state tax credit.
Pursuant to guidance issued by the IRS, the PTEs are permitted to deduct these state tax payments thereby providing a federal tax benefit. To date, many states have implemented PTE regimes, including New York and New Jersey, with more states expected to follow in the near future.
For more information on tax savings for pass-through entities (PTEs), please read this Anchin Alert here: https://www.anchin.com/news/anchin-alert-new-york-resident-state-credits-for-pass-through-entity-taxes
– Alan Goldenberg & Mike Belfer, Anchin