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2023 Schedule PTE Instructions
Who should file Form PTE?
You must complete Schedule PTE if you are a Partnership or S Corporation that is electing to pay income tax at the entity level on behalf of
the owners. For the purposes of these instructions the terms “partnership” and “S corporation” include LLCs taxed as a partnership or
S corporation, and “partner” and “shareholder” refer to a member if the entity is an LLC.
The election must be made by the due date or extended due date of the entity’s return.
The May 2023 tax bill modified the PTE by:
• Expanding eligibility by allowing partial elections if not all owners are qualifying owners.
• Requiring 100% allocation to Minnesota for resident partners.
• Removing the requirement that one qualifying owner must be subject to the limitation on state and local taxes (SALT Cap).
• Clarifying that a single member limited liability company (LLC) is eligible only if the LLC is taxed as a partnership or S corporation.
Who is eligible?
Partnerships and S Corporations who have one or more qualifying owners may elect to file and pay income tax at the entity level on behalf of
their owners.
Single-member limited liability companies (SMLLCs), not taxed as an S corporation, are not eligible to file Schedule PTE.
How is the election made?
The election is made by filing Schedule PTE. The election must be made by the due date or extended due date of the entity’s return.
The election may only be made by qualifying owners who collectively own more than 50% of the portion of the qualifying entity that is
owned by qualifying owners. Once made, the election is binding on all qualifying owners and cannot be revoked after the original due date.
Does the election satisfy owners’ Minnesota income tax filing requirement?
Partners and shareholders who are Minnesota residents at any time during the tax year may not have the entity-level tax fulfill their
Minnesota income tax filing requirement and must file a Form M1, Individual Income Tax, if they are required to file a federal income tax
return. Partners and shareholders who are not Minnesota residents at any time during the tax year may have the entity level tax fulfill their
Minnesota income tax filing requirement. To qualify, the partner or shareholder must not have Minnesota source income other than from:
• Entities that file Schedule PTE
• Entities for which the partner or shareholder elects to be included in the entity’s composite income tax return.
Nonresident partners and shareholders who receive a share of gross profit or income from an installment sale reported on line 7a or 7b of
Schedule KPI or Schedule KS are not eligible to have the entity-level tax fulfill their individual income tax filing requirement and must file
Form M1AR Accelerated Recognition of Installment Sale Gains.
Nonresident individual or estate partners and shareholders who have the entity-level tax fulfill their income tax filing requirement are not
required to file Form M1, Individual Income Tax, or Form M2, Income Tax Return for Estates and Trusts.
Trusts that are shareholders of a qualifying S-Corporation who have the entity-level tax fulfill their income tax filing requirement are not
required to file Form M2, Income Tax Return for Estates and Trusts.
How do owners report the entity-level tax on their income tax return?
Partners and shareholders may claim a refundable credit equal to the PTE tax paid by the entity on their behalf. Such claims are reported on
Schedule M1REF, Refundable Credits, or Form M2, Income Tax Return for Estates and Trusts.
Line Instructions
Complete all lines of Schedule KS for all shareholders as if they were nonresidents. Do not include amounts attributable to partners or
shareholders who are exempt from income taxes, such as an Employee Stock Ownership Plan (ESOP) or owners who are not qualifying
owners.
Part 1. Tax Calculation
Complete Part 1 to determine the pass-through entity tax. Do not include partners or shareholders who are exempt from income taxes or
owners who are not qualifying owners.
Line 1 – 80% of Federal Bonus Depreciation
Partnerships: Determine the total distributive share of federal bonus depreciation for nonresident partners who are qualifying owners. This
amount must equal the total amount reported to these partners on Schedule KPI, line 4, multiplied by 80%.
S Corporations: Determine the total pro rata share of federal bonus depreciation for all shareholders. This amount must equal the total
amount reported to shareholders on Schedule KS, line 4, multiplied by 80%.
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