It has been a few years now, April 2021, since New York State introduced the Pass Through Entity Tax (PTET) election option for small business owners. This was an innovative tax regime, and it continues to provide a great tax benefit for many individuals who are owners in pass through entities.

PTET offers a unique opportunity for pass-through entities to mitigate the impact of the federal SALT (State and Local Tax) deduction cap. Understanding the intricacies of PTET is crucial for business owners looking to maximize tax efficiency and compliance.

This article provides an overview of PTET, its purpose, implications, and key considerations for businesses operating in New York State.

The objective of PTET is to help mitigate the impact of the federal SALT deduction cap, which limits the amount of state and local taxes that individuals can deduct on their federal tax returns. PTET allows qualifying pass-through entities (S Corporations and Partnerships with at least one owner subject to NYS tax) to pay the state taxes at the entity level. This decreases the taxable income flowing to the individual, essentially giving them a deduction for state taxes that they would most likely not get due to the SALT deduction cap.

As a simplified example, an entity with $300,000 in NYS taxable PTET income would pay $20,550 in NYS PTET. This would reduce the income from the business being reported by the owners from $300,000 to $279,450. This saves the owners anywhere from approximately $4,000 to $7,000 in taxes, depending on their tax brackets. This tax savings most likely would be lost due to the SALT limitation if the full $300,000 in income flowed through to the owners. The $20,550 in taxes paid by the entity, then flow through as a credit on the owners New York State tax return so that there is no double taxation, and the savings from the deduction are true tax savings.

To qualify for PTET, a pass-through entity must be subject to New York State’s income tax, and have at least one individual owner or member subject to New York State personal income tax. The entity must elect into PTET each year by March 15, for that tax year. This election is done on the New York State Department of Taxation and Finance website at, www.tax.ny.gov/bus/ptet/.

PTET is calculated based on the entity’s New York source income and is paid at a rate ranging from 6.85% to 10.9%, depending on the entity’s taxable income. However, there are certain deductions and adjustments available to reduce the tax liability. For instance, eligible entities can deduct taxes paid to other states, as well as certain business expenses and credits, when calculating their PTE tax liability.

The SALT deduction cap is set to expire in 2025 if nothing changes… At that point, it will be questionable whether the PTET election will yield a benefit to business owners, it will depend on the Standard Deduction amounts and Alternative Minimum Tax.

Therefore, it could still be used as a tax savings strategy and will need to be looked at on an annual basis. Pass-through entities electing PTET must comply with all applicable reporting requirements, and deadlines set forth by the New York State Department of Taxation and Finance. Maintaining accurate records and fulfilling tax obligations in a timely manner is essential to avoid penalties or audits. The mechanics of, not only calculating, but reporting NYS addbacks and credits correctly will require the guidance of a qualified tax professional.

There can be administrative costs to this and so owners should review those administrative costs versus the benefit. PTET paid by the entity also creates implications for cash flow for the entity, as well as implications for allocations between partners and S Corporation shareholders. All of these items should be discussed with your tax professional.

In conclusion, if this is something you think you could benefit from, make sure you talk to your tax preparer soon. To benefit from this for the 2024 tax year you will need to make the election by March 15, 2024. This is an annual election therefore, each year you can determine if you want to make the election. Once you do make this election the entity is required to make quarterly estimates.

You do not want your best people walking out on you.

That is true of any business at any time – but it is especially true in today’s labor market. You don’t want your good people resigning because it might be extremely hard to replace them. If you are in the unfortunate position of losing some of your best employees, it may be worthwhile to take a look at how well you as a company are living out your core values in two key areas: hiring, and providing feedback.

First, hiring.

Qualified candidates are scarce right now for many positions. When you have an opening, you might get panicked or impatient as weeks pass without finding a candidate who has the necessary skills and experience for the job and who aligns with your core values. It is easy to rationalize that “somebody is better than nobody” and hire a candidate with the right resume even though they don’t appear to conform to the company’s core values.

The outcome is usually not a happy one. The person may be hardworking and productive, but if they don’t live out your core values, they are going to butt heads with your best employees – the ones who do great work and demonstrate your core values.

This leads us to the second area: providing feedback.

If you have a new or existing employee who is not living out your company’s core values, you need to give them redirecting feedback. That is, you should clearly identify the unwelcome behavior and its ramifications, and specify what needs to change and how. Many leaders shy away from providing feedback out of fear that it will upset the person and cause them to resign, leaving a hole to be filled. However, if you don’t speak out, you are tacitly condoning the behavior and giving the lie to your core values.

Once again, this isn’t going to upset the employee who doesn’t buy in to your core values … it is going to upset your best employees who really do value your core values. Given enough friction and frustration from fellow workers who don’t live out the business’s core values and who are not being held accountable for that failure, your best employees might decide to take their talents to a company that practices what it preaches.

So, before you hire someone who does not align with your core values … before you decide to tolerate behaviors that don’t match up with your core values … ask yourself: do you really want to risk having good people walk out on you? You know you don’t want that. Stick with your core values, and your best people will stick with you.

Many entrepreneurs set out knowing exactly what goals they wish to accomplish… But for Air Force veteran Sean Dion, this was not originally the case.

“The business wasn’t really my plan. I planned on retiring working for people,” he said. However, his plan changed for the better when he and his wife decided to take a leap of faith and become the franchise business owners for Mr. Electric of Queensbury.

Mr. Electric is a well-known franchise with over two-hundred locations worldwide, providing electrical installation and repair services to its customers. Sean opened Mr. Electric of Queensbury in 2017 and, since that day, his hard-work and commitment to serving his community has led to immense success for the business.

Sean’s entrepreneurial career began when he was only 16 years old selling newspapers in his community. By saving the money he made, it allowed him the opportunity to obtain an associates degree at Vermont Technical College. “I had one uncle, who was also a Vietnam veteran in the Army, that went to a technical trade school and got a degree in electronics and instrumentation and I just followed his lead to go to school and learn engineering. I didn’t really have a good idea on what I wanted to do so I thought I’d give it a try,” he said.

It was also during this time that Sean met 14 year old Jeanne, who shared his entrepreneurial spirit and was selling newspapers herself. The two shared an adjoining route and, as they spent more time together, their relationship grew. After four years of dating, the two were married.

In addition to his business drive, Sean had a strong desire to serve his country. He came from a long line of military involvement —his parents, grandparents, and uncles all served— and Sean wanted to carry on the legacy: “Two months after my 17th birthday, I enlisted in the Vermont Army National Guard as a mechanic for generators,” he said. “It was an in-the-blood type desire to serve my country like my family had.”

In 1991, the Vermont Army National Guard was activated, and Sean served in Riyadh, Saudi Arabia, where he supported three air traffic control platoons. A year later, Sean transferred to the National Guard and worked as an electrician.

After a little over ten years working for IBM, Sean left and started a career at Global Foundries. It was during this time that he received a solicitation on LinkedIn for an opportunity with Mr. Electric. “I thought to myself, I’ve always worked for somebody but then again always had the entrepreneurial spirit with my wife,” he said. The two traveled to Mr. Electric corporate headquarters in Waco, Texas for an interview, and were eventually offered the position.

After thinking everything over, Sean and Jeanne decided to accept and began building their business. Jeanne, having a background in real estate, took on the office end of the business while Sean focused on the technician aspect. The two made a great team and within just a few months, they were expanding faster than they had planned. “Within eight months of opening we had three vans on the road,” said Sean.

During this period, Sean was still working full time at Global Foundries, and was struggling to manage both jobs. He decided to ask his director to go part-time… However, that same week Sean found out that he was getting laid off. This gave him the opportunity to put all his effort into his business and really invest in what he was passionate about.

“There was a true need for what we’re being commissioned to do and taking that we build a culture where we’re contributing to the community,” he said.

Jeanne and Sean’s hard work paid off because within only three years, Mr. Queensbury made it to Top Gun, an award given to the top franchise owners, ranking number 22 out of more than two-hundred locations.

When asked how he achieved so much success in such a short amount of time, Sean explained: “(I have) a spirit to win. I don’t take no for an answer, I’m very stubborn, very motivated, very focused, but not just that… It’s recruiting good talent and retaining good talent. Instead of focusing on making money, focus on the customer, and focus on taking care of your employees.”

Outside of work, Sean and Jeanne have extended their commitment to the community within their own household by becoming foster parents for several years. At one point, the two were caring for seven kids under the age of seven, while also housing and caring for a World War II veteran they befriended at church: “They actually didn’t call us a foster home, they called us a group home for a period of time,” said Sean.

The two also share two children of their own, Aaron and Meghann. Both of their biological children carried on the legacy of serving their country, and Aaron is currently still serving to this day.

In terms of their business, Sean and Jeanne have big plans for the future – their goal is to expand into Lake Placid and Saranac Lake. Additionally, they are working on opening an office in Plattsburgh that would extend their borders all the way to Canada.

“We’re already starting to get work up there without even advertising,” said Sean.

It’s clear that their success is far from over!

For more information, please visit their website at mrelectric.com/queensbury

Looking out over the verdant, rolling acreage at Dancing Grain Farm Brewery, owner Rachel McDermott sees opportunity… More specifically, she sees 6,500 square feet of opportunity. That’s because, after just two short years of operation, Dancing Grain is already in a position to expand.

Leased for the first time by McDermott’s father and uncle back in the 1980’s, the land in Moreau, NY that Dancing Grain now calls home was originally just 230 acres. Its original focus was on producing corn, soybeans, hay and straw… Several decades later, spanning a period in which the property would experience a full tornado and decreasing land bases, the family fully purchased the farmland and the remaining pieces of the original farmstead. Immediately upon doing so, McDermott and her team set to work on outlining a new, and sustainable vision for the future.

DGFB Motto: More out of Less

A capital region native, McDermott grew up in the farming industry with her father, Jim, and uncle, Bob, at her side teaching her the ropes. Although she left the area to attend college at Cornell University, followed by a short stint in the corporate world, McDermott knew that home was where she belonged, and eventually returned to help run the family farm back in 2016.

“When it came to looking to the future, the biggest question at the time for us was, ‘How do we make more with less?'” Referencing a world with shrinking farmland, an economy with higher production prices, and a society that is always looking to the newest and latest, McDermott and her family were determined to find a way to capitalize on the operation they already had established… The final solution? Craft beer, with ingredients cultivated through vertical integration and regenerative farming.

Visions Become Reality

“There are a lot of options in craft beer,” said McDermott. “And a lot of them are very great. What sets us apart however is that we not only craft our own brews, we produce the main ingredients used to make them.” According to their website, DGFB is proud to highlight that over 90% of their ingredients are sourced from their own fields, a statistic not often seen when it comes to craft brews.

We had McDermott elaborate a bit further on how this can be done: “When we originally sat down to think about how to expand our operation, we knew we wanted to enter a sphere that complimented what we already had established,” said McDermott. She continued on to explain how, “at the time, we saw how up and coming the craft brew sector was , and noted that the main ingredients that are needed – grains like malting barley, distillers’ rye, and corn – fit in easily into the rotation of cash crops that our pre-withstanding farm was already built around.”

McDermott elaborated on how, “our team was really excited about this, because not only did this mean we could grow many of the ingredients needed right on our own land, but the ingredients themselves would actually benefit what we already had going… For example, grains help to restore some natural compounds in the earth, like nitrogen, that some of our other products, like soybeans, take out.”

In the end, McDermott acknowledged that “we know that all industries cost something to the land, but with what we were envisioning, we saw how we could institute not just clean farming practices when producing, but truly integrate regenerative farming techniques as well to help minimize the negative impact we may leave behind,” said McDermott.

With a holistic concept secured, and a full 308 acres under their control, the DGFB team began to upgrade the farm by investing in 115,000 feet of tile drainage to increase soil health, fertility, and lengthen the growing season. Dually, McDermott also worked directly with local and regional brewers and distillers to create a specialty grains program designed to enhance the quality and usability of malting barley, distillers’ rye, and corn.

Finally, after several research trials conducted between 2017 and 2021, the team was able to move to the next stage of their vision – a brewhouse and taproom.

Dancing Grain Today

In line with their “more with less” motto, when it came time to develop a structure that would house the next part of their project, the DGFB team thought: “Why don’t we utilize the land and buildings we already own?” referencing the dilapidated farmstead structures they inherited when they purchased the entirety of the farm.

Though it was in rough shape at the start, by hiring a local company to refurbish and renovate one of the barns, the team was able to breathe new life into the space. Today, Dancing Grain is home to a three-and-a-half barrel brewhouse which, in a completely intentional move, also houses their farm style taproom: “When you walk into the taproom you can completely see into the brewhouse. That’s on purpose. We wanted everything to be completely transparent to the customer,” said McDermott.

She continued on to explain “While we want our customers to enjoy their favorite brews, we also want them to understand that everything that we pour into those glasses is just one part of the story. The bigger picture: that of sustainable ingredients, which are sourced through regenerative farming practices, which were developed with intention, and so on and so forth; is all really in an effort to ensure that the products we make here do not take more from the land than they give back to it in some way.”

Officially opened in 2022, the current space is open year round and boasts 14 specially cultivated brews. Throughout the year, one can also find a number of specialty events and themed nights to enjoy with family and friends.

Always Looking Forward

Never ones to stop moving forward, the Dancing Grain family has big plans in 2024 to expand their offerings to the community – McDermott is about to begin a refurbishment project on a second building on the property.

To be opened as a secondary space, focused on community events and gatherings, the barn renovation will be a gorgeous 6,500 square-foot space that will allow Dancing Grain to host events all year round, without requiring them to close their main taproom off to the public. “We see this space as becoming a true part of the community in the years to come. From fundraisers, to weddings, to just an everyday open air picnic space for families. We hope this place transforms into something that community life breathes through in every aspect.”

Connect with Dancing Grain

“We want you to ask about our story!” said McDermott, encouraging anyone who’s interested in learning more to connect with the team or visit the taproom in Moreau.

For those interested in connecting with or visiting Dancing Grain, please visit their website at www.dancinggrain.com today.