North Carolina law allows certain pass-through entities to make an election to pay NC income tax at the entity level. If the S corporation or partnership makes this election, they are then called a "Taxed PTE." This is similar to the Pass-through Entity Tax (PTET) that other states have enacted, but NC does not have a special PTE form at this time. To make this election in Drake Tax 2022, data entry is as follows:

1120-S

• Go to NC screen 401 and check the box Election to be a Taxed S Corporation.

  • You will see changes on the applicable lines of Form NC 401S and the NC 401 K1 for each shareholder.

    Note  When the tax is paid by the S corporation, nothing goes on Schedule K-1, line 8 per the NC DOR.

• To calculate estimates, use one of the following options:

  • The NC > PTE screen.

  • The ES screen. On the right side of the screen, select ST: NC and Type: NP.

1065

• Go to NC screen 1 > and check the box Taxed Partnership (Pass Through Entity).

  • You will see changes on the applicable lines of Form NC 403 and the NC 403K1 for each partner.

• To calculate estimates, use the PTE screen. To calculate estimates, use one of the following options:

  • The NC > PTE screen.

  • The ES screen. On the right side of the screen, select ST: NC.

1040

You may need to make an entry on the NC > screen ADDS > Line 14. Per the Instructions:

"Line 14. Taxed Pass-Through Entity Loss. Effective for tax year 2022, North Carolina law allows an eligible S corporation and an eligible partnership to elect to pay North Carolina income tax at the entity level (collectively a “Taxed PTE”). If you are a shareholder or a partner in a Taxed PTE, enter your share of North Carolina loss from the Taxed PTE. Note: The Taxed PTE must report this amount to you on your 2022 North Carolina K-1."

You may need to make an entry on the NC > screen DEDS > Line 38. Per the Instructions:

"Line 38. Taxed Pass-Through Entity Income. Effective for tax year 2022, North Carolina law allows an eligible S corporation and an eligible partnership to elect to pay North Carolina income tax at the entity level (collectively a “Taxed PTE”). If you are a shareholder or a partner in a Taxed PTE, enter your share of North Carolina income from the Taxed PTE. Note: The Taxed PTE must report this amount to you on your 2022 North Carolina K-1."