How to enter Virginia PTE in ProConnect Tax

Recent PTE legislation

Virginia recently passed legislation making changes to their pass-through entity tax. Tax bulletin 23-3 details the changes. 

The new legislation repeals the requirement that restricted qualifying pass-through entities to those 100 percent owned by natural persons or persons eligible to be shareholders of an S corporation. 

Updated requirements for eligible owners

This requirement was replaced with an eligible owner requirement that allows any PTE to make the PTET election, but limits who’s eligible to claim the refundable PTET credit. 

Eligible owners under the new law are direct owners of a PTE who are a natural person subject to Virginia individual income tax, or estates or trusts subject to Virginia fiduciary income tax.

We plan to release an update on April 20 for these changes.

Down below we'll go over how to enter PTE for Virginia on Individual, Partnership, and S Corporate returns in ProConnect Tax.

Table of contents:

Individual

1. From the Input Return tab, go to State & Local ⮕ Other Credits ⮕ VA Credits.
2. Under the Virginia Schedule CR section towards the bottom of the screen, under the Pass Through Entity Elective Tax Payment Credit subsection, enter the amount from the K-1 in the Total credits allows this year field.
   • This amount flows to page 5, part VI of Schedule CR.

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Partnership

The Form 502PTEP must be e-filed. Select Virginia for e-filing on the Profile tab, otherwise critical diagnostic ref. 58072 will be triggered.

1. From the Input Return tab, go to State & Local ⮕ Miscellaneous Information ⮕ VA Miscellaneous Information.
2. Under the Virginia Miscellaneous Information section, in the Form 502PTET subsection, check the Certify eligibility and election to pay VA income tax at entity level for the taxable year (MANDATORY) box.

Additional checkboxes and entries may be needed in this section, depending on your client needs.

The partner's share of tax will flow to page 2, line 10 of their Sch VK-1.

If you need to file before April 20:

If the entity has some ineligible owners, you’ll need to override the PTET page 2, line 1 amounts on State & Local ⮕ Miscellaneous Information ⮕ VA Miscellaneous Information, and override the PTET credit amount for all Schedule K-1s by going to Schedule K-1 ⮕ Schedule K-1 Miscellaneous under the Virginia Miscellaneous subsection, entering -1 (for 0) in the Pass-through entity elective tax payment credit [Override] field.

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S Corporation

The Form 502PTEP must be e-filed. Select Virginia for e-filing on the Profile tab, otherwise critical diagnostic ref. 58117 will be triggered.

1. From the Input Return tab, go to State & Local ⮕ Miscellaneous ⮕ VA Miscellaneous.
2. Under the Virginia Miscellaneous Information section, in the Form 502PTET subsection towards the bottom, check the Certify eligibility and election to pay VA income tax at entity level for the taxable year (MANDATORY) box.

Additional checkboxes and entries may be needed in this section, depending on your client needs.

The partner's share of tax will flow to page 2, line 10 of their Sch VK-1.

If needed, overrides are available at the K-1 level under the Refundable Credits (Form 500CR) subsection at the bottom of the State & Local ⮕ Schedule K-1 ⮕ Virginia Schedule K-1 Overrides screen.

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