The Colorado Department of Revenue has issued supplemental instructions for pass-through entities that will make the State and Local Tax Parity Act election for tax year 2022.
Direct Link: https://tax.colorado.gov/sites/tax/files/documents/Special_Instructions_FormDR0106EP_2022.pdf
Making an Election Under the SALT Parity Act
In the state of Colorado for tax years on or after January 1, 2022, partnerships and S corporations may, on an annual basis, elect to be subject to tax at the entity level under section 39-22-343, C.R.S. Entities that elect entity level taxation are subject to the same requirement to remit quarterly estimated payments as C corporations.
In general, a partnership or S corporation that will make the election must remit quarterly estimated tax payments during the year if its net Colorado tax liability for the year will exceed $5,000. An electing partnership or S corporation may use form
DR 0106EP to remit quarterly estimated payments. Electing partnerships and S corporations may also register to make estimated payments via electronic funds transfer, as described online at tax.colorado.gov/electronic-funds-transfer.
Due Dates
For electing partnerships and S corporations that file on a calendar year basis, the four quarterly
estimated payments are due April 15th, June 15th, September 15th, and December 15th. For
fiscal year filers, the four quarterly estimated payments are due on the 15th day of the fourth,
sixth, ninth, and twelfth months of the fiscal year. If the due date falls on a Saturday, Sunday, or
legal holiday, the payment is due on the next business day.
Required Payments
Each quarterly estimated payment must be 25% of the required annual amount. Because the
election was not available for tax years beginning prior to January 1, 2022, the required annual
amount is 70% of the actual net Colorado tax liability for the current tax year. In general, the net
Colorado tax liability is calculated by multiplying by 4.55% the sum of:
- each electing pass-through entity owner’s pro rata or distributive share of the electing pass-through entity’s income attributable to the state; and
- each resident electing pass-through entity owner’s pro rata or distributive share of the electing pass-through entity’s income not attributable to the state.
House Bill 21-1327 and section 39-22-606, C.R.S., contain additional information regarding this election to pay tax at the entity level and the calculation of that tax. Contact your TaxOps adviser for further guidance.
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