Pass-through entity (PTE) elective tax
For taxable years beginning on or after January 1, 2021, and before January 1, 2031, qualifying pass-through entities (PTEs) may annually elect to pay an entity-level state tax on income. If the qualified entity deducts the PTE elective tax for federal purposes, the amount of the PTE elective tax that was deducted is added back for California purposes in computing the qualified entity's California net income. For California purposes, qualified taxpayers receive a credit for their share of the entity-level tax, reducing their California personal income tax.
Do you qualify?
A qualifying PTE is an entity taxed as a partnership or S corporation.
Who does not qualify?
A qualified PTE does not include:
- Publicly traded partnerships
- An entity permitted or required to be in a combined reporting group
Who is a qualified taxpayer?
A qualified taxpayer is a partner, member, or shareholder of an electing qualified entity that is:
- An individual, fiduciary, estate, or trust subject to California personal income tax
- A disregarded single member LLC that is owned by an individual, fiduciary, estate, or trust subject to California personal income tax
To be a qualified taxpayer, the partner, member, or shareholder must consent to have all of their pro rata or distributive share and guaranteed payments included in the qualified net income of the electing qualified entity.
A qualified taxpayer is not a:
- Disregarded business entity and its partners and members
- Except for a disregarded single member LLC that is owned by an individual, fiduciary, estate, or trust subject to California personal income tax
- Corporation
- Partnership
PTE elective tax election
An annual election must be made on a timely-filed original or superseding tax return. The election cannot be made on an amended return. Once the election is made, it is irrevocable for that year and is binding on all consenting and nonconsenting partners, shareholders, or members of the qualified entity.
How to make the election
2021 taxable year
The election must be made on a timely-filed original or superseding tax return by filing a completed FTB 3804 with the qualified entity's return and including the PTE elective tax amount on the designated line of the qualified entity’s return.
2022 to 2025 taxable years
Beginning on or after January 1, 2022, and before January 1, 2026,
- The election must be made on a timely-filed original or superseding return by filing a completed FTB 3804 with the qualified entity's return and including the PTE elective tax amount on the designated line of the qualified entity’s return, and
- The qualified entity must make the required initial payment by June 15 of the taxable year of the election.
2026 to 2030 taxable years
Beginning on or after January 1, 2026, and before January 1, 2031,
- The election must be made on a timely filed original or superseding return by filing a completed FTB 3804 with the qualified entity's return and including the PTE elective tax amount on the designated line of the qualified entity’s return, and
- The qualified entity must make the required initial payment by June 15 of the taxable year of the election. However, if the June 15 payment is missed or less than the required amount, the qualified entity may still make a PTE elective tax election. If the qualified entity makes a valid election without the full June 15 payment, qualified taxpayer(s) must reduce their PTE elective tax credit by 12.5% of their pro rata share of the unpaid amount that was due on June 15.
When to pay the PTE elective tax
The payment date must be within the following time frames:
2021 taxable year
Pay the PTE elective tax on or before the due date of the original tax return.
2022 to 2030 taxable years
Use the following table:
| Due | Payment** |
|---|---|
| *On or before June 15th during the taxable year of the election | Payment 1 For 2026 to 2030 taxable years, if Payment 1 is not made by June 15 during the taxable year of the election or is less than the required amount, the qualified entity may still make a PTE elective tax election. If the qualified entity makes a valid PTE elective tax election without the full June 15 payment, qualified taxpayer(s) must reduce their PTE elective tax credit by 12.5% of their pro rata share of the unpaid amount that was due on June 15. |
| On or before the due date of the original return without regard to extensions | Payment 2 Pay the remaining amount. |
*Note: When the statutory due date for the first or the second payment falls on a weekend or legal holiday, a payment made on the next business day will be treated as made on the statutory due date. For example, with respect to the 2024 taxable year of election, if the payment due on or before June 15, 2024, is paid in the statutorily-required amount on or before June 17, 2024, the payment will be considered timely.
** Failure to make the required payments may result in penalties and interest.
How to pay the first and second PTE elective tax payments
Qualified entities must make all PTE elective tax payments either by using the free Web Pay application accessed through FTB’s website or by using a Pass-Through Entity elective tax Payment Voucher. This includes PTE elective tax payments made with the qualified entity’s return. The PTE elective tax payment cannot be combined with the qualified entity’s other tax payments. To pay by voucher, print the FTB 3893 Voucher from FTB’s website and mail it to FTB, along with the payment, to “Franchise Tax Board, P.O. Box 942857, Sacramento, CA 94257-0531.” Once made, the payments will remain as PTE elective tax payments on the qualified entity’s account until the tax return is filed.
PTE elective tax calculation
The PTE elective tax is 9.3% of the qualified entity's qualified net income, which is the sum of the pro rata or distributive share and guaranteed payments of each qualified taxpayers’ income subject to California personal income tax. For additional information, visit Help with pass-through entity (PTE) elective tax.
Tax credit
Qualified taxpayers are eligible to claim a nonrefundable credit for the amount of tax paid on the qualified taxpayers’ pro rata or distributive share and guaranteed payments included in the qualified entity’s qualified net income. Unused credits can be carried over for up to 5 years.
For taxable years beginning on or after January 1, 2022, and before January 1, 2031, to calculate the other state tax credit (OSTC), taxpayers must increase the “net tax payable” by the amount of PTE credit that reduced net tax, before application of the OSTC, in the same taxable year.
How to claim your tax credit
Qualified taxpayers can claim the credit on their personal income tax return by filing a completed FTB 3804-CR with their return.
What form to file
- 2026 Pass-Through Entity Elective Tax Payment Voucher (FTB 3893) Form | Instructions
- 2025 Pass-Through Entity Elective Tax Credit (FTB 3804-CR) Form (Coming soon) | Instructions
- 2025 Pass-Through Entity Elective Tax Calculation (FTB 3804) Form | Instructions
- 2025 Pass-Through Entity Elective Tax Payment Voucher (FTB 3893) Form | Instructions
- 2024 Pass-Through Entity Elective Tax Calculation (FTB 3804) Form | Instructions
- 2024 Pass-Through Entity Elective Tax Credit (FTB 3804-CR) Form | Instructions