PTETaxDesk / 2026 State PTET & $40k SALT Guides / S-Corporation Single Class of Stock Rule (IRC § 1361): Avoiding Disproportionate PTET Payments
S-Corporation Single Class of Stock Rule (IRC § 1361): Avoiding Disproportionate PTET Payments
S-Corporation Single Class of Stock Rule (IRC § 1361)?
When an S-Corporation pays state PTET on behalf of some shareholders (such as residents) and not others (such as nonresidents), the corporation must make equalizing cash distributions so all per-share distributions remain strictly pro rata under Treas. Reg. § 1.1361-1(l).
When an S-Corporation pays state PTET on behalf of some shareholders (such as residents) and not others (such as nonresidents), the corporation must make equalizing cash distributions so all per-share distributions remain strictly pro rata under Treas. Reg. § 1.1361-1(l).
Open 2026 $40,000 SALT Cap vs. State PTET Calculator
2026 PTET & SALT Compliance Checklist
- Adopt a Written Partner/Shareholder PTET Consent Resolution: Keep signed authorization in your corporate or partnership minute book.
- Remit Cash-Basis Vouchers Before December 31, 2026: Under IRS Notice 2020-75, cash-basis entities can deduct 2026 PTET only to the extent paid by December 31, 2026.
- Avoid Overpayment Refunds (IRC § 111): Base your Q4 PTET payment on actual projected 2026 state liability so next year's state refund isn't recaptured as ordinary federal income.
Frequently Asked Questions
S-Corporation Single Class of Stock Rule (IRC § 1361)?
When an S-Corporation pays state PTET on behalf of some shareholders (such as residents) and not others (such as nonresidents), the corporation must make equalizing cash distributions so all per-share distributions remain strictly pro rata under Treas. Reg. § 1.1361-1(l).