Metro Estimated Tax Payments for Pass-through Entities and Individuals, Where Business Gross Receipts Vary Near the Business Tax Filing Threshold

Tax Administration Policy – Metro Estimated Tax Payments for Pass-through Entities and Individuals, Where Business Gross Receipts Vary Near the Business Tax Filing Threshold

Metro’s Supportive Housing Services Business Income Tax (METBIT) is imposed on the net income of a business doing business within the district, whose gross receipts everywhere exceed $5 million. If the business is a pass-through entity (PTE) whose gross receipts are at or below $5 million, the tax is imposed on the PTE’s owner(s) which may be business entities or individuals. If the owner is a business entity it may subject to the METBIT. If the owner is an individual, the owner will be subject to the Supportive Housing Services Personal Income Tax.

If the PTE’s gross receipts vary each year and fall both above or below the $5 million threshold it will be difficult to know whether the PTE or the PTE’s owner(s) should make estimated tax payments. The following guidance may help avoid penalties and interest on underpayment of estimated taxes for the PTE and its owner(s).

1. The PTE can make estimated payments.
2. The PTE should monitor its gross receipts to determine if it must file and pay the METBIT.
3. If the PTE will not exceed the threshold, and will not file and pay the METBIT that year:
   1. The PTE must send a letter to the Revenue Division making an irrevocable election to either:
      1. Refund the estimated payments to the PTE, or
      2. Transfer the estimated payments to its owner(s)’s accounts.
   2. The letter must include:
      1. The signature of all the PTE’s owners.
      2. State whether the payments are to be refunded to the PTE or transferred to its owner(s).
      3. If transferred to owners:
         1. what amounts will be transferred to whom, and
         2. sufficient information to get the proper amount to the right account.
   3. To avoid or minimize inadvertent billing notices, the letter must be sent:
      1. As early as possible, but
      2. No later than the original federal tax return due date (generally March 15).

Note 1: If the PTE elects to receive a refund of estimated tax payments its owner(s) may incur penalty and interest on underpayment of estimated taxes depending upon each owner(s)’s situation.

Note 2: If the PTE elects to transfer its estimated payments to the owner(s), payments will be applied to each owner(s)’s account(s) in the amounts directed as of the date the PTE made those payments. If those payments were timely and of the amount necessary to avoid an underpayment scenario for the owner(s), the owner(s) will not be charged an underpayment penalty or interest. If the payments were not timely or were insufficient to avoid an underpayment scenario for the owner(s), the normal underpayment penalties and interest apply.  

06/06/2023                                           ______Thomas Lannom_____
Date                                                      Revenue Division Director

Adopted: 06/06/2023