Sep 11, 2025
Private equity (PE) firms face a unique set of state tax compliance challenges, as a single fund structure may include dozens (or even hundreds) of partnerships, S corporations, and blocker corporations, each with its own filing obligations across multiple jurisdictions.
The complexity only grows as states refine elective pass-through entity taxes (PTETs), adjust filing requirements, and tighten conformity to federal rules. With multiple deadlines approaching in September and October 2025, now is the time for tax teams to ensure compliance calendars are aligned and entity-level funding is in place.
This alert highlights three developments most relevant to PE firms:
Each of these has direct implications for notice management, penalty exposure, and investor relations.
New York State’s Pass-Through Entity Tax (PTET) has become a crucial strategy for private equity firms and other flow-through entities seeking to mitigate the $10,000 SALT deduction cap at the federal level. For tax year 2025, here’s what every proactive finance and tax leader should prioritize as September 15 approaches:
Quarterly Estimated Payments: A Fixed, Linear Schedule
Electing entities must remit four equal quarterly estimated payments, due on March 15, June 15, September 15, and December 15, each equaling 25% of the required annual payment. This required annual payment is defined as the lesser of:
These payments are linear by design, meaning they must be equal – even if business performance fluctuates during the year. While firms can choose to pay more upfront or catch up later, doing so does not change the fact that each required installment must be at least 25% of the safe-harbor amount. If income climbs mid-year, increasing later installments helps avoid underpayment penalties—but underpaying earlier quarters could still trigger costs.
September 15, 2025 — A Critical Deadline
By September 15, 2025, PE firms must:
Late or underpayments, even if overpaid later, can trigger interest and penalties and generate costly state notices.
Amended 2023 PTET Returns — Act Now
While the statute generally allows a three-year window for filing amended PTET returns (counting from the later of filing date or date paid), specific guidance for 2023 returns aligns the practical deadline with September 2025. This mirrors historical deadlines observed for earlier years, for example, 2021 returns were due by September 15, 2023, and 2022 returns by September 16, 2024.
Thus, September 15, 2025, is effectively the final opportunity to amend 2023 PTET filings and correct any discrepancies before the window closes.
Compliance Checklist for PE Firms
Why This Matters for PE Firms
California’s elective PTET, first introduced in 2021, continues to create challenges for taxpayers. The regime offers significant federal tax savings for pass-through entities and their owners, but it also comes with strict compliance requirements—most notably a midyear prepayment rule that has proven to be a stumbling block for many businesses.
The June 15 Prepayment Requirement
For tax years 2022 through 2025, entities that wish to make a PTET election must make a prepayment by June 15 of the tax year. This prepayment must be the greater of:
· $1,000 or · 50 percent of the prior year’s PTET liability.
This deadline is absolute. Failure to make the payment on time—or to meet the minimum threshold—results in the automatic loss of the election for that year. The Franchise Tax Board (FTB) does not allow corrective action, and no late election or make-up payment can restore eligibility once the deadline has passed. In practice, many entities only discover the problem months later, when the FTB issues a notice disallowing their election. By then, the opportunity for relief has closed, and the expected federal deduction is lost.
Disaster Relief Extension to October 15, 2025
There is an important exception for 2025. The FTB has announced that, for taxpayers located in certain Los Angeles County disaster areas, both the June prepayment deadline and the PTET return filing deadline are postponed until **October 15, 2025.
This extension is intended to provide relief for businesses affected by the declared disasters, giving them additional time to make their elections and payments.
Entities that qualify for this relief must ensure their address on file reflects their location in the disaster area or, if their tax preparer is affected, provide appropriate designation when filing. Failure to claim the relief properly could result in the FTB treating the payment as late and invalidating the election.
Compliance Implications for PE Firms
For private equity firms with multiple portfolio entities, these rules raise significant compliance considerations. It is essential to track which entities intend to elect PTET and verify that they have made the required June 15 prepayment or October 15, if they qualify for disaster relief. Because the prepayment is calculated using the prior year’s liability, firms should also confirm that last year’s PTET filings were accurate and that any changes in entity structure or income will not cause an unexpected shortfall.
Finally, firms should be prepared for a possible wave of FTB notices in late 2025 and early 2026 for entities that missed the prepayment requirement. Early identification of these issues allows firms to communicate the impact to investors and adjust cash flow projections to account for the loss of the state tax deduction at the federal level.
Why This Matters for PE Firms
Texas has streamlined its franchise tax compliance process for small entities beginning with the 2025 filing season—but the change introduces new compliance nuances that private equity (PE) firms must manage carefully. While the elimination of the “No Tax Due” report reduces administrative burden, it also creates new traps for those not closely tracking informational filing requirements.
2025 Threshold and Reporting Changes
For 2025 franchise tax reports (based on 2024 activity), entities with annualized total revenue of $2,470,000 or less are no longer required to file the traditional “No Tax Due” report. Instead, these entities must submit one of the following:
This change simplifies compliance by removing a tax return filing requirement—but it is not a blanket exemption. Entities falling below the threshold must still submit informational reports, and failure to do so can result in penalties.
Penalties for Missed PIR/OIR Filings
While no franchise tax may be owed, failing to submit the PIR or OIR will trigger an automatic $50 penalty per entity. For private equity firms that manage multiple blockers, SPVs, or holding entities registered in Texas, this can quickly lead to significant penalty volumes and unwanted notice activity.
Missed filings often lead to:
Compliance Implications for PE Firms
To stay ahead of these changes and avoid penalties, PE firms should take a proactive approach to their Texas state tax compliance strategy:
Why This Matters for Private Equity
For private equity firms, state tax compliance is about more than just remitting the correct amount of tax—it’s about minimizing administrative risk and operational friction. Every missed informational report or estimated payment can generate a state notice that consumes time, resources, and investor trust.
The upcoming fall deadlines for 2024 tax year activity bring three high-risk compliance areas into focus:
Each of these requires close coordination between fund tax teams, portfolio company controllers, and external tax advisors. The margin for error is small, especially when managing compliance for dozens or hundreds of entitiesacross multiple jurisdictions.
New York & NYC PTET
Deadline: September 15, 2025
Quarterly Estimated Payments (2025)
Pay the third quarterly installment (25% of required annual PTET and NYC PTET liability, if applicable).
Confirm that the March 15 and June 15 payments were timely and complete.
Use the safe harbor amount:
90% of 2025 estimated PTET, or
100% of 2024 actual PTET.
Amended 2023 PTET Returns
Review 2023 PTET filings for:
Ownership changes
Federal adjustments
Misapplied investor elections
File any necessary amended 2023 PTET returns by September 15, 2025.
California PTET
Deadlines:
PTET Prepayment Requirement (2025 Election)
Confirm that each electing entity made a June 15 prepayment equal to:
The greater of $1,000 or 50% of 2024 PTET liability.
If not paid by June 15, determine if the entity qualifies for disaster relief (October 15 deadline):
Entity or tax preparer is located in a designated LA County disaster area.
FTB address reflects disaster zone status or appropriate designation was filed.
Election Validation
Texas Franchise Tax
Deadline: May 15, 2025
PIR/OIR Informational Filing (2025 Report Year)
Identify entities with annualized total revenue less than or equal to $2,470,000 for 2024.
Verify that each such entity:
Is not required to file a “No Tax Due” return.
Must file one of the following:
Public Information Report (PIR), or
Ownership Information Report (OIR) if not subject to PIR.
Penalty Prevention
Strategic Reminders for PE Fund Tax Teams
Fall 2025 presents more than just a routine compliance cycle for private equity firms—it serves as a critical test of entity-level tax governance. With multiple jurisdictions tightening enforcement and automating notice generation, the cost of small missteps can escalate quickly.
In today’s regulatory climate, where state tax authorities increasingly rely on automated systems to flag and issue notices, precision in compliance processes is as essential as accuracy in tax calculations. Early planning, disciplined execution, and clear communication across tax teams and advisors will be the defining factors of a successful fall compliance season.
Experience the full potential of Noticehub through a virtual demo.
Jeroen van der Wal
Senior Account Executive
