After weeks of negotiation and discussion regarding competing tax proposals in Trenton, a deal has been struck on the state budget and tax reform by Governor Phil Murphy and legislative leaders. The result is a host of business tax changes enacted as part of Assembly Bills A-3088, A-3438 and A-4202. Here is a summary of some of the major business tax changes set to take effect in New Jersey:

Tax Amnesty

  • A-3438 provides for a 90-day tax amnesty period to run through no later than January 15, 2019.
  • Under the new amnesty, any taxpayer with liabilities for returns due on or after February 1, 2009, can pay the tax, plus half the interest due as of November 1, 2018 and avoid any penalties with the exception of criminal and civil fraud penalties.
  • An eligible taxpayer cannot be notified of or be under criminal action or investigation.
  • The new law also imposes a 5 percent non-participation penalty for liabilities eligible for amnesty that are subsequently discovered by the Division of Taxation.

Continue Reading New Jersey Taxes—They Are a-Changing…

In February 2018, the New Jersey Tax Court delivered another blow to the Division of Taxation’s (the “Division”) attempts to use partnership income tax withholding to tax out-of-state limited partners. In so doing, the Tax Court has arguably called into question New Jersey’s entire partnership remittance or withholding regime.

Case Discussion

In National Auto Dealers Exchange, L.P. v. Director, Division of Taxation, No. 000028-2014, the Tax Court held that the Division could not impose the partnership remittance in accordance with N.J.S.A. 54:10A-15.11 on a limited partnership whose 99-percent corporate limited partner declared that it maintained a regular place of business in New Jersey.

Continue Reading New Jersey’s Taxation of Limited Partnerships: The Saga Continues

The New Jersey Division of Taxation has issued guidance pertaining to the state’s treatment of the federal Tax Cuts and Jobs Act’s one-time repatriation of certain foreign earnings and profits.  Under the federal Act, U.S. shareholders of controlled foreign corporations or corporations owning 10 percent or more of another foreign corporation are deemed to receive a repatriated dividend of accumulated post-1986 deferred foreign income in the last tax year beginning before January 1, 2018.

Continue Reading New Jersey Issues New Guidance on Federal Deemed Repatriation Rules

On March 13th, New Jersey Governor Murphy delivered his administration’s first budget address.  In the address and subsequent summary of the budget proposals, the Governor called for a number of different personal income tax, corporate tax and sales tax changes.  The corporate tax changes are being labeled as a “modernization” of business taxes.  Some of the key tax changes include the following:

  • Increasing the Gross Income Tax (“GIT”) deduction for property taxes paid from $10,000 to $15,000.
  • Closing the carried interest loophole in New Jersey tax.  At this point, it is not clear exactly what form this proposal will take but there is currently pending legislation which would impose a special surtax on such income and eliminate the exclusion from GIT for nonresidents performing investment/intangible management activities in New Jersey.

Continue Reading Governor Murphy Calls for Tax Reform

Since Governor-Elect Murphy is set to take office later this month, we thought it would be instructive to offer up a brief primer and some additional thoughts on the new administration’s corporate tax plan for the Garden State.  To be more specific, the Murphy team has repeatedly called for closing a “loophole” in the Corporation Business Tax (“CBT”) by adopting something called combined reporting.

Continue Reading Combined Reporting Coming to New Jersey-The Good, The Bad and Other Policy Issues

On November 28, the New Jersey Tax Court issued an opinion in Infosys Limited of India, Inc. v. Director, Division of Taxation, Dck. No. 012060-2016, that denied the Division of Taxation’s attempt to tax foreign income subject to an income tax treaty between India and the U.S. and thus, not taxable for federal income tax purposes.  In granting summary judgment and a significant refund in favor of the taxpayer, the Tax Court addressed New Jersey’s position on what is included in a taxpayer’s entire net income subject to the Corporation Business Tax (“CBT”).  Entire net income with state-specific adjustments is the tax base for CBT purposes.

Continue Reading New Jersey Tax Court Says No to Taxing Foreign-Source Income