A4495 —
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1Introduced
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2In Committee
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3Passed General Assembly
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4Passed Senate
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5To Executive
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6Enacted
This bill died with 2018-2019 Regular Session. It reached “Introduced” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.
This bill is no longer active — its legislative session has ended, so there is no live prognosis. It would have to be reintroduced in the current session to move again.
Bill Text
What changed in the latest version
544 added · 687 removedPlain-language change summary
The amendment adds a section (C.54:10A-4.15) that allows taxpayers to deduct the full value of deductions taken under federal tax law for specific privilege periods starting January 1, 2018, when calculating their entire net income. However, this deduction is only permitted if the corresponding amounts of income have not been excluded or exempted under the Corporation Business Tax Act. This change clarifies how taxpayers can compute their net income while ensuring that only income not exempted is eligible for such deductions.
2018, c.131c.0131 CC (A4495) §1CHAPTER –131 C.54:10A-4.15(CORRECTED §10COPY) - NoteAn Act P.L.concerning the corporation business tax and the definition of gross income under the gross income tax, supplementing P.L.1945, c.162 and amending various parts of the statutory law.
2018, CHAPTER 131, approved October 4, 2018 Assembly, No.
4495 An Act concerning the corporation business tax and the definition of gross income under the gross income tax, supplementing P.L.1945, c.162 and amending various parts of the statutory law.
1. C.54:10A-4.15 (NewPermitted section)deductions For privilege periods beginning on and after January 1, 2018, a taxpayer shall be allowed as a deduction for computing entire net incomeincome. pursuant to section 4 of P.L.1945, c.162 (C.54:10A-4), in the amount of the full value of the deduction that the taxpayer was allowed for federal income tax purposes and for which the taxpayer had taken for federal income tax purposes pursuant to section 250 of the federal Internal Revenue Code (26 U.S.C.
1. For privilege periods beginning on and after January 1, 2018, a taxpayer shall be allowed as a deduction for computing entire net income pursuant to section 4 of P.L.1945, c.162 (C.54:10A-4), in the amount of the full value of the deduction that the taxpayer was allowed for federal income tax purposes and for which the taxpayer had taken for federal income tax purposes pursuant to section 250 of the federal Internal Revenue Code (26 U.S.C.
C.54:10A-4 Definitions.
(b) (b) "Allocation factor" shall mean the proportionate part of a taxpayer's net worth or entire net income used to determine a measure of its tax under this act.
(d) (d) "Net worth" shall mean the aggregate of the values disclosed by the books of the corporation for (1) issued and outstanding capital stock, (2) paid-in or capital surplus, (3) earned surplus and undivided profits, and (4) surplus reserves which can reasonably be expected to accrue to holders or owners of equitable shares, not including reasonable valuation reserves, such as reserves for depreciation or obsolescence or depletion. Notwithstanding the foregoing, net worth shall not include any deduction for the amount of the excess depreciation described in paragraph (2) (F) of subsection (k) of this section. The foregoing aggregate of values shall be reduced by [100%] 50% of the amount disclosed by the books of the corporation for investment in the capital stock of one or more subsidiaries, which investment is defined as ownership (1) of at least 80% of the total combined voting power of all classes of stock of the subsidiary entitled to vote and (2) of at least 80% of the total number of shares of all other classes of stock except nonvoting stock which is limited and preferred as to dividends.
(g) (g) "Regulated investment company" shall mean any corporation which for a period covered by its report, is registered and regulated under the Investment Company Act of 1940 (54 Stat.
(h) (h) "Taxpayer" shall mean any corporation, and any partnership required, or consenting, to report or to pay taxes, interest or penalties under this act.
(i) (i) "Fiscal year" shall mean an accounting period ending on any day other than the last day of December on the basis of which the taxpayer is required to report for federal income tax purposes.
(j) (j) Except as herein provided, "privilege period" shall mean the calendar or fiscal accounting period for which a tax is payable under this act.
(k) (k) "Entire net income" shall mean total net income from all sources, whether within or without the United States, and shall include the gain derived from the employment of capital or labor, or from both combined, as well as profit gained through a sale or conversion of capital assets.
For the purpose of this act, the amount of a taxpayer's entire net income shall be deemed prima facie to be equal in amount to the taxable income, before net operating loss deduction and special deductions, which the taxpayer is required to report, or, if the taxpayer is classified as a partnership for federal tax purposes, would otherwise be required to report, to the United States Treasury Department for the purpose of computing its federal income tax, provided however, that in the determination of such entire net income, (1) (1) Entire net income shall exclude for the periods set forth in paragraph (2)(F)(i) of this subsection, any amount, except with respect to qualified mass commuting vehicles as described in section 168(f)(8)(D)(v) of the Internal Revenue Code as in effect immediately prior to January 1, 1984, which is included in a taxpayer's federal taxable income solely as a result of an election made pursuant to the provisions of paragraph (8) of that section.
(2) (2) Entire net income shall be determined without the exclusion, deduction or credit of:
(ii) (ii) For the periods set forth in subparagraph (F)(i) of paragraph (2) of this subsection, any amount, except with respect to qualified mass commuting vehicles as described in section 168(f)(8)(D)(v) of the Internal Revenue Code as in effect immediately prior to January 1, 1984, which the taxpayer claimed as a deduction in computing federal income tax pursuant to a qualified lease agreement under paragraph (8) of that section.
(G) (G) (i) The amount of any civil, civil administrative, or criminal penalty or fine, including a penalty or fine under an administrative consent order, assessed and collected for a violation of a State or federal environmental law, an administrative consent order, or an environmental ordinance or resolution of a local governmental entity, and any interest earned on the penalty or fine, and any economic benefits having accrued to the violator as a result of a violation, which benefits are assessed and recovered in a civil, civil administrative, or criminal action, or pursuant to an administrative consent order. The provisions of this paragraph shall not apply to a penalty or fine assessed or collected for a violation of a State or federal environmental law, or local environmental ordinance or resolution, if the penalty or fine was for a violation that resulted from fire, riot, sabotage, flood, storm event, natural cause, or other act of God beyond the reasonable control of the violator, or caused by an act or omission of a person who was outside the reasonable control of the violator.
(ii) (ii) The amount of treble damages paid to the Department of Environmental Protection pursuant to subsection a.
A deduction shall also be permitted to the extent that the taxpayer establishes by a preponderance of the evidence, as determined by the director, that the interest is directly or indirectly paid, accrued or incurred to (i) a related member in a foreign nation which has in force a comprehensive income tax treaty with the United States States and the related member (aa) was subject to tax in the foreign nation on a tax base that included the payment paid, accrued, or incurred;
and (bb) under which the related member's income received from the transaction was taxed at an effective tax rate equal to or greater than a rate of three percentage points less than the rate of tax applied to taxable interest by the State of New Jersey pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), provided however that the taxpayer shall disclose on its return for the privilege period the name of the related member, the amount of the interest, the relevant foreign nation, and such other information as the director may prescribe or (ii) to an independent lender and the taxpayer guarantees the debt on which the interest is required. [TransactionsThe betweenadjustments membersrequired ofby athis combinedsubparagraph groupshall arenot eliminatedapply into thetransactions computationbetween ofrelated themembers entireincluded netin incomea ofcombined thegroup membersreported ofon thea New Jersey combined group;return.
therefore, this subparagraph only applies to interest paid, accrued or incurred by a taxable member of a combined group to related parties that are not members of the combined group.] The adjustments required by this subparagraph shall not apply to transactions between related members included in a combined group reported on a New Jersey combined return.
(ii) (ii) For privilege periods beginning after December 31, 2017, notwithstanding the provisions of P.L.1945, c.162 (C.54:10A-1 et seq.) or any other law to the contrary, for the purposes of determining the amount of income pursuant to P.L.1945, c.162 (C.54:10A-1 et seq.) that is net of expenses, no amounts shall be taken as a deduction pursuant to section 199A of the Internal Revenue Code (26 U.S.C.
(3) (3) The director may, whenever necessary to properly reflect the entire net income of any taxpayer, determine the year or period in which any item of income or deduction shall be included, without being limited to the method of accounting employed by the taxpayer.
(4) (4) There shall be allowed as a deduction from entire net income of a banking corporation, to the extent not deductible in determining federal taxable income, the eligible net income of an international banking facility determined as follows:
(i) (i) Making, arranging for, placing or carrying loans to foreign persons, provided, however, that in the case of a foreign person which is an individual, or which is a foreign branch of a domestic corporation (other than a bank), or which is a foreign corporation or foreign partnership which is controlled by one or more domestic corporations (other than banks), domestic partnerships or resident individuals, all the proceeds of the loan are for use outside of the United States;
(ii) (ii) Making or placing deposits with foreign persons which are banks or foreign branches of banks (including foreign subsidiaries) or foreign branches of the taxpayers or with other international banking facilities;
or (iv)(iv) Such other activities as an international banking facility may, from time to time, be authorized to engage in;
(5) (A) (i) Entire net income shall exclude 100% of dividends which were included in computing such taxable income for federal income tax purposes, paid to the taxpayer by one or more subsidiaries owned by the taxpayer to the extent of the 80% or more ownership of investment described in subsection (d) of this section for privilege periods [ending] beginning on or before December 31, 2016.
(ii) For [the] privilege [period] periods beginning after December 31, 2016 and before January 1, 2019, entire net income shall exclude 95% of dividends which were included in computing such taxable income for federal income tax purposes, paid or deemed paid, to the taxpayer by one or more subsidiaries owned by the taxpayer to the extent of the 80% or more ownership of investment described in subsection (d) of this section. For the purposes of calculating the tax liability owed for the paid or deemed paid dividends included in entire net income by this subsection, the taxpayer shall use either their three-year average allocation factor for the taxpayer's [2015] 2014 through [2017] 2016 tax years reported on the taxpayer's tax returns or 3.5 percent, whichever is lower. lower. (iii) For privilege periods beginning on and after January 1, [2018] 2019, entire net income shall exclude 95% of dividends which were included in computing such taxable income for federal income tax purposes, paid or deemed paid to the taxpayer by one or more subsidiaries owned by the taxpayer to the extent of the 80% or more ownership of investment described in subsection (d) of this section.
(iii) For privilege periods beginning on and after January 1, 2019, entire net income shall exclude 95% of dividends which were included in computing such taxable income for federal income tax purposes, paid or deemed paid to the taxpayer by one or more subsidiaries owned by the taxpayer to the extent of the 80% or more ownership of investment described in subsection (d) of this section.
(C)(C) To the extent a subsidiary received dividends from other subsidiaries and included those dividends in its entire net income for the purposes of determining its tax liability pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) and paid tax on those dividends, the taxpayer receiving those same dividends from the subsidiary shall exclude those dividends from its entire net income based on the subsidiary's allocation factor used by the subsidiary in determining its tax liability pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5).
For privilege periods ending before [the effective date of P.L.2018, c.48] July 31, 2019, there shall be allowed as a deduction for the privilege period the net operating loss carryover to that period.
The portion of the loss which shall be carried to each of the other privilege periods shall be the excess, if any, of the amount of the loss over the sum of the entire net income, computed without the [exclusion] exclusions permitted in [paragraph] paragraphs (4) and (5) of this subsection or the net operating loss deduction provided by subparagraph (A) of this paragraph, for each of the prior privilege periods to which the loss may be carried.
For purposes of this paragraph the term "net operating loss" means the excess of the deductions over the gross income used in computing entire net income without the net operating loss deduction provided for in subparagraph (A) of this paragraph and the [exclusion] exclusions in [paragraph] paragraphs (4) and (5) of this subsection.
(F) (F) Reduction for discharge of indebtedness. A net operating loss for any privilege period ending after June 30, 2014, and any net operating loss carryover to such privilege period, shall be reduced by the amount excluded from federal taxable income under subparagraph (A), (B), or (C) of paragraph (1) of subsection (a) of section 108 of the federal Internal Revenue Code (26 U.S.C.
(7) (7) The entire net income of gas, electric and gas and electric public utilities that were subject to, or would have been subject to tax if doing business in this State, the provisions of P.L.1940, c.5 (C.54:30A-49 et seq.) prior to 1998, shall be adjusted by substituting the New Jersey depreciation allowance for federal tax depreciation with respect to assets placed in service prior to January 1, 1998. For gas, electric, and gas and electric public utilities that were subject to, or would have been subject to tax if doing business in this State, the provisions of P.L.1940, c.5 (C.54:30A-49 et seq.) prior to 1998, the New Jersey depreciation allowance shall be computed as follows:
(i) (i) Depreciation for federal income tax purposes shall be disallowed in full.
(ii) (ii) A deduction shall be allowed for the New Jersey depreciation allowance. The New Jersey depreciation allowance shall be computed for the single asset account described above based on the New Jersey tax basis as adjusted above as if all assets in the single asset account were first placed in service on January 1, 1998. Depreciation shall be computed using the straight line method over a thirty-year life.
(8) (8) In the case of taxpayers that are gas, electric, gas and electric, or telecommunications public utilities as defined pursuant to subsection (q) of this section, the director shall have authority to promulgate rules and issue guidance correcting distortions and adjusting timing differences resulting from the adoption of P.L.1997, c.162 (C.54:10A-5.25 et al.).
(9) (9) Notwithstanding paragraph (1) of this subsection, entire net income shall not include the income derived by a corporation organized in a foreign country from the international operation of a ship or ships, or from the international operation of aircraft, if such income is exempt from federal taxation pursuant to section 883 of the federal Internal Revenue Code of 1986, 26 U.S.C.
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s.108), for privilege periods beginning after December 31, 2008 and before January 1, 2011, entire net income shall include the amount of discharge of indebtedness income excluded for federal income tax purposes pursuant to subsection (i) of section 108 of the federal Internal Revenue Code of 1986 (26 U.S.C.
(B)(B) For purposes of this paragraph, "net deferred tax liability" means deferred tax liabilities that exceed the deferred tax assets of the combined group, as computed in accordance with generally accepted accounting principles, and "net deferred tax asset" means that deferred tax assets exceed the deferred tax liabilities of the combined group, as computed in accordance with generally accepted accounting principles.
(C)(C) Only publicly traded companies, including affiliated corporations participating in the filing of a publicly traded company's financial statements prepared in accordance with generally accepted accounting principles, as of the effective date of this paragraph, shall be eligible for this deduction.
(D)(D) If the provisions of sections 18 through [22] 23 of P.L.2018, c.48 (C.54:10A-4.6 to [C.54:10A-4.10] C.54:10A-4.11) result in an aggregate increase to the members' net deferred tax liability or an aggregate decrease to the members' net deferred tax asset, or an aggregate change from a net deferred tax asset to a net deferred tax liability, the combined group shall be entitled to a deduction, as determined in this paragraph.
(E)(E) For 10 years beginning with the combined group's first privilege period beginning on or after January 1 of the fifth year after the effective date of P.L.2018, c.48 (C.54:10A-54.1(C.54:10A-5.41 etand al.)C.54:10A-4.6 [becomesto effective],C.54:10A-4.11), a combined group shall be entitled to a deduction from combined group entire net income equal to one-tenth of the amount necessary to offset the increase in the net deferred tax liability or decrease in the net deferred tax asset, or aggregate change from a net deferred tax asset to a net deferred tax liability.
Such increase in the net deferred tax liability or decrease in the net deferred tax asset or the aggregate change from a net deferred tax asset to a net deferred tax liability shall be computed based on the change that would result from the imposition of the unitary reporting requirements under sections 1 [through 17-21] and 18 through 23 of P.L.2018, c.48 (C.54:10A-54.1(C.54:10A-4.6 etto al.)C.54:10A-4.11) but for the deduction provided under this paragraph as of the effective date of this paragraph.
(F)(F) The deferred tax impact determined in subparagraph (E) of this paragraph must be converted to the annual Deferred Tax Deduction amount, as follows:
(i)(i) the deferred tax impact determined in subparagraph (E) of this paragraph shall be divided by the rate determined under section 5 of P.L.1945, c.162 (C.54:10A-5) at the effective date of P.L.2018, c.48 (C.54:10A-54.1(C.54:10A-5.41 et al.);
(ii)(ii) the resulting amount shall be further divided by the New Jersey unitary business allocation factor that was used by the combined group in the calculation of the deferred tax assets and deferred tax liabilities as described in subparagraph (E) of this paragraph;
(H)(H) Any combined group intending to claim a deduction under this paragraph shall file a statement with the director on or before July of the year subsequent to the first privilege period for which a combined return is required. Such statement shall specify the total amount of the deduction which the combined group claims on such form and in such manner as prescribed by the director. No deduction shall be allowed under this paragraph for any privilege period except to the extent claimed on such timely filed statement in accordance with this paragraph.
(l) (l) "Real estate investment trust" shall mean any corporation, trust or association qualifying and electing to be taxed as a real estate investment trust under federal law.
(m)(m) "Financial business corporation" shall mean any corporate enterprise which is (1) in substantial competition with the business of national banks and which (2) employs moneyed capital with the object of making profit by its use as money, through discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debt;
(n) (n) "International banking facility" shall mean a set of asset and liability accounts segregated on the books and records of a depository institution, United States branch or agency of a foreign bank, or an Edge or Agreement Corporation that includes only international banking facility time deposits and international banking facility extensions of credit as such terms are defined in section 204.8(a)(2) and section 204.8(a)(3) of Regulation D of the board of governors of the Federal Reserve System, 12 CFR Part 204, effective December 3, 1981. In the event that the United States enacts a law, or the board of governors of the Federal Reserve System adopts a regulation which amends the present definition of international banking facility or of such facilities' time deposits or extensions of credit, the Commissioner of Banking and Insurance shall forthwith adopt regulations defining such terms in the same manner as such terms are set forth in the laws of the United States or the regulations of the board of governors of the Federal Reserve System. The regulations of the Commissioner of Banking and Insurance shall thereafter provide the applicable definitions.
(o) (o) "S corporation" means a corporation included in the definition of an "S corporation" pursuant to section of the federal Internal Revenue Code of 1986, 26 U.S.C.
(p) (p) "New Jersey S corporation" means a corporation that is an S corporation;
(q) (q) "Public Utility" means "public utility" as defined in R.S.48:2-13.
(r) (r) "Qualified investment partnership" means a partnership under this act that has more than 10 members or partners with no member or partner owning more than a 50% interest in the entity and that derives at least 90% of its gross income from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stocks or securities or foreign currencies or commodities or other similar income (including but not limited to gains from swaps, options, futures or forward contracts) derived with respect to its business of investing or trading in those stocks, securities, currencies or commodities, but "investment partnership" shall not include a "dealer in securities" within the meaning of section 1236 of the federal Internal Revenue Code of 1986, 26 U.S.C.
(t) (t) "Partnership" means an entity classified as a partnership for federal income tax purposes.
(u) (u) "Prior net operating loss conversion carryover" means a net operating loss incurred in a privilege period ending prior to [the effective date of P.L.2018, c.48 (C.54:10A-5.41 et al.)] July 31, 2019 and converted from a pre-allocation net operating loss to a post-allocation net operating loss as follows:
(1) (1) As used in this subsection:
"Base year" means the last privilege period ending prior to [the effective date of P.L.2018, c.48 (C.54:10A-54.1 et al.)] July 31, 2019.
"Base year BAF" means the taxpayer's business allocation factor as provided in sections 6 through [8] 10 of P.L.1945, c.162 (C.54:10A-6 through [54:10A-8] C.54:10A-10) for purposes of calculating entire net income for the base year, as such section was in effect for the last privilege period ending prior to [the effective date of P.L.2018, c.48 (C.54:10A-54.1 et al.)] July 31, 2019.
"UNOL" means the unabsorbed portion of net operating loss as calculated under paragraph (6) of subsection (k) of this section as such paragraph was in effect for the last privilege period ending prior to [the effective date of P.L.2018, c.48 (C.54:10A-54.1 et al.)] July 31, 2019, that was not deductible in previous privilege periods and was eligible for carryover on the last day of the base year subject to the limitations for deduction under such subsection, including any net operating loss sustained by the taxpayer during the base year.
(2) (2) The prior net operating loss conversion carryover shall be calculated as follows:
(B) The taxpayer shall continue to carry over its prior net operating loss conversion carryover to offset its allocated entire net income as provided in sections 6 through [8] 10 of P.L.1945, c.162 (C.54:10A-6 through [54:10A-8] C.54:10A-10) for privilege periods [beginning] ending on and after [the effective date of P.L.2018, c.48 (C.54:10A-54.1 et al.)] July 31, 2019. Such carryover periods shall not exceed the twenty privilege periods following the privilege period of the initial loss. The entire amount of the prior net operating loss conversion carryover for any privilege period shall be carried to the earliest of the privilege periods to which the loss may be carried. The portion of the prior net operating loss conversion carryover which shall be carried to each of the other privilege periods shall be the excess, if any, of the amount of the prior net operating loss conversion carryover over the sum of the entire net income, computed without the [exclusion] exclusions permitted in [paragraph] paragraphs (4) and (5) of subsection (k) of this section allocated to this State.
(v) (v) "Net operating loss deduction" means the amount allowed as a deduction for the net operating loss carryover to the privilege period, calculated as follows:
(1) (1) Net operating loss carryover.
A net operating loss for any privilege period [beginning] ending on or after [the effective date of this act] July 31, 2019, shall be a net operating loss carryover to each of the twenty privilege periods following the period of the loss.
The portion of the loss which shall be carried to each of the other privilege periods shall be the excess, if any, of the amount of the loss over the sum of the entire net income, computed without the [exclusion] exclusions permitted in [paragraph] paragraphs (4) and (5) of subsection (k) of this section allocated to this State.
(2) (2) Net operating loss.
For purposes of this paragraph the term "net operating loss" means the excess of the deductions over the gross income used in computing entire net income, without regard to any net operating loss carryover, and computed without the [exclusion] exclusions in [paragraph] paragraphs (4) and (5) of subsection (k) of this section, allocated to this State pursuant to sections 6 through [8] 10 of P.L.1945, c.162 (C.54:10A-6 through [54:10A-8] C.54:10A-10).
(3) (3) Reduction for discharge of indebtedness.
A net operating loss for any privilege period [beginning] ending on or after [the effective date of this act] July 31, 2019, and any net operating loss carryover to such privilege period, shall be reduced by the amount excluded from federal taxable income under subparagraph (A), (B), or (C) of paragraph (1) of subsection (a) of section 108 of the federal Internal Revenue Code, 26 U.S.C.
(4) (4) A net operating loss carryover shall not include any net operating loss incurred during any privilege period [beginning] ending prior to [the effective date of P.L.2018, c.48 (C.54:10A-54.1 et al.)] July 31, 2019.
(5) (5) Change in ownership.
(x) (x) "Affiliated group" means an affiliated group as defined in section 1504 of the federal Internal Revenue Code, 26 U.S.C.
(y) (y) "Combinable captive insurance company" means an entity that is treated as an association taxable as a corporation under the federal Internal Revenue Code:
(1) (1) more than 50% of the voting stock of which is owned or controlled, directly or indirectly, by a single entity that is treated as an association taxable as a corporation under the federal Internal Revenue Code, and not exempt from federal income tax;
(2) (2) that is licensed as a captive insurance company under the laws of this State or another jurisdiction;
(3)(3) whose business includes providing, directly and indirectly, insurance or reinsurance covering the risks of its parent, members of its affiliated group, or both;
and (4) (4) 50% or less of whose gross receipts for the privilege period consist of premiums from arrangements that constitute insurance for federal income tax purposes. purposes. A combinable captive insurance company shall not be exempt under section 3 of P.L.1945, c.162 (C.54:10A-3).
A combinable captive insurance company shall not be exempt under section 3 of P.L.1945, c.162 (C.54:10A-3).
of section 18 of P.L.P.L.2018, c.48 (C.54:10A-4.6) and shall be exempt under section 3 of P.L.1945, c.162 (C.54:10A-3).
2018, c.48 (C.54:10A-4.6) and shall be exempt under section 3 of P.L.1945, c.162 (C.54:10A-3).
(z) "Combined group" means the group of all companies that have common ownership and are engaged in a unitary business, where at least one company is subject to tax under this chapter, and shall include all business entities, except as provided [infor subsectionunder k.any section of the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.).
of section 18 of P.L.2018, c.48 (C.54:10A-4.6)] for under any section of the Corporation Business Tax Act (1945), P.L.1945, c.
162 (C:54:10A-1 et seq.).
(dd)(dd) "Member" means a [corporation] business entity that is a part of a combined group.
or (ii) a New Jersey S Corporation which does not elect to be included in the [combine] combined group.
(ff)(ff) "Taxable member" means a member that is subject to tax pursuant to the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.).
of section 3 of P.L.2001, c.136 [(C.54:10A-15.6(a))] (C.54:10A-15.6) or subsection a.
of section 4 of P.L.P.L.2001, c.136 (C.54:10A-15.7), as applicable. A business conducted directly or indirectly by one corporation is unitary with that portion of a business conducted by another corporation through its direct or indirect interest in a partnership.
2001, c.136 (C.54:10A-15.7),3. asSection applicable. 5 Aof businessP.L.2002, conductedc.40 directly(C.54:10A-4.4) or indirectly by one corporation is unitaryamended withto thatread portionas offollows: a business conducted by another corporation through its direct or indirect interest in a partnership.
(cf: C.54:10A-4.4 Definitions relative to computing entire net income and related member transactions.
P.L.2018, c.48, s.3) 3. 5. Section 5 of P.L.2002, c.40 (C.54:10A-4.4) is amended to read as follows:
5. a.
ForFor the purposes of this section:
c. c. (1) The adjustments required in subsection b.
(a) the interest expenses and costs and intangible expenses and costs are directly or indirectly paid, accrued or incurred to a related member in a foreign nation which has in force a comprehensive income tax treaty with the United States and the (i) related member was subject to tax in the foreign nation on a tax base that included the [payment] amount paid, accrued, or incurred and (ii) the related member's income received from the transaction was taxed at an effective tax rate equal to or greater than a rate of three percentage points less than the rate of tax applied to taxable interest by the State of New Jersey pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5);
or (c) the taxpayer and the director agree in writing to the application or use of an alternative method of apportionment under section 8 of P.L.1945, c.162 (C.54:10A-8). Nothing in this subsection shall be construed to limit or negate the director's authority to otherwise enter into agreements and compromises otherwise allowed by law. (2) (2) For the purposes of qualifying for the exception provided by subparagraph (a) of paragraph (1) of this subsection, the taxpayer shall disclose on its return for the privilege period the name of the related member, the amount of the interest expenses and costs and intangible expenses and costs deducted, the relevant foreign nation, and such other information as the director may prescribe.
(3) (3) The adjustments required in subsection b.
e. e. The adjustments required by this section shall not apply to transactions between related members included in a combined group reported on a New Jersey combined return.
(cf: 4. Section 18 of P.L.2018, c.48 (C.54:10A-4.6) is amended to read as follows:
P.L.2018, c.48, s.4) C.54:10A-4.6 4. Determination Section 18 of P.L.2018,entire c.48net (C.54:10A-4.6)income isfor amendedmember toof readcombined asgroup. follows:
a. a. For a member incorporated in the United States, the income included in income of the combined group shall be the member's entire net income otherwise determined pursuant to the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.).
c. c. (1) If a member of a combined group receives income from the unitary business from a partnership, the combined group's entire net income shall include the member's direct and indirect distributive share of the partnership's unitary business income.
(1) (2) If Thea distributivemember share of incomea receivedcombined bygroup areceives limitedincome partner from athe qualifiedunitary investmentbusiness partnershipfrom shalla notpartnership, bethe consideredcombined togroup's beentire derivednet fromincome ashall unitaryinclude business unless the generalmember's partnerdirect ofand suchindirect investmentdistributive partnershipshare andof suchthe limitedpartnership's partnerunitary havebusiness commonincome. ownership.
(2) The distributive share of income received by a limited partner from a qualified investment partnership shall not be considered to be derived from a unitary business unless the general partner of such investment partnership and such limited partner have common ownership.
e. e. Except as otherwise provided by regulation, business income from an intercompany transaction among members of the same combined group shall be deferred in a manner similar to the deferral under 26 C.F.R.
(1) (1) The object of a deferred intercompany transaction is:
or (2) (2) The buyer and seller cease to be members of the same combined group, regardless of whether the buyer and seller remain sufficiently interdependent, integrated, and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value between them.
(1) (1) Such prior net operating loss conversion carryover deduction shall be allowed to offset only the entire net income allocated to this state of the corporation that created the prior net operating loss;
(2) (2) The prior net operating loss conversion carryover deduction computed under subsection (u) of section 4 of P.L.1945, c.162 (C.54:10A-4) shall be applied against the entire net income allocated to this state of the corporation that created the prior net operating loss before the net operating loss carryover computed under subsection h.
(1) (1) For privilege periods beginning on or after the first day of the initial privilege period for which a combined unitary tax return is required under this section and sections 19, 20, and 23 of P.L.2018, c.48 (C.54:18A-4.7, C.54:18A-4.8, and C.54:18A-4.11), if the computation of a combined group's entire net income allocated to this state results in a net operating loss, a taxable member of such group may carry over the net operating loss allocated to this state, as calculated under this section and sections 19 and 23 of P.L.2018, c.48 (C.54:18A-4.7 and C.54:18A-4.11), and shall be deductible from entire net income derived from the unitary business in a future privilege period to the extent that the carryover and deduction is otherwise consistent with subsection (v) of section 4 of P.L.1945, c.162 (C.54:10A-4). (2) (2) Where a taxable member of a combined group has a net operating loss carryover derived from a loss incurred by a combined group in a privilege period beginning on or after the first day of the initial privilege period for which a combined unitary tax return is required under this section and sections 19, 20, and 23 of P.L.2018, c.48 (C.54:18A-4.7, C.54:18A-4.8, and C.54:18A-4.11), then the taxable member may share the net operating loss carryover with other taxable members of the combined group if such other taxable members were members of the combined group in the privilege period that the loss was incurred.
(3) (3) Where a taxable member of a combined group has a net operating loss carryover derived from a loss incurred in a privilege period during which the taxable member was not a member of such combined group, the carryover shall remain available to be deducted by that taxable member or other group members that, in the year the loss was incurred, were part of the same combined group as such taxable member.
(4) (4) A net operating loss carryover shall not include any net operating loss incurred during any privilege period beginning prior to the first day of the initial privilege period for which a combined unitary tax return is required under this section and sections 19 and 23 of P.L.2018, c.48 (C.54:18A-4.7 and C.54:18A-4.11). i. Tax credits earned by a member of a combined group shall be utilized as follows:
(1) (1) If a taxable member of a combined group earns a tax credit in a privilege period beginning on or after the first day of the initial privilege period for which a combined unitary tax return is required under this section and sections 19, 20, and 23 of P.L.2018, c.48 (C.54:18A-4.7, C.54:18A-4.8, and C.54:18A-4.11), then the taxable member may share the credit with other taxable members of the combined group.
(2) (2) If a taxable member of a combined group has a tax credit carryover derived from a privilege period beginning prior to the first day of the initial privilege period for which a combined unitary tax return is required under this section and sections 19, 20, and 23 of P.L.2018, c.48 (C.54:18A-4.7, C.54:18A-4.8, and C.54:18A-4.11), then the taxable member may share the carryover credit with other taxable members of the combined group.
(3) (3) If a taxable member of a combined group has a tax credit carryover derived from a privilege period during which the taxable member was not a member of such combined group, the credit carryover shall remain available to be utilized by such taxable member or other group members.
(4) (4) To the extent a taxable member has more than one corporation business tax credit that it may utilize in a privilege period, whether such credits were earned by said member or are available to said member in accordance with paragraphs (1), (2) and (3) of this subsection, the order of priority of the application of the credits shall be as prescribed by the director.
(1) (1) A corporation or combined group which is licensed, in whole or in part, as an insurance company under the laws of this State or of another state, including corporations which are surplus lines insurers declared eligible by the Commissioner of Banking and Insurance pursuant to section 11 of P.L.1960, c.32 (C.17:22-6.45) to insure risks within this State that is not a combinable captive insurance company. Notwithstanding a provision, if any, to the contrary in this section, the income of an insurance company that is not a combinable captive insurance company, the allocation or apportionment of income related thereto and the apportionment factors of an insurance company that is not a combinable captive insurance company shall not be included in a combined unitary tax return filed under this section and sections 19, 20, and 23 of P.L.2018, c.48 (C.54:18A-4.7, C.54:18A-4.8, and C.54:18A-4.11). In addition, the dividend exclusion provisions of paragraph (5) of subsection (k) of section 4 of P.L.1945, c.162 (C.54:10A-4) relating to dividends paid by insurance companies to non-insurance companies included in the unitary group shall not be affected by P.L.2018, c.48 (C.54:10A-5.41 et al.).
(2) (2) A corporation that is regulated, in whole or in part, by the Federal Energy Regulatory Commission, the New Jersey Board of Public Utilities, or similar regulatory body of another state, with respect to rates charged to customers for electric or gas services and water and wastewater services.
(cf: 5. Section 22 of P.L.2018, c.48 (C.54:10A-4.10) is amended to read as follows:
P.L.2018, c.48, s.18) C.54:10A-4.10 5. Determination Section 22 of P.L.2018,managerial c.48member. (C.54:10A-4.10) is amended to read as follows:
22. 22. a.
Determinationa. of Managerial Member. If the combined group has a common parent corporation within the meaning of the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.), and that common parent corporation is a taxable member of the corporate group, the managerial member shall be the common parent corporation. In other cases, the combined group shall select a taxable member as its managerial member or, in the discretion of the director or upon failure of the combined group to select its managerial member, the director shall designate a taxable member of the combined group as managerial member. Once the election of the managerial member is made, the election shall be binding for 10 successive privilege periods, except as otherwise provided for by the director.
Determination of Managerial Member. If the combined group has a common parent corporation within the meaning of the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.), and that common parent corporation is a taxable member of the corporate group, the managerial member shall be the common parent corporation. In other cases, the combined group shall select a taxable member as its managerial member or, in the discretion of the director or upon failure of the combined group to select its managerial member, the director shall designate a taxable member of the combined group as managerial member. Once the election of the managerial member is made, the election shall be binding for 10 successive privilege periods, except as otherwise provided for by the director.
c. c. The privilege period for the combined group is the privilege period of the managerial member.
e. e. If a combined group is eligible to elect the managerial member of the combined group, notice of the election shall be submitted in writing to the director not later than the due date or, if an extension of time to file has been requested and granted, not later than the extended due date of the mandatory combined return for the initial privilege period for which a return is required. The managerial member shall be the designated agent and the responsible person for filing the combined return and paying the tax for the combined group. If another taxable member is subsequently designated as the managerial member, the subsequent designation shall be subject to the approval of the director.
g. For privilege periods [beginning] ending on and after [January 1, 2019] July 31, 2019, a combined group must file a mandatory combined return. However, if privilege periods of the members of the combined group differ, the first mandatory combined return for the combined group shall be required for the privilege period of the managerial member.
(1) (1) make any deficiency assessment against either the managerial member or a taxable member of the combined group;
(2) (2) refund or credit any overpayment to either the managerial member or a taxable member of the combined group;
(3) (3) require any payment to be made by electronic funds transfer;
and (4) (4) require the mandatory combined return to be filed electronically.
(cf: 6. Section of P.L.1945, c.162 (C.54:10A-5) is amended to read as follows:
P.L.2018, c.48, s.22) 6. C.54:10A-5 SectionFranchise oftax. P.L.1945, c.162 (C.54:10A-5) is amended to read as follows:
Accounting or Privilege Periods Beginning on or The Percentage of the Rate after: after: to be Imposed Shall be:
April 1, 1983 1983 75% July 1, 1984 1984 50% July 1, 1985 1985 25% July 1, 1986 1986 0 (b) (b) (Deleted by amendment, P.L.1968, c.250, s.2.) (c) (c) (1) For a taxpayer that is not a New Jersey S corporation, 3 1/4% of its entire net income or such portion thereof as may be allocable to this State as provided in sections 6 through [8] 10 of P.L.1945, c.162 (C.54:10A-6 through [C.54:10A-8] C.54:10A-10), plus such portion thereof as is specifically assigned to this State as provided in section 5 of P.L.1993, c.173 (C.54:10A-6.1);
provided however, that for a taxpayer that has entire net income of $100,000 or less for a privilege period and is not a partnership the rate for that privilege period shall be 7 1/2% and provided further that for a taxpayer that has entire net income of $50,000 or less for a privilege period and is not a partnership the rate for that privilege period shall be 6 1/2%. For privilege periods [beginning] ending on or after [the effective date of P.L.2018, c.48] July 31, 2019, the tax rate shall be applied against [the] taxable net income. income. (2) For a taxpayer that is a New Jersey S corporation:
(i) (2) forFor privilegea periodstaxpayer ending on or before June 30, 1998 the rate determined by subtracting the maximum tax bracket rate provided under N.J.S.54A:2-1 for the privilege period from the tax rate that wouldis otherwisea beNew applicableJersey to the taxpayer's entire net income for the privilege period if the taxpayer were not an S corporationcorporation: provided under paragraph (1) of this subsection for the privilege period;
and (ii) (i) For a taxpayer that has entire net income in excess of $100,000 for the privilege period, for privilege periods ending on or after July 1, 1998, but on or before June 30, 2001,1998 the rate shalldetermined beby 2%,subtracting the formaximum privilegetax periodsbracket ending on or after July 1, 2001, but on or before June 30, 2006, the rate shallprovided beunder 1.33%,N.J.S.54A:2-1 for the privilege periodsperiod endingfrom onthe ortax afterrate Julythat 1,would 2006,otherwise butbe onapplicable orto before June 30, 2007, the ratetaxpayer's shallentire benet 0.67%,income and for the privilege periodsperiod endingif onthe ortaxpayer afterwere Julynot 1,an 2007S therecorporation shallprovided beunder noparagraph rate(1) of taxthis imposedsubsection underfor thisthe paragraph;privilege period;
and (iii)(ii) For a taxpayer that has entire net income in excess of $100,000 orfor lessthe privilege period, for privilege periods ending on or after July 1, 1998, but on or before June 30, 2001, the rate shall be 2%, for thatprivilege periods ending on or after July 1, 2001, but on or before June 30, 2006, the rate shall be 1.33%, for privilege periodperiods ending on or after July 1, 2006, but on or before June 30, 2007, the rate shall be 0.5%,0.67%, and for privilege periods ending on or after July 1, 2001,2007 there shall be no rate of tax imposed under this paragraph.paragraph;
and (iv)(iii) TheFor taxpayer'sa ratetaxpayer determinedthat underhas subparagraph (i), (ii) or (iii) of this paragraph shall be multiplied by its entire net income thatof is$100,000 not subject to federal income taxation or suchless portionfor thereofprivilege asperiods mayending beon allocableor toafter thisJuly State1, pursuant1998, tobut sectionson 6or throughbefore [8]June 1030, of2001, P.L.1945,the c.162rate (C.54:10A-6for throughthat [C.54:10A-8]privilege C.54:10A-10)period plusshall suchbe portion0.5%, thereofand asfor is specifically assigned to this State as provided in section 5 of P.L.1993, c.173 (C.54:10A-6.1). For privilege periods ending on or after July 31,1, 2019,2001, thethere tax rate shall be appliedno againstrate taxableof nettax income.imposed under this paragraph.
(3) (iv) ForThe ataxpayer's taxpayerrate that is a New Jersey S corporation, in addition to the amount, if any, determined under paragraphsubparagraph (2)(i), of(ii) thisor subsection,(iii) the tax rate that would otherwise be applicable to the taxpayer's entire net income for the privilege period if the taxpayer were not an S corporation provided under paragraph (1) of this subsectionparagraph forshall thebe privilege period multiplied by its entire net income that is not subject to federal income taxation or such portion thereof as may be allocable to this State pursuant to sections 6 through [8] 10 of P.L.1945, c.162 (C.54:10A-6 through [54:10A-8]C.54:10A-10) C.54:10A-10). plus Forsuch privilegeportion periodsthereof [beginning]as endingis onspecifically orassigned afterto [thethis effectiveState dateas provided in section 5 of P.L.2018,P.L.1993, c.48c.173 (C.54:10A-54.1(C.54:10A-6.1). etFor al.)]privilege periods ending on or after July 31, 2019, the tax rate shall be applied against taxable net income.
(d) (3) Provided,For however,a taxpayer that theis franchisea taxNew toJersey beS annuallycorporation, assessedin toaddition and paid by any investment company or real estate investment trust, which has elected to report as such and has filed its return in the formamount, andif withinany, thedetermined timeunder providedparagraph in(2) of this actsubsection, and the rulestax andrate regulationsthat promulgatedwould inotherwise connectionbe therewith,applicable shall,to in the casetaxpayer's of an investment company, be measured by 40% of its entire net income andfor 40%the ofprivilege itsperiod entireif net worth, and in the casetaxpayer ofwere anot realan estateS investmentcorporation trust,provided byunder 4%paragraph of(1) its entire net income and 15% of itsthis entiresubsection netfor worth, at the ratesprivilege hereinbeforeperiod setmultiplied forthby forits theentire computation of tax on net income andthat netis worth,subject respectively,to butfederal inincome notaxation caseor lesssuch thanportion $250,thereof andas furthermay provided,be however,allocable that the franchise tax to bethis annuallyState assessedpursuant to andsections paid6 bythrough a10 regulated investment company which for a period covered by its report satisfies the requirements of ChapterP.L.1945, 1,c.162 Subchapter(C.54:10A-6 M,through PartC.54:10A-10). I, Section 852(a) of the federal Internal Revenue Code shall be $250. For privilege periods [beginning] ending on or after [the effective date of P.L.2018, c.48 (C.54:10A-54.1 et al.)] July 31, 2019, the tax rate shall be applied against taxable net income.
(d) Provided, however, that the franchise tax to be annually assessed to and paid by any investment company or real estate investment trust, which has elected to report as such and has filed its return in the form and within the time provided in this act and the rules and regulations promulgated in connection therewith, shall, in the case of an investment company, be measured by 40% of its entire net income and 40% of its entire net worth, and in the case of a real estate investment trust, by 4% of its entire net income and 15% of its entire net worth, at the rates hereinbefore set forth for the computation of tax on net income and net worth, respectively, but in no case less than $250, and further provided, however, that the franchise tax to be annually assessed to and paid by a regulated investment company which for a period covered by its report satisfies the requirements of Chapter 1, Subchapter M, Part I, Section 852(a) of the federal Internal Revenue Code shall be $250. For privilege periods ending on or after July 31, 2019, the tax rate shall be applied against taxable net income.
Period Beginning Domestic Foreign In Calendar Year Corporation Corporation Corporation Minimum Tax Tax Minimum Tax 1994 $ 50 $100 1995 $100 $200 1996 $150 $200 1997 $200 $200 1998 $200 $200 1999 $200 $200 2000 $200 $200 2001 $210 $210 and for calendar years 2002 through 2005 the minimum tax for all taxpayers shall be $500, and for calendar year 2006 through calendar year the minimum tax for all corporations, and for privilege periods beginning in calendar year 2012 and thereafter the minimum tax for corporations that are not New Jersey S corporations shall be based on the New Jersey gross receipts of the taxpayer pursuant to the following schedule:
New Jersey Gross Receipts: Receipts: Minimum Tax:
$1,500 $1,000,000 or more .
New Jersey Gross Receipts: Receipts: Minimum Tax:
$1,125 $1,000,000 or more .
(g) (g) Provided however, that for privilege periods beginning on or after January 1, 2001 but before January 1, 2002 the franchise tax annually assessed to and paid by a taxpayer:
(1) (1) that is a limited liability company or foreign limited liability company classified as a partnership for federal income tax purposes shall be the amount determined pursuant to the provisions of section 3 of P.L.2001, c.136 (C.54:10A-15.6);
or (2) (2) that is a limited partnership or foreign limited partnership classified as a partnership for federal income tax purposes shall be the amount determined pursuant to the provisions of section 4 of P.L.2001, c.136 (C.54:10A-15.7).
(h) (h) Provided however, that for privilege periods beginning on or after January 1, 2002 the franchise tax annually assessed to and paid by a taxpayer that is a partnership shall be the amount determined pursuant to the provisions of section 12 of P.L.2002, c.40 (C.54:10A-15.11).
(i) (i) (Deleted by amendment, P.L.2008, c.120) (cf: 7. Section 1 of P.L.2018, c.48 (C.54:10A-5.41) is amended to read as follows:
P.L.2018, c.48, s.5) 7. C.54:10A-5.41 SectionAssessment, 1payment of P.L.2018,surtax. c.48 (C.54:10A-5.41) is amended to read as follows:
1. 1. a.
Ina. addition to the tax paid by each taxpayer determined pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), each taxpayer, except for a public utility, shall be assessed and shall pay a surtax as follows:
In (1) addition Forto athe taxpayer,tax exceptpaid aby publiceach utility,taxpayer thatdetermined haspursuant allocatedto taxablesection net5 income in excess of $1P.L.1945, millionc.162 for(C.54:10A-5), theeach privilegetaxpayer, periods,except beginningfor ona orpublic afterutility, Januaryshall 1,be 2018assessed throughand Decembershall 31,pay 2019,a the surtax imposedas shallfollows: be 2.5%;
(2) (1) For a taxpayer, except a public utility, that has allocated taxable net income in excess of $1 million for the privilege periods, beginning on or after January 1, 20202018 through December 31, 2021,2019, the surtax imposed shall be 1.5%.2.5%;
b. (2) For purposesa oftaxpayer, thisexcept section,a public (1)utility, "taxpayer"that shallhas meanallocated anytaxable businessnet entityincome [requiredin toexcess reportof and$1 paymillion tax for federalthe incomeprivilege taxperiods, purposes,beginning andon shallor includeafter anyJanuary business1, entity]2020 thatthrough isDecember subject31, to2021, tax as provided in the Corporationsurtax Businessimposed Taxshall (1945),be P.L.1945,1.5%. c.162 (C.54:10A-1 et seq.).
(2)b. "allocatedFor taxablepurposes netof income"this shallsection, mean allocated(1) entire"taxpayer" netshall incomemean forany privilegebusiness periodsentity endingthat beforeis Julysubject 31,to 2019,tax or taxable net income as definedprovided in subsectionthe (w)Corporation ofBusiness sectionTax 4(1945), of P.L.1945, c.162 (C.54:10A-4)(C.54:10A-1 foret privilegeseq.). periods ending on and after July 31, 2019.
(2) "allocated taxable net income" shall mean allocated entire net income for privilege periods ending before July 31, 2019, or taxable net income as defined in subsection (w) of section 4 of P.L.1945, c.162 (C.54:10A-4) for privilege periods ending on and after July 31, 2019.
(cf: 8. N.J.S.54A:5-1 is amended to read as follows:
P.L.2018, c.48, s.1) 8. New N.J.S.54A:5-1Jersey isgross amendedincome todefined. read as follows:
a. a. Salaries, wages, tips, fees, commissions, bonuses, and other remuneration received for services rendered whether in cash or in property, and amounts paid or distributed, or deemed paid or distributed, out of a medical savings account that are not excluded from gross income pursuant to section 5 of P.L.1997, c.414 (C.54A:6-27).
(1) (1) taxes based on income;
(2) (2) a civil, civil administrative, or criminal penalty or fine, including a penalty or fine under an administrative consent order, assessed and collected for a violation of a State or federal environmental law, an administrative consent order, or an environmental ordinance or resolution of a local governmental entity, and any interest earned on the penalty or fine, and any economic benefits having accrued to the violator as a result of a violation, which benefits are assessed and recovered in a civil, civil administrative, or criminal action, or pursuant to an administrative consent order. The provisions of this paragraph shall not apply to a penalty or fine assessed or collected for a violation of a State or federal environmental law, or local environmental ordinance or resolution, if the penalty or fine was for a violation that resulted from fire, riot, sabotage, flood, storm event, natural cause, or other act of God beyond the reasonable control of the violator, or caused by an act or omission of a person who was outside the reasonable control of the violator;
and (3) (3) treble damages paid to the Department of Environmental Protection pursuant to subsection a.
c. c. Net gains or income from disposition of property. Net gains or net income, less net losses, derived from the sale, exchange or other disposition of property, including real or personal, whether tangible or intangible as determined in accordance with the method of accounting allowed for federal income tax purposes. For the purpose of determining gain or loss, the basis of property shall be the adjusted basis used for federal income tax purposes, except as expressly provided for under this act, but without a deduction for penalties, fines, or economic benefits excepted pursuant to paragraph (2), or for treble damages excepted pursuant to paragraph (3) of subsection b.
For purposes of this clause, the term "reorganization" means-- (i) (i) A statutory merger or consolidation;
(ii) (ii) The acquisition by one corporation, in exchange solely for all or part of its voting stock (or in exchange solely for all or a part of the voting stock of a corporation which is in control of the acquiring corporation) of stock of another corporation if, immediately after the acquisition, the acquiring corporation has control of such other corporation (whether or not such acquiring corporation had control immediately before the acquisition);
(iv)(iv) A transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor, or one or more of its shareholders (including persons who were shareholders immediately before the transfer), or any combination thereof, is in control of the corporation to which the assets are transferred;
(v) (v) A recapitalization;
(vi)(vi) A mere change in identity, form, or place of organization however effected;
e. e. Interest, except interest referred to in clause (1) or (2) of N.J.S.54A:6-14, or distributions paid by a qualified investment fund as defined in section 2 of P.L.1987, c.310 (C.54A:6-14.1), to the extent provided in that section.
k. Distributive share of partnership incomeincome, , excluding the gain or income derived from the sale or assignment of a tax credit transfer certificate pursuant to section 7 of P.L.2011, c.149 (C.34:1B-248) and section 10 of P.L.2014, c.63 (C.34:1B-251) from any sale or assignment of a tax credit issued pursuant to an award of tax credits approved by the New Jersey Economic Development Authority prior to July 1, 2018, regardless of when such sale or assignment occurs.
(cf: 9. Section of P.L.2018, c.48 is amended to read as follows:
P.L.2018, c.48, s.26) 9. Section33. 33 of P.L.2018, c.48 is amended to read as follows:
33. This act shall take effect immediately but section 1 and the provisions of section 3, other than provisions amending paragraph (5) of subsection (k) of section 4 of P.L.1945, c.162 (C.54:10A-4), shall be effective for tax years beginning on and after January 1, 20182018; [, sections 2 and 3];
section 2 and the provisions of section 3 amending paragraph (5) of subsection (k) of section 4 of P.L.1945, c.162 (C.54:10A-4) are retroactive to January 1, 2017, and the remaining sections shall apply to tax years beginning on and after January 1, 2018, provided however that the provisions of this act related to combined reporting and market based sourcing shall apply to tax years [beginning] ending on and after [January 1, 2019] July 31, 2019. Section [35]32 shall be effective for tax years beginning on and after [January 1, 2019] July 31, 2019.
10. 10. This act shall take effect immediately and be retroactive to January 1, 2018, except as follows:
Approved STATEMENTOctober 4, 2018. This bill amends certain provisions regarding the tax base and operative dates under the corporation business tax (“CBT”), and in particular P.L.2018, c.48 (C.54:10A-5.41 et al.);
provides a CBT deduction in the amount of a deduction claimed by a taxpayer pursuant to section 250 of the federal Internal Revenue Code;
and clarifies the gross income tax treatment of certain tax credits approved by the New Jersey Economic Development Authority prior to July 1, 2018.
CBT Tax Base, Rates, and Deductions Regarding the CBT surtax imposed under P.L.2018, c.48 (C.54:10A-5.41 et al.) (“chapter 48”), the bill:
(1) updates the tax base, to provide that “allocated entire net income” means:
entire net income for privilege periods ending before July 31, 2019, and taxable net income (as defined in N.J.S.A.54:10A-4(w)) for privilege periods ending on and after July 31, 2019;
and (2) clarifies that the term “taxpayer” means a business entity that is subject to the CBT. Likewise, the bill provides that, for privilege periods ending on or after July 31, 2019, the CBT rate per N.J.S.A.54:10A-5 applies to taxable net income.
Certain operative dates relative to chapter 48 are revised by the bill.
For a taxpayer that owns 80 percent or more of a subsidiary, the dividend received deduction may be claimed at:
100 percent for privilege periods beginning on or before December 31, 2016;
at 95 percent for privilege periods beginning January 1, 2017 until December 31, 2018, while giving a taxpayer allocation relief on the deemed dividends;
and at 95 percent for privilege periods beginning on and after January 1, 2019. The rates of the deduction, however, are not affected by the bill. The bill also extends the operative dates for:
(1) the net operating loss deduction;
and (2) the prior net operating loss conversion carryover, to privilege periods ending prior to July 31, 2019 (in contrast to the effective date of chapter 48, July 1, 2018) under the CBT.
The bill provides that a “combinable captive insurance company,” meaning a captive insurer that is more than 50 percent owned (directly or indirectly) by a single entity and with gross receipts of 50 percent or less from insurance premiums, is not exempt from the CBT.
For purposes of determining “net worth” under the CBT (per N.J.S.A.54:10A-4), the allowable reduction for investment in capital stock of one or more subsidiaries is reduced, to 50 percent (from 100 percent).
In the event that there is a change in 50 percent or more of the ownership of a corporation because of the redemption or sale of stock, and the corporation changes the trade or business giving rise to the loss, no net operating loss sustained before the changes may be carried over to be deducted from income earned after such changes.
Nevertheless, if the Direction of the Division of Taxation determines that the acquisition was for the primary purpose of the use of taking advantage of the net operating loss carryover, the director may disallow the carryover. This provision does not apply between members of a combined group reported on a New Jersey combined return.
Additionally, the bill provides a CBT deduction to mirror the federal deduction allowed under the Internal Revenue Code relative to income derived from certain foreign assets, as adopted by 18 other states. The federal Tax Cuts and Jobs Act has implemented a tax on American shareholders’ income from controlled foreign corporations (“GILTI”), to the extent the income exceeds a 10 percent return on invested foreign assets. Moreover, foreign derived intangible income (“FDII”) is income derived from certain business assets, including intellectual property. Section 250 of the federal Internal Revenue Code (26 U.S.C.
s.250) allows a taxpayer to claim a deduction relative to the GILTI and FDII of a business. This bill allows a taxpayer to claim a CBT deduction in the amount of the section 250 deduction claimed by the taxpayer in the tax year.
Combined Reporting The bill updates the effective dates of the combined reporting requirements of chapter 48, to commence for privilege periods ending on and after July 31, 2019. For each member of a combined reporting group filing a mandatory or elective New Jersey combined return, the minimum tax under the CBT is set at $2,000 for the group privilege period.
Under current law, entities regulated by the Federal Energy Regulatory Commission, the New Jersey Board of Public Utilities, or a similar regulatory body of another State, are exempted from certain combined reporting provisions with respect to rates charged to customers for electric or gas services, per N.J.S.A.54:10A-4.6. The bill extends this exemption to water and wastewater.
Regarding the add back provision of N.J.S.A.54:10A-4.4, the bill provides that the add back provision does not apply to transactions between related members included in a combined group reported on a New Jersey combined return.
Tax Treatment of Certain EDA Tax Credits The bill clarifies that “gross income” under the gross income tax does not include gains or income from the sale or assignment of a tax credit transfer certificate under the Grow New Jersey Assistance Program, N.J.S.A.34:1B-248 and N.J.S.A.34:1B-251, for any sale or assignment of a tax credit approved by the EDA on or prior to July 1, 2018, irrespective of the date the sale or assignment occurs.
It is noted that the director’s authority as it relates to allocation factor, more commonly known as ‘Section 8,’ allows the director discretion to afford relief to individual taxpayers as necessary.
Amends provisions regarding tax base and operative dates relative to CBT and combined reporting;
provides CBT deduction in amount of certain foreign-related income;
clarifies tax treatment of certain tax credits awarded by EDA.
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Sponsorship breakdown
Export CSV (upgrade) →0 sponsors · 0 co-sponsors · 120 not signed on
Sponsors (0)
None.
Co-sponsors (0)
None.
Not signed on (120)
120 members have not signed on to this bill.
Show all 120 →"Not signed on" means a member has not sponsored or co-sponsored this bill — it does not imply opposition. Members flagged Voted No have a recorded No vote on this bill.
Frequently asked questions
- What is the current status of A4495?
- This bill died with 2018-2019 Regular Session. It reached “Introduced” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.
- Where can I track A4495?
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