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New Jersey State Tax Updates

For the latest news and updates on New Jersey state and local tax

April 1, 2020

New Jersey to Extend Deadline

The New Jersey Department of Treasury has extended the due date to file and make payments for individual gross income tax and corporate business tax to July 15, 2020. Taxpayers do not have to file for an extension; it will happen automatically. The announcement from Govender Murphy, makes New Jersey the last state with an income tax to push back its tax filing deadline.

New Jersey Division of Taxation Issues Employer Withholding Tax Guidance in Respect to COVID-19

On March 31, 2020, New Jersey Updated its Website Issuing Employer Withholding Tax Guidance, regarding the sourcing of wages of employees who regularly work in the state but are telecommuting from an out of state home office. New Jersey acknowledges that employment tax wages are sourced based on where the service or employment is performed. However, the state suggests that “during the temporary period of the COVID-19 pandemic, wage income will continue to be sourced as determined by the employer in accordance with the employer’s jurisdiction.”

New Jersey Telecommuter COVID-19 Employer and Employee Update

One of the biggest issues arising from businesses closing down is how employers should source wages of their employees who do not normally work in one state but work in another. New Jersey provided guidance in response to this quandary and affirmed that wage income should continue to be sourced by the employer in accordance with the employer’s jurisdiction. Employers are not required to update employees’ work states in their payroll systems if employees are temporarily working in other states, whether at home or at another worksite. Furthermore, New Jersey companies will not be found to have a connection or “nexus” to another state because their employees are working there due to the pandemic.

One of the biggest issues arising from businesses closing down due is how employers should source wages of their employees who do not normally work in one state but work in another. New Jersey provided guidance in response to this quandary and affirmed that wage income should continue to be sourced by the employer in accordance with the employer’s jurisdiction. Employers are not required to update employees’ work states in their payroll systems if employees are temporarily working in other states, whether at home or at another worksite. Furthermore, New Jersey companies will not be found to have a connection or “nexus” to another state because their employees are working there due to the pandemic.

March 25, 2020

New Jersey Legislation Passed

On March 21, Governor Murphy signed several measures into law. All businesses, within all market sectors, in NJ will need guidance on how these new laws will apply.

A-3841 / S-2300 was passed by the New Jersey legislature and provides for an automatic extension of the deadline to file a Gross Income tax or Corporation Business tax return of 90 days because the Federal government extended the filing due date or payment for Federal returns.  As of March 25, 2020 Governor Murphy has not signed this into law.

A-3845 / S-2284 authorize the New Jersey Economic Development Authority to provide grants during periods of emergency declared by the Governor, such as the coronavirus, and for the duration of the economic disruptions caused by the emergency.

A-3846 / S-2293 creates the “Temporary Lost Wage Unemployment Program” to allow those affected by coronavirus to recoup wages lost and to assist employers who pay wages to workers under quarantine. The bill appropriates $20 million for the program. Learn more here.

February 2020

Film and Digital Media Credit

New Jersey’s film and digital media tax credit program has been expanded by the passing of Assembly Bill 5580, which increases the annual cap on incentives for film and television productions to $100 million a year (formerly $75 million) and extends the provisions through 2028. The demand for tax credits was greater than the supply; therefore, more production companies were applying than there were dollars available. The enactment of this provision will lead to job growth and spur economic activity as studios seek film locations in New Jersey. The digital media tax break will remain capped at $10 million.

To learn more about the qualifications of this tax credit, click here.

January 2020

New Jersey Law Circumvents the Fed Cap on State & Local Deductions

New Jersey business owners will be elated to learn that Governor Murphy signed legislation, similar to Connecticut, that allows for pass-through entities, S-corps and LLCs, to pay state income taxes at the entity level, as a business tax, rather than at the partner or individual level. The flow-through entity’s taxable income will be reduced by the amount of the tax, which will result in a lower amount of flow-through income to be taxed at the owner’s federal level. In effect, this provides business owners a deduction for their New Jersey taxes without those taxes being subject to the $10,000 cap.

The new entity-level tax is referred to as a “pass-through business alternative income tax” that is effective as of January 1, 2020. Business owners should keep in mind that the option to pay the tax at the entity level is an annual election and must be made by either all the members of an entity or by an officer or member of the entity who is authorized to make the annual election. Since tax rates imposed at the entity level are not the same as those rates imposed on an individual level, business owners should determine the tax benefit prior to making an election.

To learn more about the implications of this tax, click here.

NJ Streamlined Business Reinstatement and Dissolution Program

On December 10, the New Jersey Department of Treasury announced a new program designed to help those that are in revoke status due to lack of compliance with State administrative reporting requirements. The program will allow certain revoked businesses to fully reinstate or dissolve.

The Department’s Division of Revenue and Enterprise Services will provide an online self-service reinstatement and dissolution process from March 1, 2020 through June 15, 2020. In order to participate, there will a one-time administrative fee of $500 plus a convenience or credit card processing fee. In addition, the taxpayer will need to attest that the business has satisfied any known State tax obligations, negating the need for a tax clearance certificates or full annual report details.

According to the Department, the benefits of the program include a fully automated filing process with no additional forms, one business day reinstatement or dissolution, definitive closure for entities dissolving, and lower costs for companies with significant outstanding back-year fees due.

November 2019

Technical Bulletins to Impact NJ Corporate Taxpayers

The New Jersey Division of Taxation recently issued several newsworthy technical bulletins. Now that we are upon year end, NJ corporate taxpayers should take note of the following:

  • Automatic Extension for 2019 Corporate Business Tax Returns: Taxpayers filing a CBT-100, CBT-100U, BFC-1, or CBT-100S, with an original due date of November 15, 2019 (for a fiscal tax year ending July 31, 2019), or December 15, 2019 (for a fiscal year filer with a tax year ending August 31, 2019), have been granted an automatic extension to file their tax returns by January 15, 2020. Taxpayers will not be charged a late penalty filing if the returns are filed by the extended due date. The extension only applies to the filing of the return and not to the related payments. (Automatic Extension for 2019 Corporation Business Tax Returns for Certain Fiscal Tax Year Filers, 10/04/2019)
  • The Unitary Business Principle and Combined Returns: The Division in TB-93 explains the unitary business principle and the definition of a unitary business for NJ Corporation Business Tax purposes. The Department provides examples and explains that a unitary business is characterized with “significant flows of value evidenced by functional integration, centralization of management, and economies of scale.” In addition, participants in an economic enterprise under common ownership may also be considered if there is unity of operation and use due to the existence of interdependence of functions. (TB-93, 10/17/2019)
  • Treatment of IRC Sec. 951A and IRC Sec. 250 under the NJ CBT Act: While FDII has been newly classified under the IRC for the purposes of qualifying for the export subsidy deduction, the income has always been in the tax base for both Federal and New Jersey tax purposes as part of Entire Net Income (“ENI”). Therefore, GILTI and FDII are included in ENI. GILTI and FDII are not treated as dividends or deemed dividend income for New Jersey CBT purposes, as they are separate categories of income and are not treated as distributions from earnings and profits. In addition, provisions were enacted allowing the Federal deductions under IRC Sec. 250(a) for NJ CBT purposes. However, such deductions are allowed only to the specific taxpayer that included the GILTII and FDII income on its Federal and NJ CBT returns and actually took the deduction for Federal tax purposes. Taxpayers can take the deduction for NJ CBT purposes if it was allowed for Federal tax purposes. The technical bulletin also discusses sourcing of GILTI and FDII under the NJ CBT Act, sourcing for combined groups, and filing instructions. (TB-92(R), Revised 10/31/19)

October 2019

30-Day Penalty Relief for Corporations

The New Jersey Division of Taxation will automatically waive the late filing penalty for corporation business taxpayers with a properly extended federal return due date of October 15, 2019, if the return is filed by November 15, 2019, for extended calendar-year corporations or filed within one month of the extended due date for 2018 returns for fiscal year corporations. The Division will consider elections made timely, if the elections are made on a 2018 New Jersey Corporation Business Tax Return filed by November 15th or within one month for an extended 2018 return for a fiscal year corporation. Interest and penalties for late payment of the tax may still apply but a failure to file by the November 15, 2019 date may result in the imposition of a late filing penalty based on the October 15, 2019 due date.

July 2019

Combined Reporting Methods

For tax years on and after July 31, 2019, combined reporting becomes mandatory in New Jersey. The taxpayer must use the water’s edge group method unless electing to use a world-wide group return or an affiliated group return.

Penalties Waiver

If the penalty for underpayment is less than $1,000 for an individual or corporate franchise tax in the tax year 2017 and 2018 the taxpayer can apply for a special waiver it was due to tax planning uncertainty due to the federal changes.

Updates by City

City of Newark

Aprl 2, 2020

Small Businesses

Mayor Baraka recently stated that “[s]mall businesses are often the heart of our neighborhoods and, equally, are an important piece of our economy. We can’t stand by and wait for help from other sources. Here in Newark, we must solve our own problems.”

Applications for the fund opened March 31, 2020, through a link on the United Way of Essex County website, which is partnering with the City to administer the program. The link is uwnewark.org. The deadline to apply is April 30, 2020.

A webinar featuring Mayor Baraka to help business owners apply will be available on Thursday, April 2 at 2 pm. It can be accessed at zoom.us/webinar/register/WN_IepTI0JdQDO7x1bTGRWbAw.

A small business webinar is also available on the Invest Newark website at investnewark.org/.

The small business grant was the first initiative Mayor Baraka began launching a week ago to ease the financial burden of Newark residents. With $2 million earmarked for this small business grant program, the City will offer about 200 business grants up to $10,000 to provide working capital for operating costs, payroll, accounts payable, inventory, equipment, rent, taxes, licensing or other business-related expenses. To qualify, businesses must have a physical establishment in Newark, have 10 employees of less, and show loss of income directly tied to the coronavirus crisis. The grant program will be coordinated by the City’s Department of Economic and Housing Development in partnership with the United Way of Essex County and Invest Newark, with funding from local funding, federal funding, and private sources, including Prudential and Invest Newark.

The Mayor’s five other programs include short-term rental housing for 300 of the most vulnerable Newark residents, including those without permanent addresses and cash infusions of varying amounts to the “Live Newark” program for homeowners, arts and cultural organizations and other non-profits, and tax for building owners with business tenants. For more information on these programs, please email the City’s Department of Economic and Housing Development at EHD@ci.newark.nj.us.

Source: https://www.newarknj.gov/news/mayor-baraka-launches-grant-program-to-help-small-business-owners-and-employees-impacted-by-covid-19-crisis-applications-begin-today

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