United States

New Jersey: Division of Taxation Issues Guidance on What Taxes Must be Added back for CBT Purposes

Mar 20, 2017
From KPMG TaxWatch

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The New Jersey Division of Taxation recently issued a Technical Bulletin discussing what taxes are required to be added back in determining New Jersey Corporation Business Tax or CBT. Under New Jersey law, an addback is required for “taxes paid or accrued to the United States, a possession or territory of the United States, a state, a political subdivision thereof, or the District of Columbia, or to any foreign country, state, province, territory or subdivision thereof, on or measured by profits or income, or business presence or business activity.” A regulation provides that “business presence” or “business activity” taxes include, but are not limited to, net worth taxes, gross receipts taxes, and single business taxes. Property taxes, excise taxes, payroll taxes, and sales taxes are not considered taxes based on business presence or business activity. The Bulletin walks through some recent cases addressing whether taxes must be added back and then provides that the following types of taxes must be added back: (1) taxes measured based on profits or income; (2) taxes based on business presence or business activity that are not property taxes, excise taxes, payroll taxes, or sales taxes; and (3) taxes similar to the Corporation Business Tax. Taxes that should not be added back, include but are not limited to, gross receipts taxes that are imposed based on receipts, but not on profits and taxes imposed on capital stock that measure the value of the taxpayer’s assets. The Bulletin concludes with list of taxes that, in the Division’s view, are not required to be added back in calculating CBT, such as the West Virginia B&O Tax and the Alabama Privilege Tax. The Bulletin then provides a non-exclusive list of taxes required to be added back, which includes the Texas Margin Tax and the Washington B&O Tax. Please contact Jim Venere at 973-912-6349 with questions on Technical Bulletin 80.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.