New Jersey: Guidance Issued on NOLs and Combined Returns

On February 18, 2020, the New Jersey Division of Taxation issued TB-95, which sets forth extensive guidance on computing and using net operating losses and carryovers in the combined group context. Recall, for privilege periods ending on and after July 31, 2019, New Jersey requires entities engaged in a unitary business to file combined returns. Also, effective for tax years ending on and after July 31, 2019, New Jersey combined group net operating loss deductions and New Jersey combined group net operating loss carryovers must be calculated on a post-allocation basis. Previously, these were calculated on a pre-allocation basis. For New Jersey combined returns, there are specific rules governing current year combined group post-allocation net operating losses, prior net operating losses conversion carryovers, and combined group post-allocation net operating loss carryovers.  In short, taxpayers expecting to be in a loss position and/or that have current NOL carryforwards that must be converted into prior net operating loss conversion carryovers will want to carefully review the Bulletin. Please contact Jim Venere at 973-912-6349 with questions on TB- 95.