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New Jersey: Division addresses the Net Deferred Tax Liability Deduction for certain combined filers

Listen to a brief overview of state tax developments this week, including New Jersey, or read full New Jersey development below.

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Detailed New Jersey Development

On February 24, 2020, the New Jersey Division of Taxation issued TB-96 explaining the eligibility requirements for the Net Deferred Tax Liability Deduction. Recall, New Jersey’s combined reporting provisions allow a deduction to provide relief if a publicly-traded company is adversely affected by the move to combined reporting. Specifically, if the move to combined reporting results in an aggregate increase to the members’ net deferred tax liability, or an aggregate decrease to the members’ deferred tax assets, or an aggregate change from a net deferred tax asset to a net deferred tax liability, the combined group is entitled to a new deduction.  The deduction will be taken in equal amounts over a ten-year period beginning on or after January 1, 2023.

TB-96 confirms that a taxpayer is eligible for the deduction only if it files financial statements with the regulatory authority of the U.S. or a foreign nation with which the United States has a reciprocal agreement. Furthermore, publicly-traded companies are eligible as long as their stock is listed on any exchange or over-the counter market that is regulated by a U.S. or foreign authority with a reciprocal agreement with the United States.  As such, if a parent corporation files financial statements under IFRS and is listed on a qualifying foreign stock exchange, the U.S. subsidiaries that are included in the parent company’s financial statements will be eligible for the deduction.  The Bulletin also confirms that the deduction is intended to mitigate only the financial statement impact of the shift to combined reporting. Adverse impact related to the state’s move to market-based sourcing cannot be factored into the deduction.  To claim the deduction, taxpayers must complete Form DT-1 (New Jersey Corporation Business Tax Statement of Net Deferred Tax Liability Deduction) on or before July 1, 2020. The form will be available online no later than April 1, 2020.  For more information, please contact Jim Venere at 973-912-6349.

This Week's Developments

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Featured Speaker

Sarah McGahan

Sarah McGahan

Director, State & Local Tax, KPMG US