July 09, 2018
New tax rules were written into New Jersey’s fiscal 2019 budget.
“Newly instituted combined reporting requirements for corporations and new taxes
on C-corporations and individuals earnings more than $5 million are matters in
New Jersey’s fiscal 2019 budget that beg close heed, tax attorneys caution.
“Combined reporting, which looks at a company’s overall profits
instead of just its New Jersey-based entities, represents a fundamental shift
in the way the state taxes corporations. Historically, if a corporation was
owned by another entity, New Jersey taxed each separately.
“That meant each corporate unit determined whether it was
subject its own New Jersey tax liability. The new tax will result in all
business units operating in the state being taxed as one business.
“‘There’s a lot of ambiguity in the law. What are the limits
[of a unitary business]? How many companies, and which companies?’ asked Jaime
Reichardt, chair of the state and local tax practice at Sills Cummis &
Gross. ‘It’s a very fact-sensitive inquiry. It’s also a constitutional inquiry
that’s been subject of case law from the United States Supreme Court going back
decades. This may lead to further controversies, uncertainty and litigation.’”