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New Jersey Announces Separate Voluntary Disclosure Initiatives for Corporations & Partnerships

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New Jersey Announces Separate Voluntary Disclosure Initiatives for Corporations & Partnerships

The New Jersey Division of Taxation recently announced two limited-time voluntary disclosure initiatives. One initiative, the Intangible Asset Nexus Initiative, is for companies that hold intangible assets and derive income from the use of those assets in New Jersey. The second initiative, the Partnership Tax and Partner Fees Initiative, offers a voluntary disclosure program for partnerships with New Jersey sourced income that have not filed the relevant forms or paid the tax and partner fees owed. Both programs begin on March 15, 2014 and run through May 15, 2014. For businesses that have not complied with their potential New Jersey corporation business tax or partnership filing requirements in connection with these issues, these programs offer a beneficial alternative to the standard voluntary disclosure program and significant potential savings.

Intangible Asset Nexus Initiative
The Intangible Asset Nexus Initiative allows corporations that have derived income such as royalties or interest from the use of intangible assets in New Jersey to come forward and file returns as required under current New Jersey law. This initiative is being offered by the New Jersey Division of Taxation for the second time in recent years.  However, the current initiative has several key differences from the previous initiative, including a more taxpayer-friendly look back period and a waiver of all penalties.  As disclosed on the New Jersey Division of Taxation website, all of the standard procedures and requirements apply to companies who participate in this initiative, as well as the following:

  • The look back period will be limited to the periods beginning after July 1, 2010, or the date business commenced, whichever is later.
  • All required returns must be filed and the full tax liability must be paid within 45 days of the execution of the voluntary disclosure agreement.
  • The Division will waive all penalties.
  • The taxpayer must pay the interest within 30 days of the assessment.
  • Companies that added royalties back to income in prior years may submit amended returns to claim an exception to the add-back.  This applies to any period where the statute of limitations remains open.
  • All returns will be subject to routine audit with respect to issues not specifically covered in the voluntary disclosure agreement.

Partnership Tax & Partner Fees Initiative
The New Jersey Division of Taxation is offering a Partnership Tax & Partner Fees Initiative for partnerships that have New Jersey source income and have not filed the relevant forms and/or paid the tax and fees.  All partnerships with income or loss derived from NJ sources are required to file Form NJ-1065.  Partnerships with more than two owners and income or loss derived from NJ sources are also required to file a New Jersey PART-100 and pay a filing fee based upon the number of owners, unless the partnership meets certain exceptions.  This initiative offers partnerships the chance to come forward through a limited voluntary disclosure program.  All of the standard procedures and requirements apply to companies who participate in this initiative, as well as the following:

  • The look back period will be limited to the periods beginning after January 1, 2010, or the date business commenced, whichever is later.
  • All required returns must be filed and all taxes and fees must be paid within 45 days of the execution of the voluntary disclosure agreement.
  • The Division will waive all penalties.
  • The taxpayer must pay the interest within 30 days of the assessment.
  • All returns will be subject to routine audit with respect to issues not specifically covered in the voluntary disclosure agreement.

Conclusion:
As New Jersey continues to pursue out of state companies who may have unfiled tax returns in connection with these two issues, these initiatives offer taxpayers an opportunity to come forward prior to being discovered by the New Jersey Division of Taxation.  We have seen an uptick in the number of examinations conducted by New Jersey, particularly in connection with the Intangible Asset issue.  There are many benefits to participating in these programs, but interested taxpayers should also consider the obligations pertaining to the remittance of all taxes and interest within specified time frames and the administrative requirements of these programs. 

Should you have any questions or require additional information on either of these initiatives, please contact your Marcum LLP SALT professional.

A special thanks to article contributor John Heilmann, Supervisor, Tax & Business Services
 
 
 
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