State of New Jersey: Combined Corporate Reporting Requirement
By Nicholas Massaro, Senior, Tax & Business Services
In 2018, the New Jersey Division of Taxation enacted legislation that mandates combined reporting for tax years ending on and after July 31, 2019. Combined reporting is mandated for commonly owned companies that are engaged in a unitary business where least one member of the combined group is subject to New Jersey corporate business tax.
New Jersey Technical Bulletin TB-86 defines includable entities as those with common ownership and which are engaged in a unitary business, and may include:
- U.S. Corporations
- Foreign Corporations
- Banking Corporations
- Financial Corporations
- Limited Liability Companies (unless treated as partnerships or disregarded entities for federal purposes)
- Foreign Limited Liability Companies (unless treated as partnerships or disregarded entities for federal purposes)
- Federal S Corporations (that have not made a New Jersey S corporation election)
- New Jersey S Corporations (that have elected to be included in the combined group)
- Combinable Captive Insurance Companies
- Qualified Subchapter S Subsidiaries (that have not made a New Jersey S corporation election)
- New Jersey Qualified Subchapter S Subsidiaries (that elected to be included in the combined group)
- Professional Corporations
- Any other business entities however and/or wherever incorporated or formed, that are treated as corporations for federal purposes except when excluded by statute
(Note: There are additional entities still under review by the Division related to inclusion, such as Real Estate Investment Trusts, Regulated Investment Companies, and Investment Companies. If these entities have nexus to New Jersey they will be subject to the statutory minimum tax; if the Division concludes these entities are to be included in the combined group they will be subject to $2,000 of minimum tax. Additional guidance on these three entity types is forthcoming).Limited Liability Companies treated as partnerships and disregarded entities for Federal Tax purposes are not included in the combined reporting; however, a Limited Liability Company which has made the election to be taxed as a corporation will be included in the combined reporting if all criteria are met. A minimum tax of $2,000 will be assessed on each member in the combined group which has nexus (a filing requirement) in the state.
Regarding the combined reporting, if any one member of the combined group has a filing requirement, no member can claim protection from filing.
Preparation for 2019 combined reporting should have already begun, as the managerial member must register with the New Jersey Division of Revenue and Enterprise Services and obtain a New Jersey identification number specific to combined reporting. This identification number will be used by the managerial member to file all returns, extensions, and estimated payments for the combined group. An existing NJ identification number or federal employer identification number cannot be used for combined reporting. The common parent of the group typically is the managerial member.
How does this affect 2018 tax returns?
Overpayments from the 2018 corporate tax returns cannot be credited to the 2019 combined return until the managerial member has registered with the New Jersey Division of Revenue.
With 2019 second quarter estimates fast approaching, entities that will be subject to the combined reporting requirements should register for their combined reporting identification numbers as soon as possible, so they are able to make their second quarter estimates and stay in compliance with the new reporting requirements.
New Jersey filers must proactively register according to this new requirement. If you have any questions related to combined reporting or your company’s inclusion, please reach out to your Marcum State and Local tax advisor.