About
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Careers
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Contact
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Services Industries Knowledge Center People

About Our Services

We offer tailored solutions — whether private company or owner; public or private fund, adviser or fund service provider; or Fortune 1000 enterprise. Learn how we can help you.

Learn More

Assurance Services

Employee Benefit Plan Audits Internal Controls Investment Company Audits Private Company Audits SOC Readiness & Compliance

Tax Services

Federal Tax Planning & Compliance High Net Worth & Wealth Transfer International Filings & Structuring Investment Company Tax State & Local Tax Tax Credits & Incentives Transaction Tax Planning

Advisory Services

Business Valuations Data & Insights Digital Finance Solutions IT Strategy & Implementation M&A Advisory Outsourced Accounting Solutions Risk Assurance & Advisory Transaction Services Turnaround & Restructuring

Our Industry Expertise

Our industry experience means you can find professionals who speak your language and bring earned insights to the table. Learn how we can help you.

Learn More

Key Industries

Digital Assets Investment Companies Manufacturing Private Companies Private Equity Real Estate & Construction Technology & Life Science
VIEW THE COMPLETE LIST

Knowledge Center

Our team wants to help your team stay up to date. Browse our thought leadership, events and news for insights and a point of view on business-critical topics.

Learn More

Insights

Browse valuable articles and publications our experts have written to help you and your organization answer key questions — and consider new ones.

Read Our Insights

Events

Join us in person and online for events that address timely topics and key business considerations.

Explore Our Events

News

Find out what is happening at Cohen & Company, from industry recognitions and growth updates, to where we are contributing to important media stories.

Read Our News
People
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Back to Insights

New Jersey Adds Combined Filing Rule, Increases Tax Rates and Alters Factor Sourcing Rules

June 20, 2019 Investment Company Tax, State & Local Tax, Mutual Funds

New Jersey has made a number of significant changes to their tax law. Importantly, upon passing Assembly Bill A4202 last July, the state of New Jersey will soon require a combined taxpayer group to file one singular state return. The new filing requirement begins for tax years ending on or after July 31, 2019. In addition, the state has made changes to important tax rates as well as to its receipts factor sourcing rules. Below outlines what taxpayers need to know. 

Combined New Jersey Filing

What Is a Combined Group Under New Jersey’s New Law?
A combined group is one in which:

  1. There is common ownership, represented by 50% or more voting control for each member either directly or indirectly, and
  2. Unitary group members are sufficiently interdependent, integrated and have interrelated activities that provide synergies and mutual benefit.

Who Should Be Included in the Combined Tax Return?
A combined return should include the following entities: 

  1. Corporations
  2. LLCs (those not treated as partnerships)
  3. Federal S Corporations and Qualified Subchapter S Subsidiaries (QSSS) that have not made a separate New Jersey S Election
  4. New Jersey S Corporations and QSSSs that have made a separate New Jersey S Election but elect to be treated as part of the combined group.

Additional Facts for Combined Filing

  • Each member of the group is subject to the $2,000 minimum tax, unless the member does not have nexus.
  • A managerial member of the group must be chosen and will register online. A managerial member will most often be the common parent of the combined group. If a common parent is not part of the group, then the managerial member selected should be a taxable member of the combined group, i.e., subject to New Jersey tax.
  • Registration may be completed on the New Jersey Division of Revenue’s website.
  • During the registration process, the managerial member will be assigned a New Jersey tax identification number specific to combined reporting. This identification number must be used by the managerial member to file returns and pay estimates and extensions for the combined group.
  • The managerial member is responsible for making payments on behalf of the taxable members; however, “each taxable member of a combined group will be held jointly and severally liable for the corporation business tax due from any taxable member, whether or not that tax has been self-assessed, and for any interest, penalties or additions to tax due” (N.J. Rev. Stat. 54:10A-4.8(c)).
  • A water’s edge election will be presumed to be made by the group unless specified otherwise by the managerial member.
  • The following entities are required to file separate New Jersey returns, as the statute does not specifically address them: Real Estate Investment Trusts (REITs), Regulated Investment Companies (RICs) and investment companies. 

Other Important New Jersey Tax Changes

New Jersey Tax Rate Changes

  • Effective for tax year 2018, the top tax rate is 10.75%, which is up from 8.97% in 2017. The top rate is also applied to income reported on non-resident New Jersey composite tax returns.
  • C Corporations will be assessed a surcharge of 2.5% on New Jersey taxable net income in excess of $1 million for tax years beginning on or after January 1, 2018, through December 31, 2019. The surcharge is then reduced to 1.5% for tax years beginning on or after January 1, 2020, through December 31, 2021.

New Jersey Receipts Factor Sourcing

  • New Jersey has traditionally sourced services using a cost of performance method or where the service was performed. 
  • Effective for tax years beginning after 2018, sales of services will be sourced to New Jersey if the benefit of the service is received in the state, also known as the market-based sourcing method.
  • If the state in which the benefit is received cannot be determined, New Jersey provides the following:
    • For individual customers, the benefit of the service is deemed to be received at the customer’s billing address;
    • For any other customer, the benefit of the service is deemed received at the location from which the services were ordered in the customer’s regular course of operations; and
    • If the location from which the services were ordered in the customer’s regular course of operations cannot be determined, the benefit of the service is deemed to be received at the customer’s billing address.
  • Receipts from the services of a registered securities or commodities broker or dealer and receipts from asset management services are sourced to New Jersey if the customer is in New Jersey.
  

Please contact a member of your service team or Hannah Prengler at hprengler@cohencpa.com for further discussion.
 

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.
 
 

Sign Up for Our Emails & Events

Receive insights from our specialists in a variety of areas and timely information on upcoming events directly to your inbox as they go live in our online Knowledge Center.

Subscribe Today
Subscribe to our newsletter
About Contact Submit RFP Privacy Policy
LinkedIn Twitter Facebook
© 2023 Cohen & Company