New Jersey
Subscribe to New Jersey's Posts

New York Issues Much-Anticipated Guidance on Taxation of Telecommuting Employees

Since the outset of the COVID-19 pandemic and work-from-home mandates, New York employers and their nonresident employees have been waiting for the Department of Taxation and Finance to address the million-dollar question: Do wages earned by a nonresident who typically works in a New York office but is now telecommuting from another state due to the pandemic constitute New York source income? New York has historical guidance concerning the application of its "convenience of the employee/necessity of the employer" test, the test used to determine whether a telecommuting nonresident's wages are sourced to New York, but until recently the Department had been silent as to whether or how such rule applied under the unprecedented circumstances of the COVID-19 pandemic. As many expected, in a recent update to the residency FAQs, the Department clearly stated its position that a nonresident whose primary office is in New York State is considered to be working in New...

Continue Reading

New Jersey Reconsiders Financial Transaction Tax

A troubling New Jersey financial transaction tax proposal, which appeared to be gaining in popularity over the last few months, has reportedly been left out of the 2021 budget deal Governor Phil Murphy struck with legislative leaders last week. The decision to drop the transaction tax from the deal came days after the Wall Street Journal reported that prominent stock exchanges with data centers in New Jersey were prepared to exit the state if the tax plan was adopted. Although the financial transaction tax may be off the table this round, Governor Murphy still likes the idea and we are hearing that the concept is not permanently dead. S2902/A4402 would impose a financial transaction tax on persons or entities that process 10,000 or more financial transactions through electronic infrastructure located in New Jersey during the year. According to the bill, there are reportedly billions of financial transactions processed daily, and many of those are processed...

Continue Reading

DC and New Jersey Join Mississippi in Disregarding Coronavirus-Caused Remote Work for Tax Purposes

As part of our open letter to state tax administrators urging relief of undue tax administration burdens in light of COVID-19, we urged the disregarding of remote work for tax purposes. The public health necessity for businesses to close central operations and direct employees to work from home should not be used as an “opportunity” to create nexus for affected businesses. Mississippi’s Department of Revenue responded to us very quickly, agreeing with us on that point: “Mississippi will not use any changes in the employees temporary work locations due to the pandemic to impose nexus or alter apportionment of income for any business while temporary telework requirements are in place.” New Jersey’s Division of Taxation also quickly issued a similar statement: “In the event that employees are working from home solely as a result of closures due to the coronavirus outbreak and/or the employer’s social distancing policy, no threshold will be considered to have...

Continue Reading

The Nexus Implications of Teleworking

Over the past several weeks, state and local governments have issued a slew of “stay-in-place” or “shelter-in-place” orders mandating the closure of all “nonessential businesses” and requiring all persons to self-isolate. For most companies, this means that most, if not all, of their employees are required to work remotely. While telework has become a great way for businesses to protect their employees from the Coronavirus (COVID-19), it may also be exposing the businesses to taxation in states where they may not otherwise have sufficient nexus. This is because employees may be working remotely from states where a business does not otherwise have a presence. Under the traditional nexus rules, the employees’ work in these states would likely be sufficient to create nexus such that the states can tax the business. This seems unfair given that the federal, state and local governments are strongly encouraging individuals not to travel and to work remotely....

Continue Reading

CARES Act Could Result in Taxation of More GILTI in New Jersey

The federal stimulus bill (the CARES Act), HR 748, which was signed into law by President Trump on March 27, includes certain corporate income tax provisions designed to provide relief to corporate taxpayers. One such provision–the net operating loss (NOL) provision that allows taxpayers to carryback NOLs to prior years–could have unintended consequences at the state level. For some taxpayers, the carryback of NOLs to 2018 and 2019 could reduce the deductions allowed pursuant to IRC § 250 applicable to global intangible low-taxed income (GILTI) and foreign derived intangible income (FDII) generated in those years. While this will obviously have federal income tax consequences it will also have consequences in states that tax GILTI and allow the deductions in IRC § 250. This blog post focuses on the consequences of the NOL rules to the New Jersey Corporation Business Tax (CBT), but the issue could arise in other states, including, for example, Nebraska and...

Continue Reading

BREAKING NEWS: New Jersey Is GILTI, Again!

Taxpayers may have celebrated too soon when the New Jersey Division of Taxation announced that it was withdrawing TB-85 and the GDP-based apportionment regime for global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII) in favor of a more fair apportionment regime. Read our first post on T8-85 here. Yesterday, the Division issued a new Technical Bulletin (TB-92) on the state’s treatment of GILTI and FDII that is quite troubling. The guidance provides that GILTI and FDII should be included in the general business income apportionment factor and sourced as “other business receipts” to New Jersey. The guidance then provides that “to compute the New Jersey allocation factor on Schedule J, the net amount of GILTI and the net FDII income amounts are included in the numerator (if applicable) and the denominator. This is to help prevent distortion to the allocation factor and arrive at a reasonable and equitable determination of New...

Continue Reading

Southeast States Respond to Federal Tax Reform and NJ Senate Leader Talks Tax Surcharge to Limit Corporate “Windfall”

Virginia and Georgia are two of the latest states to pass laws responding to the federal tax reform passed in December 2017, known as the Tax Cuts and Jobs Act (TCJA). Both states updated their codes to conform to the current Internal Revenue Code (IRC) with some notable exceptions. Virginia On February 22, 2018, and February 23, 2018, the Virginia General Assembly enacted Chapter 14 (SB 230) and Chapter 15 (HB 154) of the 2018 Session Virginia Acts of Assembly, respectively. Before this legislation was enacted, the Virginia Code conformed to the IRC in effect as of December 31, 2016. While the new legislation conforms the Virginia Code to the IRC effective as of February 9, 2018, there are some very notable exceptions. The legislation explicitly provides that the Virginia Code does not conform to most provisions of the TCJA with an exception for “any… provision of the [TCJA] that affects the computation of federal adjusted gross income of individuals or...

Continue Reading

Resistance is not Always Futile: New Decision in Ongoing Delaware Unclaimed Property Audit Litigation

On August 9, 2017, the US Court of Appeals for the Third Circuit (Third Circuit), overruling the US District Court for the District of Delaware (District Court), allowed a claim by a holder seeking to prevent an unclaimed property audit by Delaware on due process grounds to proceed. See Plains All American Pipeline L.P. v. Cook et al., No. 16-3631 (3d Cir. Aug. 9, 2017).  The procedural due process claim challenges Delaware’s use of auditors that have a stake in the assessment. Consistent with the District Court decision, the Third Circuit held that challenges to Delaware’s estimation methodology were ruled not ripe. The case has been remanded to the District Court for further proceedings. Background The holder, Plains All American Pipeline L.P. (Plains) brought a lawsuit against Delaware officials including the Secretary of Finance, the State Escheator, the State unclaimed property Audit Manager and third party auditor, Kelmar Associates, LLC (Kelmar)....

Continue Reading

Favorable Guidance from the New Jersey Tax Court on the ‘Unreasonable’ Exception to the Related-Party Intangible Expense Add-back

In a recent decision, the New Jersey Tax Court provided some long-awaited guidance on the “unreasonable” exception to the state’s related-party intangible expense add-back provision. In BMC Software, Inc v. Div. of Taxation, No 000403-2012 (2017), the Tax Court held that payments made by a subsidiary to its parent for a software distribution license were intangible expenses that were subject to the add-back provision, but that the statutory exception for “unreasonable” adjustments applied so that the subsidiary was able to deduct the expenses in computing its Corporation Business Tax (CBT). The court first determined that the expense was an intangible expense and not the sale of tangible personal property between the entities because the contract specifically called the fee a royalty, the parent reported the income as royalty income and the parent retained full ownership of the intellectual property rights indicating that no sale had taken place. Thus, the...

Continue Reading

STAY CONNECTED

TOPICS

ARCHIVES