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“Voluntary” in Name Only? New Jersey Introduces Transfer Pricing Initiative

The New Jersey Division of Taxation (Division) has announced a “voluntary” transfer pricing initiative beginning June 15, 2022, and continuing through March 2, 2023. According to the Division, the initiative is targeted toward companies that have intercompany transactions that would be subject to transfer pricing adjustment.

The initiative is broadly available to taxpayers with related party intercompany pricing, even if those taxpayers are currently under audit or have a case pending before the Division’s Conference and Appeals Branch. However, the initiative does not apply to matters in litigation.

Taxpayers must agree in writing to participate in the initiative by September 15, 2022, and comply with Division deadlines thereafter (including by providing “all required transfer pricing, tax, and financial information and documentation” to the Division by October 31, 2022). As part of any agreement reached with a taxpayer, the Division will agree to waive all applicable penalties and all rights to assess any additional tax, interest or penalties except for adjustments relating to federal corrections.

Notably, the Division is warning taxpayers that do not reach an agreement through the initiative that in the future it will: (1) “assess all applicable penalties;” (2) “not waive any penalties;” and (3) audit according to the Division’s “regular audit schedule” without agreeing “to a methodology or settlement for any unaudited open tax years.”

Evidently, the Division has hired Dr. Ednaldo Silva, Founder & Director of RoyaltyStat, to assist with the initiative. Sources familiar with the initiative report that the Division will consider prospective-only settlement agreements under the initiative, under the right circumstances.




Maryland Offers Attractive Amnesty Program – Even for Taxpayers Under Audit!

Starting September 1, 2015, the Comptroller of Maryland (Comptroller) will offer qualifying taxpayers that failed to file or pay certain taxes an opportunity to remit tax under very attractive penalty and interest terms.  The 2015 Tax Amnesty Program (Program) is the first offered in Maryland since 2009, when the state raised nearly $30 million, not including approximately $20 million collected the following year under approved payment plans.  The amnesty program offered before that (in 2001) brought in $39.4 million.  Consistent with the Maryland amnesty programs offered in the past, the Program will apply to the state and local individual income tax, corporate income tax, withholding taxes, sales and use taxes, and admissions and amusement taxes.

The Program was made law by Governor Larry Hogan when he signed Senate Bill 763, available here, after two months of deliberation in the legislature.  While the Program is scheduled to run through October 30, 2015, the Comptroller has a history of informally extending these programs beyond their codified period.  For companies that are nervous about potential assessments following the Gore and ConAgra decisions, the amnesty offers an opportunity that should be evaluated.

Perks  

The Program’s main benefits include:

  1. Waiver of 50 percent of the interest;
  2. Waiver of all civil penalties (except previously assessed fraud penalties); and
  3. A bar on all criminal prosecutions arising from filing the delinquent return unless the charge is already pending or under investigation by a state prosecutor.

Qualification

The Program is open to almost all businesses, even if under audit or in litigation.  The statute provides for only two classifications of taxpayers that do not qualify:

  1. Taxpayers granted amnesty under a Maryland Amnesty Program held between 1999-2014; and
  2. Taxpayers eligible for the 2004 post-SYL settlement period relating to Delaware Holding Companies.

Because the Program’s enacting statute does not prohibit participants from being under audit, or even those engaged in litigation with the Comptroller, even taxpayers with known issues and controversy may find the amnesty an attractive vehicle to reach resolution of a controversy with the state.

Practice Note

Because the range of taxpayers eligible for the Program is so broad, we encourage all businesses to evaluate whether participation will benefit them.  Given that past Maryland amnesty programs excluded taxpayers over a certain size (based on employee count), large companies who were not able to resolve uncertain exposure in the state should evaluate this new offering.  If your business is currently under audit (or concerned about any tax obligations from previous years), please contact the authors to evaluate whether the Program is right for you.




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