On July 3, 2023, New Jersey Governor Phil Murphy signed into law Assembly Bill 5323 which enacted significant changes to the state’s Corporate Business Tax Act (CBT) and Gross Income Tax Act (GIT). Following are the updates you need to know.
Effective for tax years beginning on and after January 1, 2023:
- Gross Income Tax and Corporation Business Tax Sourcing Uniformity
Taxpayers, including partners in partnerships and shareholders in S corporations, that conduct business operations partly inside and outside of New Jersey must source business receipts using a single sales factor as opposed to the historic three-factor formula, and service receipts should be sourced using market sourcing rules (instead of cost of performance rules).
Effective for privilege periods ending on and after July 31, 2023:
- Clarification for Corporation Business Tax Nexus Purposes
A non-New Jersey corporation will be deemed to have substantial nexus if it derives New Jersey receipts in excess of $100,000 or has 200 or more separate transactions delivered to customers in the State during the corporation’s taxable year.
- Corporation Business Tax Due Dates
The New Jersey corporate return is due the 15th day of the month following the month of the original due date of the federal return. The extended due date is the 15th day of the month following the extended due date of the federal return. For C-Corporations filing federal Form 1120, the original and extended due dates would be May 15th and November 15th, respectively. Taxpayers filing as S-Corporations and Partnerships have no changes to their due dates (original and extended due dates are April 15th and October 15th, respectively).
- NOL Conformity
Net operating losses now conform with the 80% limitation on utilization of NOLs under IRC Section 172.
- Sales Factor Sourcing for all Combined Groups
Combined groups are now required to use the Finnigan Method for sourcing receipts. The numerator of the New Jersey allocation factor is based on the all the combined group members’ New Jersey receipts.
Effective retroactively for tax years beginning on or after January 1, 2022:
- Change in Timing of Deduction for New Jersey Qualified Research Expenditures
New Jersey decouples from the IRC Section 174 amortization requirement for research and experimental expenditures. New Jersey will allow a full deduction for expenses incurred during the same privilege period for which NJ Research and Development Tax Credit is claimed.
New Jersey Unemployment Insurance reporting update as of July 31, 2023:
- New Jersey Governor Murphy also signed new amendments to the State’s Unemployment Compensation law that update the employer’s responsibility when a worker separation occurs. Currently, when a worker separates from a company, the employer must provide the employee with Form BC-10 (Instructions for Claiming Unemployment Benefits). As of July 31, employers must also simultaneously submit the completed Form BC-10 to the NJDOL, as well as a new second form that the NJDOL is in process of creating. This new form will help the state have sufficient information for benefit determination. Employers must provide these two forms to the State regardless of whether an unemployment benefits claim was filed by the separated worker.
- The law also increases penalties for noncompliance. Failure to comply can result in a daily $500 fine, or 25% of the amount withheld from the employee by the delay, whichever is greater. Visit the NJDOL Labor & Workforce Division’s website for instructions on form submission and to download the new form once it is made available.
New Website for Businesses
In addition, New Jersey has recently launched a new website as a one-stop resource for businesses in the state. Visit and bookmark www.business.nj.gov to access resources, personalized guides, live chat, funding opportunities, and more.
