NJ Business Tax Changes

The tax changes include:

• An increase in the minimum tax from $200 to $500 for all taxpayers and possibly $2,000 for members of affiliated groups.

• The introduction of an Alternative Minimum Assessment (AMA) which taxpayers will pay if it exceeds their regular tax. See Schedule AM.

• The Dividend exclusion has been changed.

• The tax rate for taxpayers with taxable income of less than $50,000 has been reduced to 6 1/2%.

• Uncoupling from Federal bonus 30% depreciation.

• The disallowance of deductions for interest and intangible expenses paid to a related company.

• The imposition of a Fee on Professional Corporations with more than two licensed professionals.

• Investment Company effective tax base increased to 40% from 25%.

• The implementation of a "throw out" receipts fraction wherein receipts sourced to jurisdictions where the taxpayer is not subject to tax are excluded from the receipts fraction denominator.

• With the repeal of both the Corporation Income Tax and Savings Institution Tax, taxpayers who previously filed those returns will now file the Corporation Business Tax Return.

• The disallowance of deductions for taxes paid to foreign countries.

• And taxpayers are not permitted to deduct any Net Operating Loss for 2002 or 2003 unless it was purchased from a High Technology Company through the Technology Unused Benefit Transfer Program.

Also, note that the Annual Report, Schedule CAR-100, has been revised to a page size schedule that should be included with the Corporation Business Tax return filing. It is no longer used to remit the amount due on the tax return. The related Annual Report/Registered Agent Change Fees should be reported on line 24, page 1 of the CBT-100 tax return and included in the computation of the balance due or overpayment, whichever is applicable. If a balance due is computed, payment should be remitted with Form CBT-100-V.

Four new tax credits are included on the return: 1) the HMO Assistance Fund Tax Credit, 2) the Neighborhood Revitalization State Tax Credit, 3) the Effluent Equipment Tax Credit, and 4) the Economic Recovery Tax Credit.

In addition, as part of the Business Tax Reform Act, a Study Commission has been created to review the Corporation Business Tax and to make recommendations to modernize it. As part of this process, the Division will be gathering additional statistical information from the returns filed. In order to accomplish this task a new schedule of summary data (Schedule A-4) has been created. All taxpayers are requested to fully complete this schedule along with Schedule A using the state forms.

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