New Jersey Addback Policy Reveals Refund Potential

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By Leslie A. Pappas

Corporate taxpayers in New Jersey may have new refund opportunities under new guidance from the state’s Division of Taxation.

Technical Bulletin 80, issued March 15, lays out which types of taxes the department believes are subject to addback.

The bulletin marks the first time New Jersey’s Division of Taxation has explained its policies concerning which taxes are subject to addback and “might surprise some taxpayers” such as banks, David J. Gutowski, Michael I. Lurie, and Matthew L. Setzer of Reed Smith LLP, wrote in a client alert March 16.

The bulletin cites PPL Electric Utilities Corporation v. Director, 28 N.J. Tax 128 (Tax Ct. 2014) and Duke Energy Corporation v. Director, 28 N.J. Tax 226 (Tax Ct. 2014) as instructive cases on the addback of specific taxes.

Taxes that should be added back include those similar to New Jersey’s Corporation Business Tax, taxes measured on profits or income, or taxes based on business presence or business activity that aren’t property, excise, payroll or sales taxes, the bulletin said.

Taxes that shouldn’t be added back include excise taxes, sales taxes, payroll taxes, property taxes, gross receipts taxes that are imposed on receipts rather than profits, and taxes imposed on capital stock that measure the value of the taxpayer’s assets.

Refund Opportunity

The bulletin lists 29 taxes and fees in 23 states and territories that wouldn’t be required to be added back.

The guidance also gives examples of taxes and fees in 14 states, Puerto Rico, the District of Columbia, and four major U.S. cities (Los Angeles, New York City, Philadelphia and Seattle) that would be subject to addback in New Jersey.

In contrast to prior guidance, the division said taxpayers shouldn’t add back the Pennsylvania Bank Shares Tax because it is a “business presence or business activity” tax, according to Reed Smith. Because of this, refund opportunities may exist for companies that added back bank shares taxes, such as the Pennsylvania Bank Shares Tax, the Ohio Financial Institutions Tax and the Virginia Bank Franchise Tax, Reed Smith said.

Taxes imposed by some other states, municipalities, territories and foreign countries aren’t included in the list, the bulletin said. The Division of Taxation said it will update the list periodically.

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at LPappas@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of technical Bulletin 80 is at http://src.bna.com/na6.

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