New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 7 - CORPORATION BUSINESS TAX ACT › Subchapter 5 - ENTIRE NET INCOME; DEFINITION, COMPONENTS AND RULES FOR COMPUTING › Section 18:7-5.11 - Right of Director to require consolidated/combined filing and certain disclosures

Current through Register Vol. 56, No. 14, July 15, 2024
(a) The
				entire net income of a taxpayer exercising its franchise in this State that is a
				member of an affiliated group or a controlled group pursuant to I.R.C. §§
				1504 or 1563 shall be determined by eliminating all payments to, or charges by,
				other members of the affiliated or controlled group in excess of fair compensation
				in all inter-group transactions of any kind.
(b) Notwithstanding the elimination of all
				inter-group transactions in excess of fair compensation, if the taxpayer cannot
				demonstrate by clear and convincing evidence that a report by a taxpayer discloses
				the true earnings of the taxpayer on its business carried on in this State, the
				Director may, at the Director's discretion, require the taxpayer to file a
				consolidated return of the entire operations of the affiliated group or controlled
				group, including its own operations or income to the extent permitted under the
				Constitution and statutes of the United States. The Director shall determine the
				true amount of entire net income earned by the taxpayer in this State.
(c) The consolidated entire net income of the
				taxpayer and of the other members of its affiliated group or controlled group shall
				be allocated to this State by use of the applicable allocation formula that the
				Director requires pursuant to
				N.J.S.A. 54:10A-1 et seq.
				to be used by the taxpayer. The return shall include in the allocation formula the
				property, payrolls, and sales of all corporations for which the return is made. The
				Director may require a consolidated return without regard to whether the other
				members of the affiliated or controlled group, other than the taxpayer, are or are
				not exercising their franchises in this State.
(d) A consolidated return required pursuant to
				this section shall be filed within 60 days after it is demanded, subject to the
				penalties of the State Uniform Tax Procedure Law,
				N.J.S.A. 54:48-1 et
				seq.
(e) The member of an affiliated
				group or controlled group shall incorporate in its return, required pursuant to this
				section, information needed to determine its taxable entire net income, and shall
				furnish any additional information the Director requires within 30 days after it is
				demanded, subject to the penalties of the State Uniform Tax Procedure Law,
				N.J.S.A. 54:48-1 et
				seq.
(f) Each taxpayer that files a
				return and is a member of an affiliated or a consolidated group pursuant to I.R.C.
				§§ 1504 or 1563, shall, within 90 days of notice of a request of the
				Director, disclose in its return for the privilege period the amount of all
				inter-member costs or expenses, including, but not limited to, management fees,
				rents, and other services, for the privilege period.
(g) If the taxpayer acquires products or services
				from another member of its affiliated or controlled group, which it resells or
				otherwise uses to generate revenue or expense, the taxpayer shall within 90 days of
				a request from the Director, disclose by computerized spread sheet or other form as
				specified by the Director the amount of revenue or expense generated from those
				products or services including, but not limited to, management fees, rents, and
				other services. A failure to file such disclosure constitutes the filing an
				incomplete tax return, subject to the penalties of the State Uniform Tax Procedure
				Law,
				N.J.S.A. 54:48-1 et seq.,
				including, without limitation,
				N.J.S.A. 54:49-4
				and
				54:52-8.
(h) Subsections (a) through (g) above shall not
				apply to members of a combined group reported on the same New Jersey combined
				return. See N.J.A.C. 18:7-21 for more information on combined groups and combined
				reporting.
(i) For privilege periods
				ending on and after July 31, 2019, (a) through (g) above shall apply to taxpayers
				that are not included together as members of a combined group reported on the same
				New Jersey combined return. See N.J.A.C. 18:7-21 for more information on combined
				groups and combined reporting.