New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 7 - CORPORATION BUSINESS TAX ACT › Subchapter 14 - TAX CLEARANCE › Section 18:7-14.1 - Tax Clearance Certificate

Current through Register Vol. 56, No. 14, July 15, 2024
(a) This section
				describes certain actions and certain transactions by corporations that require the
				prior issuance of a Tax Clearance Certificate by the Director of the Division of
				Taxation as evidence that all State taxes, penalties, interest, and fees have been
				paid or provided for in order to avoid a transferee liability to certain officers
				and directors.
(b) The following words
				and terms, when used in this section, have the following meanings unless the context
				clearly indicates otherwise:
"Authorized foreign corporation" means a corporation holding a
				  general Certificate of Authority to do business in New Jersey issued by the Division
				  of Revenue and Enterprise Services to the exclusion of any other authority, license,
				  or right derived from any other source.
"Business entity" means a corporation, partnership, or limited
				  liability company, whether organized under the laws of this State or under the laws
				  of any other state or foreign jurisdiction, which is subject to taxation under any
				  state tax law.
"Certification" means a writing on behalf of a corporation making
				  an undertaking executed under oath of its president, vice president, or treasurer
				  which represents that the corporation making the undertaking has a net worth not
				  less than 10 times the amount of all taxes paid by a corporation applying for a Tax
				  Clearance Certificate during the last complete year in which it filed tax returns
				  with the State of New Jersey. Net worth, for this purpose, is net worth defined in
				  the conventional accounting sense determined consistent with generally accepted
				  accounting principles and not as defined at
				  N.J.S.A.
				  54:10A-4(d)  of the Corporation
				  Business Tax Act.
"Director" means the Director of the Division of Taxation.
"Domestic corporation" means a corporation that received its
				  charter under any law of the State of New Jersey.
"Foreign corporation" means any corporation other than a domestic
				  corporation that is subject to taxes. The term includes entities that are taxable as
				  such, as well as any entity obligated to withhold personal income taxes or to
				  collect sales and use tax.
"Liquidation" means any distribution by a corporation to its
				  shareholders with respect to its capital stock except dividend distributions out of
				  retained earnings.
"Taxes" means all taxes, fees, penalties, and interest owing under
				  any tax law of the State of New Jersey that are payable to or collectible by the
				  Director.
"Undertaking" means a writing by a domestic corporation or by an
				  authorized foreign corporation executed on its behalf by its president, vice
				  president, or treasurer which undertakes, as surety and not as guarantor, to pay all
				  taxes of a corporation applying for a Tax Clearance Certificate on or before the
				  date such taxes are payable. Where more than one corporation undertakes to pay such
				  taxes, the undertaking must be jointly and severally undertaken.
(c) A corporation may merge under the laws of New
				Jersey or any other jurisdiction without applying for a Tax Clearance Certificate
				only where the surviving corporation is a domestic corporation or an authorized
				foreign corporation.
(d) No corporation
				may either distribute any of its assets in dissolution or in partial or complete
				liquidation, or merge or consolidate, under the laws of any jurisdiction, into a
				foreign corporation that is not an authorized foreign corporation; and no domestic
				corporation may dissolve, and no authorized foreign corporation may withdraw as an
				authorized corporation (except only where that withdrawal is affected by its merger
				or consolidation under the laws of another state into a domestic corporation or into
				another foreign corporation which, itself, is an authorized corporation), unless the
				corporation shall have applied for and received a Tax Clearance Certificate from the
				Director of the Division of Taxation that is dated not earlier than 45 days prior to
				the effective date of the corporate action or transaction described.
(e) No business entity may merge or consolidate
				into any other business entity other than a domestic business entity or a foreign
				business entity authorized to transact business in this State, unless the business
				entity files or causes to be filed by the Division of Taxation with the Division of
				Revenue and Enterprise Services a certificate issued by the Director of the Division
				of Taxation dated not earlier than 45 days prior to the effective date of the
				business entity action evidencing that the business entity's taxes have been paid or
				provided for.
(f) The Tax Clearance
				Certificate is issued by the Director of the Division of Taxation upon application
				on the appropriate form to the Division of Revenue and Enterprise Services, which is
				accompanied by a statutory fee of $ 120.00 ($ 25.00 application fee and $ 95.00
				dissolution withdrawal fee). All fees related to the application and final
				dissolution/withdrawal must be paid with the initial application for tax clearance
				in the form of a check or money order payable to "Treasurer, State of New Jersey."
				Failure to complete the tax clearance procedure will result in the forfeiture of the
				$ 120.00 fee. The Tax Clearance Certificate is dated and it voids and becomes a
				nullity 46 days after that date. The Tax Clearance Certificate is evidence that the
				requisite corporation business taxes have been paid or provided for only during the
				45-day period succeeding the issuance of the Tax Clearance Certificate.
(g) The corporation's tax liability will be deemed
				ended as of the date the application is accepted by the Division of Revenue and
				Enterprise Services, as long as the tax clearance procedure is successfully
				concluded with the Division of Taxation. Although the business tax liability will
				end before the issuance of the Tax Clearance Certificate, any prior tax obligation
				will remain payable and must be satisfied before a Tax Clearance Certificate will be
				issued. If a Tax Clearance Certificate is not issued, the business tax liability
				will be reactivated as if there was no lapse in subjectivity.
(h) An LLC or other business entity that has
				elected to be taxed as a corporation that is withdrawing from the State is required
				to obtain a Tax Clearance Certificate.
(i) A Tax Clearance Certificate may be issued
				under any one of three conditions:
1. Where an
				amount is deposited or paid on account which, in the judgment of the Director, is
				adequate to cover estimated taxes up to the date of the relevant corporation action.
				The amount that is deemed to be adequate is described in the instruction sheet
				accompanying the estimated summary tax return to be filed with the application;
				or
2. Where the application is
				accompanied by a written undertaking and a certification; or
3. Solely in the case where:
i. A domestic corporation intends to dissolve or
				where any corporation proposes to distribute any of its assets in dissolution or in
				partial or complete liquidation, and
ii.
				The application is accompanied by a written undertaking by the corporation or
				corporations that either own 50 percent or more of all classes of the applicant
				corporation's capital stock, or are a party together with the applicant corporation
				in the type of reorganization described at I.R.C. § 368(a)(1)(C), and the
				application is accompanied by a legal opinion signed by an attorney at law of the
				State of New Jersey who states that he or she is familiar with the facts of the
				transaction to the effect that all of the above requirements are met.