New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 7 - CORPORATION BUSINESS TAX ACT › Subchapter 21 - COMBINED RETURNS › Section 18:7-21.27 - Principles of Federal consolidated returns applicable

Current through Register Vol. 56, No. 14, July 15, 2024
(a) The principles and provisions set forth in
				Federal regulations promulgated pursuant to I.R.C. § 1502, shall apply to the
				extent consistent with the Corporation Business Tax Act, New Jersey combined group
				membership principles, New Jersey combined unitary return principles, and rules
				promulgated by the Director.
(b) When
				computing the combined group entire net income, the principles set forth in the U.S.
				Treasury regulations promulgated at I.R.C. § 1502 shall generally apply to the
				extent consistent with the New Jersey Corporation Business Tax Act and the unitary
				business principle to a combined group filing a New Jersey combined return as though
				the combined group filed a Federal consolidated return.
(c) For New Jersey corporations business tax
				purposes, tax rates, tax computations, estimated payment provisions, and due dates
				are different than Federal requirements.
(d) The New Jersey Corporation Business Tax Act
				(Act) has its own definitions and its own included and excluded entity provisions,
				which differ from the Internal Revenue Code. The Act has its own additions,
				deductions, exclusions, and other modifications to the entire net income. New Jersey
				combined returns are filed using a default mandatory water's-edge filing method or
				the elective worldwide or affiliated group filing method. To be included on a
				water's-edge return or worldwide return, an entity needs to be part of a unitary
				business of the combined group as defined in the Act. Water's-edge and worldwide
				returns are State tax concepts, not Federal consolidated return concepts (see
				N.J.S.A. 54:10A-4.11 and N.J.A.C. 18:7-21.15 and 21.16 for more information). The
				composition of the New Jersey affiliated group combined return for New Jersey
				purposes may be larger than the Federal affiliated group because there are specific
				New Jersey inclusions and exclusions. For combined groups, New Jersey has its own
				payment, accounting period, and liability provisions (N.J.S.A. 54:10A-4.8 and
				54:10A-4.10). The managerial member of the New Jersey combined group (which may be a
				different corporation than the corporation filing the Federal consolidated return on
				behalf of a Federal consolidated group) files the combined return on behalf of the
				combined group.
(e) For New Jersey
				combined reporting purposes, the requisite ownership threshold is more than 50
				percent. Although the Federal rules otherwise apply, New Jersey does not conform to
				the 80 percent ownership required for Federal consolidated returns. If a New Jersey
				combined group composition is different than the Federal consolidated return, the
				group must compute the combined group entire net income as though the entire group
				filed a Federal consolidated return and then make the New Jersey additions,
				deductions, exclusions, and other modifications.
(f) Generally, the provisions at
				26
				CFR 1.1502-13 apply, except as otherwise noted at
				N.J.S.A.
				54:10A-4.6.e
				and except where
				26
				CFR 1.1502-13 deals with specific provisions of
				the Internal Revenue Code to which New Jersey does not conform.
(g) The Federal consolidated return rules in
				relation to depreciation and expensing apply, except that New Jersey has decoupled
				from I.R.C. §168(k) bonus depreciation and I.R.C. § 179 expensing
				provisions and certain other depreciation and expensing provisions. See N.J.S.A.
				54:10A-4(k)(1), 54:10A-4(k)(2)(F), 54:10A-4(k)(12), and 54:10A-4(k)(13). Adjustments
				must be made, accordingly.
(h) To the
				extent consistent with the Corporation Business Tax Act, P.L. 1945, c. 162 (N.J.S.A.
				54:10A-1 et seq.), the Federal rules and regulations governing consolidated return
				net operating losses and net operating loss carryovers shall apply to the New Jersey
				net operating loss carryover provisions at
				N.J.S.A.
				54:10A-4.6.h as though the combined group filed a
				Federal consolidated return, regardless of how the members of the combined group
				filed for Federal purposes.
1. Federal carrybacks
				do not apply because New Jersey net operating losses can only be carried forward for
				20 privilege periods.
2. For privilege
				periods beginning on and after January 1, 2020, the provisions of the Internal
				Revenue Code, the Federal rules, limitations, and restrictions, thereto, governing
				Federal net operating losses and Federal net operating loss carryovers with regard
				to, but not limited to, mergers, acquisitions, reorganizations, spin-offs,
				split-offs, dissolution, bankruptcy, or any form of cessation of a business, or any
				other provision that limits or reduces Federal net operating losses and Federal net
				operating loss carryovers, shall apply to New Jersey net operating loss carryovers
				pursuant to subsection (v) of section 4 at P.L. 1945, c. 162 (N.J.S.A. 54:10A-4) and
				the New Jersey net operating loss carryover provisions of subsection h. of section
				18 at
				P.L.
				2018, c. 48 (N.J.S.A.
				54:10A-4.6).
3. The provisions of the I.R.C. governing the
				interaction between I.R.C. §172 and 250 that limits or reduces Federal net
				operating losses and Federal net operating loss carryovers, shall apply to New
				Jersey net operating loss carryovers pursuant to subsection (v) of section 4 at P.L.
				1945, c. 162 (N.J.S.A. 54:10A-4) and the
				New Jersey net operating loss carryover provisions of subsection h. of section 18 at
				P.L.
				2018, c. 48 (N.J.S.A.
				54:10A-4.6).