New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 7 - CORPORATION BUSINESS TAX ACT › Subchapter 21 - COMBINED RETURNS › Section 18:7-21.10 - Ordering of the dividend elimination, subsidiary dividend received exclusion, and net operating losses in a combined group context

Current through Register Vol. 56, No. 14, July 15, 2024
(a) In calculating entire net income, the members
				of a combined group filing a combined return shall first eliminate 100 percent of
				the intercompany dividends received from the other members of the combined group
				reported on the same New Jersey combined return.
(b) If the combined group has a loss in the
				current tax year, the entire group is deemed to have a net operating loss in the
				current tax year and the members of the combined group shall be entitled to their
				respective share of the net operating loss as a net operating loss carryover in
				subsequent privilege periods.
(c) If the
				entire net income of the combined group is a positive number, the combined group is
				deemed to have entire net income for the year. The taxable members of the combined
				group shall be assigned their portion of the combined group's entire net income for
				the year using the allocation factor and shall subtract the unused unexpired
				converted prior net operating loss carryovers if the combined group allocated entire
				net income is greater than zero.
(d) If,
				after allocating the entire net income and subtracting the unused unexpired
				converted prior net operating loss carryovers, the taxable members of the combined
				group still have combined group allocated entire net income greater than zero, then
				the taxable members may use their share of the combined group net operating loss
				carryovers or use the portion of the combined group net operating loss carryovers
				received from other taxable members.
(e)
				Only dividends from subsidiaries that are not part of the combined group included in
				the combined return are excluded pursuant to
				N.J.S.A.
				54:10A-4(k)(5). For privilege
				periods ending on and after July 31, 2019, the dividend exclusion is an allocated
				dividend exclusion. The exclusion occurs only if, after the application of N.J.A.C.
				18:7-21.19(b) and (d), the allocated entire net income is greater than zero.
1. For privilege periods ending on and after July
				31, 2019, but before July 31, 2020, when computing the allowable dividend exclusion
				for dividends received from excluded subsidiaries that are unitary with the combined
				group, the pre-allocated dividend exclusions of each member of the combined group
				are aggregated together and then distributed for use by each member using the
				member's allocation factor from Schedule J to arrive at the allocated dividend
				exclusion each member may deduct against allocated entire net income.
2. For privilege periods ending on and after July
				31, 2020, for purposes of the dividend exclusion, the members of a combined group
				filing a New Jersey combined return shall be treated as one taxpayer with regard to
				dividends and deemed dividends that were received as part of the unitary business of
				the combined group.
i. In computing the combined
				group dividend exclusion, the combined group shall use the group allocation factor
				on Schedule J.
3. A member of
				a combined group that independently has separate activities to give rise to
				sufficient nexus with New Jersey is entitled to take the allocated dividend
				exclusion on Schedule X when the dividends from the excluded subsidiaries are not
				part of the unitary business of the combined group and not included in the entire
				net income of the combined group. In circumstances where New Jersey is prohibited
				from taxing said subsidiary dividends, the member must, nonetheless, disclose such
				dividends and attach a rider with an explanation.