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 18:7-5.19 - Global Intangible Low Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII) for corporation business tax purposes

Current through Register Vol. 56, No. 14, July 15, 2024
(a) For New Jersey corporation business tax
				purposes, the amount of income reported for Federal income tax purposes pursuant to
				I.R.C. § 951A (GILTI) and § 250(b) (FDII) must be included in New Jersey
				entire net income in the same manner as for Federal tax purposes, and neither
				amounts are considered to be a dividend or a deemed dividend. GILTI and FDII do not
				qualify for the dividend exclusion of
				N.J.S.A.
				54:10A-4(k)(5).
(b) In computing the allowable I.R.C. §
				250(a) deduction , pursuant to
				N.J.S.A.
				54:10A-4.15, in order to arrive at the taxable
				amount of GILTI and FDII included in the tax base for New Jersey corporation
				business tax purposes, a deduction will be disallowed if the amounts of income
				included for Federal tax purposes under I.R.C. §§ 951A and 250 are exempt
				or excluded from entire net income under the provisions of the Corporation Business
				Tax Act.
(c) The same limitations for
				claiming the deduction for GILTI and FDII under I.R.C. § 250 for Federal tax
				purposes shall also apply for New Jersey tax purposes.
(d) If a taxpayer includes GILTI income from a
				related member in its entire net income, the taxpayer may claim an exception to the
				requirement to add back related member expenses under
				N.J.S.A.
				54:10A-4.4upon filing with the Director of the
				Division of Taxation adequate documentation to demonstrate that related member GILTI
				income is included in the taxpayer's entire net income.
(e) To the extent a combined group can demonstrate
				that the members included in the combined group on the same New Jersey combined
				return are controlled foreign corporations that generate the GILTI income, and the
				income of that controlled foreign corporation is already included in the entire net
				income of the combined group, the GILTI income may be excluded/eliminated on
				Schedule A, column b. The combined group must provide to the Director sufficient
				documentation to prove, by clear and convincing evidence, that income was already
				included. The portion of the I.R.C. § 250(a) deduction allowed under
				N.J.S.A.
				54:10A-4.15, where attributable to the GILTI and
				FDII income, shall be allowed, regardless of the intercompany eliminations,
				deferrals, or exclusions on Schedule A, column b for combined returns.
(f) For privilege periods beginning on and after
				January 1, 2018, a taxpayer filing a separate return must include the GILTI, and the
				receipts attributable to the FDII, after adjustment for the I.R.C. § 250(a)
				deductions, in the denominator of the allocation factor. The net GILTI (that is, the
				GILTI reduced by the I.R.C. § 250(a) GILTI deduction) and net FDII (that is,
				the receipts attributable to the FDII reduced by the I.R.C. § 250(a) FDII
				deduction) are only included in the numerator of the allocation factor if, based on
				N.J.S.A. 54:10A-6
				and
				54:10A-6.1
				and N.J.A.C.
				18:7-8.1 through 8.17, such amounts would be
				considered to be a New Jersey receipt; otherwise net GILTI that is, the GILTI
				reduced by the I.R.C. § 250(a) GILTI deduction and net FDII (that is, the
				receipts attributable to the FDII reduced by the I.R.C. § 250(a) FDII
				deduction) are only included in the denominator of the allocation factor.
1. The taxpayer may petition for relief pursuant
				to
				N.J.S.A.
				54:10A-8 and
				N.J.A.C.
				18:7-10.1.
2. Separate Return Example:
B forms Shell and Bell as conduits to shift income from high tax
				  nations to lower tax nations in order to lower B's overall tax burden. Shell and
				  Bell are controlled foreign corporations located in a low tax nation. B owns 100
				  percent of Shell and Bell. B files a separate New Jersey return. Although Shell does
				  not have income effectively connected to a business in the U.S. within the meaning
				  of the Internal Revenue Code, through a series of transactions Shell derives
				  receipts from U.S. sources, including New Jersey sources. Shell also derives income
				  from other countries. Bell does not have any U.S. source income and only has income
				  from Europe. Both Shell and Bell are integrated in B's worldwide business. For
				  Federal purposes, B is required to include in its entire net income the GILTI that
				  was generated from both Shell and Bell. B also sells goods directly to customers in
				  foreign nations for use outside of the U.S. Some of B's export contracts stipulate
				  that the customer will take possession of the goods in B's New Jersey warehouse
				  before the goods are exported.
The portion of the net GILTI (that is, the GILTI reduced by the
				  I.R.C. § 250(a) GILTI deduction) attributable to New Jersey from receipts
				  derived from non-effectively connected U.S. source income would be included in B's
				  numerator. The portion of the net FDII (that is, the receipts attributable to the
				  FDII reduced by the I.R.C. § 250(a) FDII deduction) attributable to New Jersey
				  receipts would be in B's numerator. The net GILTI (that is, the GILTI reduced by the
				  I.R.C. § 250(a) GILTI deduction) and net FDII (that is, the receipts
				  attributable to the FDII reduced by the I.R.C. § 250(a) FDII deduction) are
				  included in the denominator of the allocation factor.