New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 7 - CORPORATION BUSINESS TAX ACT › Subchapter 3 - COMPUTATION OF TAX › Section 18:7-3.23A - New Jersey research credit for privilege periods beginning on and after January 1, 2018

Current through Register Vol. 56, No. 14, July 15, 2024
(a) A taxpayer may be
				allowed a credit against its corporation business tax liability in an amount equal
				to 10 percent of the excess of the qualified research expenses for the privilege
				period over the base amount, and 10 percent of the basic research payments for the
				privilege period determined in accordance with I.R.C. § 41. All of the terms,
				definitions, rules, methods for calculating the credit, and restrictions are
				consistent with the terms, definitions, rules, methods for calculating the credit,
				and restrictions at I.R.C. § 41, and the applicable regulations promulgated by
				the U.S. Department of the Treasury, except as otherwise noted in this section.
				Amounts paid, incurred, or accrued by the taxpayer for energy research in New Jersey
				may also qualify for the New Jersey research credit if the amounts qualify for the
				Federal corporate income tax credit pursuant to I.R.C. § 41.
(b) Consistent treatment of expenses is required.
				Notwithstanding whether the period for filing a claim for credit or refund has
				expired for any tax year taken into account in determining the fixed-base
				percentage, the qualified research expenses taken into account in computing such
				percentage must be determined on a basis consistent with the determination of
				qualified research expenses for the credit year.
(c) The New Jersey research credit that is
				available on and after January 1, 2018, is not refundable; and no provision under
				the Internal Revenue Code making the Federal research and development credit
				refundable for any Federal tax shall apply for New Jersey corporation business tax
				purposes.
(d) Notwithstanding any
				provision in this section to the contrary, other than calculations made pursuant to
				(j) below, a credit may be claimed for only those research activities that are
				performed in New Jersey.
(e) The filing
				of a consolidated tax return by a controlled group of corporations is not permitted
				for privilege periods ending before July 31, 2019. In calculating the New Jersey
				research credit, a combined group filing either a mandatory or elective New Jersey
				combined return must use the Federal rules for calculating the credit pursuant to
				I.R.C. § 41(f)(1) and
				N.J.S.A.
				54:10A-4.6.n; provided, however, the credit will
				be calculated based on expenditures in New Jersey by the combined group filing a New
				Jersey combined return.
(f) Any act of
				Congress terminating I.R.C. § 41 will not terminate the research credit
				available for New Jersey corporation business tax purposes. Thus, in the event of
				the repeal of I.R.C. § 41, the New Jersey research and development credit will
				be determined based on I.R.C. § 41 that was in effect the last day prior to the
				effective date of the repeal by Congress.
(g) The research credit is allowed for qualified
				research in New Jersey. The research expenditures must meet the qualifications of
				both I.R.C. §§ 41 and 174, subject to applicable restrictions in the
				Internal Revenue Code and the New Jersey Corporation Business Tax Act. (See I.R.C.
				§§ 41 and 174, and regulations promulgated thereunder for other
				definitions and special rules.)
(h) In
				calculating the New Jersey research credit, a taxpayer is bound by the method for
				calculating the credit that the taxpayer uses for Federal purposes as reported on
				their Federal return when taking the credit for Federal tax purposes, except as
				provided for at (f) above (detailing the effect of repeal of I.R.C. § 41 by
				Congress). If a taxpayer files an amended Federal return changing the method used or
				adjusting the amount of credit claimed for Federal purposes, the taxpayer must file
				an amended New Jersey corporation business tax return reflecting such change in
				method for calculating the credit or the adjustment for the amount of the credit
				claimed. If the Internal Revenue Service makes adjustments to the amount of
				qualifying expenses, the taxpayer must reflect these adjustments by also filing an
				amended New Jersey corporation business tax return. Adjustments made for qualifying
				expenses for the Federal credit will not increase or decrease the New Jersey credit
				if the expenses are not for research conducted in New Jersey. In the case of repeal
				by Congress, in calculating the New Jersey research and development credit, a
				taxpayer would use the method for calculating the credit that the taxpayer would
				have used for Federal purposes as would have been reported on their Federal return
				when taking the credit for Federal tax purposes if I.R.C. § 41 had not been
				repealed by Congress.
(i) Credit for
				increased research activities must take priority as specified at
				N.J.S.A.
				54:10A-5.24.b. If any amount of property or
				expenditures is included in the calculation of the research credit, then no such
				amounts are allowable for the credit, as specified at
				N.J.S.A.
				54:10A-5.24.b.
(j) If a taxpayer has research conducted both
				within and outside New Jersey and cannot determine the amount of New Jersey
				qualified research expenses for periods beginning on or after January 1, 2018, the
				taxpayer may calculate the amount of the New Jersey qualified research expenses to
				be used for the research credit by multiplying the qualified research expenditures
				everywhere by a three-factor fraction consisting of New Jersey property, payroll,
				and receipts in the numerator over property, payroll, and receipts everywhere in the
				denominator.
1. For a combined group filing either
				a mandatory or elective New Jersey combined return, where the combined group has
				research both within and outside New Jersey and cannot determine the amount of New
				Jersey qualified research expenses for the period, the taxable members of the
				combined group may calculate the amount of the New Jersey qualified research
				expenses to be used for the research credit by multiplying the qualified research
				expenditures everywhere by a three-factor fraction consisting of New Jersey
				property, payroll, and receipts in the numerator over property, payroll, and
				receipts everywhere in the denominator.