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On April 4, 2019, the New Jersey Division of Taxation opened its website for mandatory registration of a combined group by its managing member.1
This registration website supports the Division’s previously released administrative guidance addressing a managerial member’s responsibilities under the New Jersey Corporation Business Tax (CBT) combined reporting provisions, which apply for reporting tax years ending on or after July 31, 2019.2
Determination of managerial member
For tax years ending on or after July 31, 2019, companies engaged in a unitary business are required to calculate the CBT on a combined basis.3
If the combined group has a common parent corporation and that common parent corporation is a taxable group member in New Jersey, then that parent is the managerial member.4
If the common parent corporation is not a taxable group member in New Jersey, then the combined group must designate (for a 10-year period) a taxable group member in New Jersey as the managerial member.5
Responsibilities of managerial member
The managerial member will act as the agent on behalf of the combined group.6
The managerial member will be required to address all tax matters that include filing and amending tax returns, filing extensions, and making estimated tax payments on behalf of the group.7
The managerial member also will be responsible for addressing any notices received by the combined group.8
Registration by managerial member and crediting of payments
The managerial member of each combined group is required to register with the New Jersey Division of Revenue and Enterprise Services (DORES) to obtain a new identification number that is specific to combined reporting. Registration must be completed electronically.9
The identification number will serve as the number to which combined group payments will be applied. The Division’s website states that “overpayments credited to the combined group by a taxpayer on a 2018 CBT-100 or 2018 BFC-1 will be applied to the combined group after the registration process is complete. In addition, once registration is complete, all estimated payments must be made using the combined group’s identification number.” The Division makes clear that managerial members are not allowed to make the payments under their preexisting tax identification number.
Taxpayers should note that the Division’s website provides “additional information on the estimated tax payments and overpayment credits from 2018 tax returns is forthcoming.”10
Considering that the registration website was only opened shortly before the April 15 filing deadline, it is likely that many taxpayers made 2019 estimated payments using their preexisting identification numbers. Taxpayers will need to ensure those payments, along with any 2018 overpayments, are appropriately accounted for when their registration is complete and their new identification number is available.
Taxpayers whose group members have different year-end accounting periods should be mindful that the privilege period for the combined group is the privilege period of the managerial member.11
To the extent a taxpayer registered a subsidiary as the managerial member or to the extent the taxpayer undertakes frequent transactions that change the composition of the overall group, future implications should be considered in order to avoid surprises. Given that the designation of a managerial member is made for a 10-year period, it is possible that changes to the combined group could create unintended administrative complications if the parent is not the managerial member for a group. New Jersey requires that “members of a combined group shall notify the director within 90 days of a change in the combined group where a member dissolves, a merger of any kind occurs, a member withdraws from the group, a member ceases doing business, a member of the group is acquired by a third party not in the group, or additional members enter the group which are required to be included.” 12
To the extent a taxpayer has a parent entity with no independent nexus with New Jersey, it would be wise not to inadvertently register the parent entity as the managerial member, which could result in the establishment of nexus for that entity. The Division has historically been aggressive with enforcing the state’s “doing business” standard. 13
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