N.J. Admin. Code § 18:7-21.3 - Entities included and excluded from a combined return

(a) For the purposes of the corporation business tax, the following business entity types must be included as members of the combined group filing a New Jersey combined return:

1. Corporations;

2. Combinable captive insurance companies;

3. Banking corporations and financial corporations;

4. Limited liability companies (taxed as corporations);

5. Foreign limited liability companies (taxed as corporations);

6. S corporations, except as provided at (c) below;

7. Casino licensees;

8. Qualified Subchapter S Subsidiaries that have not made a New Jersey S corporation election;

9. New Jersey Qualified Subchapter S Subsidiaries that elected to be included in the combined group;

10. Business entities that are treated as corporations for Federal purposes;

11. Professional corporations;

12. Business entities included in the combined group include entities incorporated under the laws of a foreign country as business entities that would be corporations if such entities had been incorporated under the laws of the United States; and

13. Public utilities, as defined at N.J.S.A. 54:10A-4(q), that are not excluded pursuant to N.J.S.A. 54:10A-4.6(k).

(b) For the purposes of the corporation business tax, the following business entity types are excluded as members of the combined group filing a New Jersey combined return:

1. Public utility companies that are excluded pursuant to N.J.S.A. 54:10A-4.6(k) are not included in the combined group reporting on the combined return. Such public utility companies shall file separate returns;

2. A New Jersey S corporation that does not elect to be included as part of the combined group reported on the combined return. Such New Jersey S corporations shall file separate returns;

3. Insurance companies that are not combinable captive insurance companies are excluded from the combined group reported on the combined return, except that dividends from the insurance companies may be included in the income reported by the combined group members pursuant to N.J.S.A. 54:10A-4.6(k)(1);

4. A business entity that is treated as a disregarded entity for Federal income tax purposes;

5. Partnerships, limited partnerships, or limited liability companies treated as partnerships for Federal purposes; and

6. Corporations exempt from the corporation business tax pursuant to N.J.S.A. 54:10A-3.

(c) A business entity that is treated as a disregarded entity for Federal income tax purposes is also treated as a disregarded entity for New Jersey corporation business tax purposes pursuant to N.J.S.A. 42:2C-92. Disregarded entities also include legal partnerships that are disregarded entities for Federal purposes.

1. While a disregarded entity itself is not a member of a combined group, the tax attributes of a disregarded entity are reported by a member of a combined group when the member owns the disregarded entity. The attributes of a disregarded entity owned by a member of a combined group are included in the income and allocation factor of that member and the combined group. In making a determination of which members are included in a water's-edge combined group pursuant to N.J.S.A. 54:10A-4.11, the disregarded entity's attributes shall be used by the member that owns the disregarded entity. A disregarded entity is not subject to the $ 2,000 minimum tax as a member of a combined group because a disregarded entity is not a member of the combined group. However, if a disregarded entity is part of a unitary business of a combined group, the owner of the disregarded entity will be a member of the combined group and must be included as part of the combined return, except as otherwise excluded.

(d) Partnerships, limited partnerships, or limited liability companies treated as partnerships, for Federal purposes are business entities that can be unitary with a combined group. However, these entities are not members of a combined group for New Jersey corporation business tax purposes. With regard to unitary partnerships, limited partnerships, or limited liability companies treated as partnerships, the respective income and attributes flow through to the corporate partners that are members of the combined group for the purposes of computing entire net income, allocation, and for the purposes of determining inclusion in the water's-edge basis pursuant to N.J.S.A. 42:2C-92(a), 54:10A-4(gg), 54:10A-4.6(c)(1), 54:10A-15.6, and 54:10A-15.7. Partnerships, limited partnerships, and limited liability companies that are treated as partnerships for Federal purposes are not subject to the $ 2,000 minimum tax as a member of a combined group because they are not a member of the combined group. However, Form NJ-CBT-1065 must still be filed.

(e) Newly acquired business entities under common ownership with a combined group must be included as one of the members of the combined group if it is operating as part of the combined group's business enterprise as described at N.J.A.C. 18:7-21.2(a).

(f) The Director may permit by petition of the taxpayer and the members of its unitary business group that a certain otherwise excluded taxpayer that is a member of a combined group be included in the combined group reported on the combined return. However, all of the members of the combined group, including such otherwise excluded taxpayer must disclose all of their books and records to the Director. The otherwise excluded taxpayer will be denied inclusion as a member of the combined group on the combined return if the Director determines the principal purpose of such inclusion is to exploit the tax attributes of either the other members or the otherwise excluded taxpayer.

Notes

N.J. Admin. Code § 18:7-21.3

Adopted by 54 N.J.R. 1819(a), effective 9/19/2022