On March 15, 2017, the New Jersey Tax Division published a technical bulletin, TB-80, that attempts to clarify the types of state taxes that should and should not be added back to determine a corporation’s taxable income. Under N.J.S.A. 54:10A-4(k)(2)(C), the following taxes must be added back to determine taxable income: “[T]axes paid or accrued to the United States, a possession or territory of the United States, a state, a political subdivision thereof, or the District of Columbia, or to any foreign country, state, province, territory or subdivision thereof, on or measured by profits or income, or business presence or business activity, or the tax imposed by this act…”
The bulletin cites PPL Electric Utilities Corporation v. Director, 28 N.J. Tax 128 (Tax Ct. 2014), and Duke Energy Corporation v. Director, 28 N.J. Tax 226 (Tax Ct. 2014). PPL involves taxes based on the amount of electricity sold and is not required to be added back to taxable income. Duke Energy discusses taxes based on gross receipts and gross sales, which must be added back to determine taxable income.
The bulletin goes on to list as examples specific state taxes required and not required to be added back. The gist of the bulletin is to require taxes that in any way are measured by receipts to be added back to taxable income. This bulletin is timely, as corporations compute their 2016 New Jersey state income taxes.
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