N.J. Admin. Code § 18:7-10.1

Current through Register Vol. 56, No. 11, June 3, 2024

Section 18:7-10.1 - Discretionary adjustments of business allocation factor by Director

(a) Generally, the allocation formula described in this chapter will result in a fair apportionment of the taxpayer's net worth and net income within and outside New Jersey. However, experience in this and other states that impose similar franchise taxes has shown that due to the nature of certain businesses the formula may work hardships in some cases, and not do justice either to the taxpayer or the State. Accordingly, provision is made in such cases for the Director to use some other formula that will more accurately reflect the business activity within New Jersey.

(b) Section 8 of the Act provides that where it shall appear to the Director that the business allocation factor, determined pursuant to N.J.S.A. 54:10A-6, does not properly reflect the activity, business, receipts, capital, entire net worth, or entire net income of a taxpayer reasonably attributable to New Jersey, he or she may in his or her discretion adjust the business allocation factor by:

1. Excluding one or more of the fractions therein;

2. Including one or more other elements, such as expenses, purchases, and contract values (minus subcontract values);

3. Excluding one or more assets in computing entire net worth;

4. Excluding one or more assets in computing an allocation factor; or

5. Applying any other similar or different method calculated to effect a fair and proper allocation of the entire net income and the entire net worth reasonably attributable to this State.

(c) Adjustment of the business allocation factor may be made by the Director upon his or her own initiative or upon request of a taxpayer.

1. No taxpayer may vary the regular statutory formula without the prior consent of the Director.

2. A taxpayer making application for an adjustment of its business allocation factor must file its return and compute and pay its tax in accordance with the regular statutory formula.

3. The taxpayer must attach a rider and documentation setting forth, in full, the data on which its application is based, together with a computation of the amount of tax that would be due under the proposed method with the submission of Form A-3730 when making such request.

(d) For privilege periods ending on and after July 31, 2019, the Director may adjust the business allocation factor, or the managerial member of a combined group filing a New Jersey combined return may request an adjustment of the business allocation factor, of either the managerial member or the other members of the combined group included on the same New Jersey combined return, in accordance with N.J.S.A. 54:10A-4.8 and 54:10A-4.10. For more information on combined groups and combined reporting, see N.J.A.C. 18:7-21.

1. A combined group may not change the allocation factor formula pursuant to N.J.S.A. 54:10A-4.7 without the prior consent of the Director.

2. A combined group making an application for an adjustment of its business allocation factor must file the New Jersey combined return and compute and pay its tax, in accordance with the allocation factor formula pursuant to N.J.S.A. 54:10A-4.7. The member submitting such application on behalf of the combing group must be the managerial member of the combined group.

3. The managerial member (on behalf of the combined group) must attach a rider and documentation setting forth, in full, the data upon which the application is based, together with a computation of the amount of tax that would be due under the proposed method with the submission of Form A-3730 when making a request for an adjustment of the business allocation factor.

N.J. Admin. Code § 18:7-10.1

Amended by 49 N.J.R. 1694(a), effective 6/19/2017

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