On July 2, 2024, the New Jersey Division of Taxation issued a news release detailing the newly enacted Corporate Transit Fee (CTF). This important update affects Corporation Business Tax (CBT) returns for tax years beginning on or after January 1, 2024, and introduces several key changes that businesses need to be aware of. Here’s a comprehensive breakdown of the CTF and its implications for taxpayers in New Jersey.
The CTF is a new surtax imposed on Corporation Business Tax returns for businesses with a taxable net income exceeding $10 million. Effective from January 1, 2024, through December 31, 2028, the CTF is an additional tax that companies must pay on top of their annual CBT obligations. Importantly, the CTF cannot be offset by tax credits.
Key Exclusions from the CTF
The CTF does not apply to all entities. Specifically:
- Public Utilities: The income of public utility companies is excluded from the CTF.
- Subchapter S Corporations: These entities are also exempt from the CTF.
Combined Groups and the CTF
For businesses that file a combined return using Form CBT-100U, the CTF is assessed at the group level. This means that:
- Group-Level Tax: The CTF is calculated for the entire combined group rather than individual members.
- Income Inclusion: The taxable income from members of the combined group, even if they are public utilities or S corporations, is considered when determining if the group exceeds the $10 million threshold.
Short Period Returns for 2023 CBT
Taxpayers with a short period return for a tax year starting on or after January 1, 2024, and ending before June 30, 2024, who have taxable net income over $10 million, must file a 2023 CBT-100 or CBT-100U and submit the CTF. A rider detailing the mathematical calculation of the fee must be attached to the return.
Future Tax Returns
Starting with the 2024 CBT returns, a dedicated line for the CTF will be included on the tax forms. This addition will streamline the process for reporting and calculating the fee for subsequent tax years.
Penalties and Interest for Underpayment
For the first year of the CTF’s enactment, the Division of Taxation will not impose penalties or interest for underpayments resulting from the new fee. If penalties or interest are assessed, taxpayers can request an abatement of these charges in writing to the Division.
Key Takeaways for Businesses
- Prepare for the CTF: Ensure that your accounting and tax preparation practices are updated to include the CTF calculations.
- Review Exemptions: Confirm whether your business or any of its combined group members qualify for CTF exemptions.
- File Correctly: For short period returns, follow the instructions carefully to ensure accurate filing and calculation of the CTF.
- Stay Informed: Keep abreast of any updates or changes from the New Jersey Division of Taxation regarding the CTF.
For detailed instructions and to access forms, visit the New Jersey Division of Taxation website.
By understanding these changes and preparing accordingly, businesses can ensure compliance with the new CTF regulations and avoid unnecessary complications.
For additional details and tax advice, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com