New Jersey Administrative Code
Title 18 - TREASURY - TAXATION
Chapter 7 - CORPORATION BUSINESS TAX ACT
Subchapter 21 - COMBINED RETURNS
Section 18:7-21.10 - Ordering of the dividend elimination, subsidiary dividend received exclusion, and net operating losses in a combined group context

Universal Citation: NJ Admin Code 18:7-21.10

Current through Register Vol. 56, No. 18, September 16, 2024

(a) In calculating entire net income, the members of a combined group filing a combined return shall first eliminate 100 percent of the intercompany dividends received from the other members of the combined group reported on the same New Jersey combined return.

(b) If the combined group has a loss in the current tax year, the entire group is deemed to have a net operating loss in the current tax year and the members of the combined group shall be entitled to their respective share of the net operating loss as a net operating loss carryover in subsequent privilege periods.

(c) If the entire net income of the combined group is a positive number, the combined group is deemed to have entire net income for the year. The taxable members of the combined group shall be assigned their portion of the combined group's entire net income for the year using the allocation factor and shall subtract the unused unexpired converted prior net operating loss carryovers if the combined group allocated entire net income is greater than zero.

(d) If, after allocating the entire net income and subtracting the unused unexpired converted prior net operating loss carryovers, the taxable members of the combined group still have combined group allocated entire net income greater than zero, then the taxable members may use their share of the combined group net operating loss carryovers or use the portion of the combined group net operating loss carryovers received from other taxable members.

(e) Only dividends from subsidiaries that are not part of the combined group included in the combined return are excluded pursuant to N.J.S.A. 54:10A-4(k)(5). For privilege periods ending on and after July 31, 2019, the dividend exclusion is an allocated dividend exclusion. The exclusion occurs only if, after the application of N.J.A.C. 18:7-21.19(b) and (d), the allocated entire net income is greater than zero.

1. For privilege periods ending on and after July 31, 2019, but before July 31, 2020, when computing the allowable dividend exclusion for dividends received from excluded subsidiaries that are unitary with the combined group, the pre-allocated dividend exclusions of each member of the combined group are aggregated together and then distributed for use by each member using the member's allocation factor from Schedule J to arrive at the allocated dividend exclusion each member may deduct against allocated entire net income.

2. For privilege periods ending on and after July 31, 2020, for purposes of the dividend exclusion, the members of a combined group filing a New Jersey combined return shall be treated as one taxpayer with regard to dividends and deemed dividends that were received as part of the unitary business of the combined group.
i. In computing the combined group dividend exclusion, the combined group shall use the group allocation factor on Schedule J.

3. A member of a combined group that independently has separate activities to give rise to sufficient nexus with New Jersey is entitled to take the allocated dividend exclusion on Schedule X when the dividends from the excluded subsidiaries are not part of the unitary business of the combined group and not included in the entire net income of the combined group. In circumstances where New Jersey is prohibited from taxing said subsidiary dividends, the member must, nonetheless, disclose such dividends and attach a rider with an explanation.

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