New Jersey Administrative Code
Title 18 - TREASURY - TAXATION
Chapter 7 - CORPORATION BUSINESS TAX ACT
Subchapter 21 - COMBINED RETURNS
Section 18:7-21.23 - Authority of the Director of the Division to require that a taxpayer be included in a combined return in certain instances

(a) If the Director determines that a combined group's income or loss does not properly reflect the unitary business activities of the combined group, the Director may require that the combined return of the combined group include the income, as well as the associated allocation factor or factors of any taxpayer who is not otherwise included in the combined group on the combined return, but who is a member of a unitary business with the combined group, in order to cure the improper reflection of the allocation of income of the entire unitary business. The Director may require that a combined return include the income and associated allocation factor or factors of taxpayers that are not corporations, such as disregarded entities, limited liability companies (that are not corporations for tax purposes), and partnerships.

(b) If the Director determines that a combined group's income or loss does not reflect a proper allocation of income or represents an evasion of tax, the Director may require that a combined return include or exclude the income and associated allocation factor or factors of taxpayers that may or may not have been included as members on the combined return. The Director may require that a combined return include or exclude the income and associated allocation factor or factors of taxpayers that are not corporations, such as disregarded entities, limited liability companies (that are not corporations for tax purposes), and partnerships.

(c) If the Director determines that the reported income or loss of a member of a combined group engaged in a unitary business with any taxpayer not otherwise included in the combined group on the combined return represents an avoidance or evasion of tax by the taxpayer or the combined group member, the Director may require all, or any part, of the income or loss and associated allocation factor or factors of the taxpayer be included in or excluded from the combined return for the unitary business or may require the use of a different allocation factor or factors.

(d) The Director may require that a combined return include or exclude the income or loss and associated allocation factor or factors of taxpayers that are not corporations.

(e) Such inclusion or exclusion in a combined return is in addition to, and not a limitation of or dependent on, the provisions in Corporation Business Tax Act, P.L. 1945, c. 162 (N.J.S.A. 54:10A-1 et seq.), enacted to prevent tax avoidance or evasion or to clearly reflect the income of any taxpayer.

(f) If the taxpayer disagrees with the Director's determination pursuant to (a) through (e) above, the taxpayer challenging the determination has the burden of proving by cogent evidence that is definite, positive, and certain in quality and quantity to overcome the Director's presumption of correctness.