Current through Register Vol. 56, No. 18, September 16, 2024
(a)
N.J.S.A.
54:10A-15.4 imposes an addition to the tax on the
amount of the underpayment of any installment of estimated tax by a corporation
(with certain exceptions). This addition to the tax is imposed irrespective of any
reason for the underpayment. The amount of the underpayment for any installment date
is the excess of:
1. The amount of the installment
payment which would be required to be paid if all installment payments were equal to
90 percent of the tax shown on the return for the accounting year or, if no return
was filed, 90 percent of the tax for that year, over
2. The amount, if any, of the installment paid on
or before the last day prescribed for such payment.
(b) Interest is determined at the annual rate
referred to in (c) below based upon the amount of the underpayment of any
installment of estimated tax for the period from the date such installment was
required to be paid until the 15th day of the fourth month following the close of
the tax year, or the date such underpayment was received by the Director, whichever
is earlier. For purposes of determining the period of the underpayment:
1. The date prescribed for payment of any
installment of estimated tax may not be extended; and
2. A payment of estimated tax on any installment
date, to the extent that it exceeds the amount of the installment determined under
(a)1 above for such date shall be considered a payment of any previous
underpayment.
(c) The rate to
be used at (b) above is an annual rate of five percent above the prime rate,
compounded daily from the date the tax was originally due and payable until the date
of payment. On and after July 1, 1993, the rate is three percent above the prime
rate compounded annually. Each such underpayment shall bear interest at the rate
prescribed above. The following is an example of underpayment interest computation:
1. Assume the average predominant prime rate for
the calendar year is six percent. Therefore, the applicable interest on underpayment
pursuant to this subsection is six percent plus three percent, or nine percent, on
the amount of any underpayment of estimated tax due on or after April 1 but before
July 1 of the calendar year. The method prescribed for computing the addition to the
tax may be illustrated by the following example:
i. A corporation reporting on a calendar year
basis estimated on its Statement of Estimated Tax for the calendar year, estimated
tax in the amount of $ 50,000. It made payments of $ 12,500 each on April 15, June
15, September 15, and December 15 of the calendar year. On April 15 of the following
year, it filed its New Jersey corporation business tax return, showing a total tax
of $ 200,000. Since the amount of each of the four installments paid by the last
date prescribed for payment thereof was less than 90 percent of the tax shown on the
return, the addition to the tax pursuant to this section is applicable and is
computed as follows, assuming that no exception applies:
| Item (1) | Tax on return for the current
year................. | $200,000 |
| Item (2) | Ninety percent of item
(1)....................... | 180,000 |
| Item (3) | Amount of estimated tax required to be
paid on each installment date (25 percent of $180,000).. | 45,000 |
| Item (4) | Deduct amount paid on each installment
date...... | 32,500 |
| Item (5) | Amount of underpayment for each
installment date (item (3) minus item (4))..... | 32,500 |
| Item (6) | Interest shall be charged on each
underpayment at the rate as prescribed in this subsection |
Second installment: Interest period June 15 of the current year to
April 15 of the following year
Third installment: Interest period September 15 of the current
year to April 15 of the following year
Fourth installment: Interest period December 15 of the current
year to April 15 of the following year
(d) If there has been an underpayment of estimated
tax as of the installment date prescribed for its payment and the taxpayer believes
that one or more of the exceptions described at (e) below precludes the imposition
of the addition to the tax, it should attach to its New Jersey corporation business
tax return, for the taxable year a Form CBT-160 showing the applicability of any
exception upon which the taxpayer relied.
(e) Exceptions to imposition of interest on
underpayment of an installment payment. The addition to the tax under this rule will
not be imposed for any underpayment of any installment of estimated tax if, on or
before the date prescribed for payment of the installment, the total amount of all
payments of estimated tax made equaled or exceeded the amount which would have been
required to be paid on or before such date if the estimated tax were the least of
the following amounts:
1. An amount equal to the
tax determined on the basis of the tax rates for the taxable year but otherwise on
the basis of the facts shown on the return for the preceding taxable year and the
law applicable to such year. If the tax rates for the current taxable year with
respect to which the underpayment occurs differ from the rates applicable to the
preceding taxable year, the exception will only apply to installments due on or
after the change in tax rates. If the preceding return was a short period return
filed pursuant to
N.J.A.C.
18:7-12.1, the tax computed on the basis of the
facts shown on such return for purposes of determining the applicability of the
exception shall be the tax appearing on such short period return multiplied by 12
and then divided by the number of whole months covered by such short period return;
or
2. An amount equal to 90 percent of
the tax determined by placing on an annual basis the taxable income and taxable net
worth for:
i. The first three months of the taxable
year, in the case of the installment required to be paid in the fourth
month;
ii. Either the first three months
or the first five months of the taxable year (whichever results in no addition being
imposed), in the case of the installment required to be paid in the sixth
month;
iii. Either the first six months
or the first eight months of the taxable year (whichever results in no addition
being imposed), in the case of the installment required to be paid in the ninth
month; and
iv. Either the first nine
months or the first eleven months of the taxable year (whichever results in no
addition being imposed), in the case of the installment required to be paid in the
twelfth month.
3. The tax so
determined shall be placed on an annual basis by first multiplying it by 12, and
then dividing the resulting amount by the number of months in the taxable
year.
