On January 3, the New Jersey Division of Taxation issued TB-86 (the Bulletin), which provides guidance on entities included and excluded in a combined group and which entities are subject to the $2,000 minimum tax.
Each combined group member with New Jersey nexus is subject to the minimum tax. However, the Bulletin could be interpreted to mean that each member of the unitary group would be subject to minimum tax by virtue of its unitary relationship with a New Jersey taxpayer. Further, the Bulletin states that if one member of the combined group has nexus and sufficient activities in New Jersey to be taxed based on income, no other member may claim P.L. 86-272 protection from the minimum tax. However, modified guidance is expected to address whether the minimum tax applies to all members or only to taxable members.
The Bulletin also states that disregarded entities and entities treated as partnerships for federal income tax purposes are not subject to the minimum tax.
We expect the Division to issue clarifying guidance and examples regarding the application of the minimum tax to combined groups. Subject to further clarifying guidance by the Division, there may be opportunities to challenge the application of the minimum tax as applied to P.L. 86-272 entities and other entities without nexus.