New Jersey – Court invalidates regulation denying preferential CBT treatment to owners of certain pass-through entities

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Overview

On February 27, 2017, the New Jersey Tax Court found, on summary judgment, that the New Jersey Division of Taxation exceeded its authority when it promulgated a regulation that precluded companies investing in certain pass-through entities from qualifying as ‘investment companies’ for purposes of the Corporate Business Tax (CBT). Under the CBT, investment companies may elect to measure their tax based on a combination of income and net worth factors.

Proceedings continue before the tax court to determine whether the taxpayer exercised managerial control over its limited partnership that did business in New Jersey. If so, the taxpayer would have CBT nexus with New Jersey.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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