New Jersey's Interest Addback Held 'Unreasonable' - For Many, Refunds Due September 15


Last week, New Jersey's Tax Court held that New Jersey's disallowance or "add back" of interest paid to an affiliate is "unreasonable." This decision helps level the playing field for taxpayers with high New Jersey apportionment. Typically, only taxpayers with low New Jersey apportionment can avoid adding back interest by taking advantage of the "3-percentage-point safe harbor." In fact, our experience has been that almost any company with New Jersey apportionment below 33 percent can avoid the interest addback because of this safe harbor. Although the Tax Court explicitly refused to expand the 3-percentage-point safe harbor to cover more companies concentrated in New Jersey, the "unreasonableness" ruling extends relief to many of these companies. Thus, many more taxpayers now likely qualify for some sort of exception.

A company that added back interest must consider filing a refund claim. Time is short. Especially for companies that filed a bank and financial company return on form BFC-1. For a calendar-year taxpayer, the BFC-1 return is due September 15. The four-year statute of limitations expires on the fourth anniversary of when that return was actually filed. So the statute on refund claims for 2005 will expire Wednesday of next week-at the latest-for BFC-1 taxpayers. The refund opportunity also applies to a company filing a CBT-100; that return is due October 15 for a calendar-year taxpayer.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Written by:


Reed Smith on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.