N.J. Increases Tax on P.L. 86-272-Protected Companies—Should You Comply?


In the days leading up to Monday’s deadline to file CBT returns, some of our clients that are protected from New Jersey income tax by P.L. 86-272 have asked us whether they should comply with New Jersey’s Alternative Minimum Assessment (or “AMA”),1 which, by the express terms of the statute only applies to companies that are protected by P.L. 86-272. Our answer is “no,” do not pay that AMA. Because this question has come up several times, we are issuing this alert to taxpayers just in time for their filing on Monday.

AMA’s Impact on P.L. 86-272 Protected Companies -

Until 2011, if a company was immune from income tax under P.L. 86-272, its New Jersey corporate tax liability was zero. Beginning with the 2011 tax year, however, New Jersey’s Division of Taxation is imposing gross receipts tax on these companies. The Division’s policy discriminates against companies protected from New Jersey tax by P.L. 86-272. If your company is affected, consider taking a return position that the tax doesn’t apply.

This new tax increase results from the application of the AMA, which was enacted in 2002 to supplement New Jersey’s corporate income tax. The AMA was designed to raise revenue: a taxpayer had to pay the greater of the AMA or regular income tax. Since the AMA was computed based on gross receipts or gross profits (rather than net income), it applied even if a taxpayer was immune from income tax under P.L. 86-272.

Please see full Alert below for further information.

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

Written by:

Published In:


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

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* 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.