The New Jersey Division of Taxation (“Division”) recently extended an invitation for voluntary compliance with limited look-back and penalty waiver to companies that were included in mandatory unitary combined returns and indicated that they have nexus with New Jersey but did not file separate entity returns prior to 2019 (the year New Jersey started mandatory combined filing for most corporations) via its Combined Reporting Initiative for Corporation Business Tax (New Jersey’s corporate income tax).
The Combined Reporting Initiative program runs through October 15, 2021, and is open to companies that were not: incorporated in New Jersey; authorized to do business in New Jersey; or registered for Corporation Business Tax prior to being included as part of a 2019 or 2020 combined return. The look-back period is limited to the periods ending after June 30, 2016, or the date nexus was established with New Jersey, whichever is later. All returns filed under the program are subject to audit.
The application requires disclosure of: the purported taxpayer entity’s name; the managerial member for the combined group that included the entity; the entity type; the accounting period end for the entity; whether the entity has been authorized to do business in New Jersey and, if so, the date of authorization; whether the entity received a nexus questionnaire or notice from New Jersey; and the type of taxes for which participation is requested. The Division will not commit to allowing all companies into the voluntary program, stating that it “will consider entering into a Closing Agreement” so prior contact does not expressly exclude entry into the program.
In the Division’s view, entities that are eligible for the program are not eligible for the standard Voluntary Disclosure Agreement (which has been traditionally open to non-filers). The guidance states that after the program closes, the limited look-back and penalty waiver will not be granted.
This initiative is a reminder that when a filing method or group is changed, it is important to have the answers to three questions:
- Why are we changing now (am I fairly considering the impact of a change in fact or change in law)?
- What was correct prior to now (am I opening a can of worms for a historical position if I change the filing)?
- What is correct for the future (am I doing what should be done going forward)?