22 February 2016 Law firm clients: Changes in New Jersey affect partnerships — New tax forms for 2015 and readopted personal income tax regulations Law firm partnerships with source income from New Jersey that file a New Jersey partnership income tax returns (Form NJ-1065) should take note that the NJ Division of Taxation has created two new partnership tax returns for tax years beginning on or after January 1, 2015: Form NJ-1065, Partnership Return — Gross Income Tax, and Form NJ-CBT-1065, Partnership Return — Corporation Business Tax. The forms are aimed at distinguishing between the requirements of New Jersey's gross income tax (GIT) and corporation business tax (CBT) acts. The major difference between the 2015 Form NJ-1065 and the prior Form NJ-1065 is that the filing fee must now be reported directly on the return and remitted with the new Partnership Payment Voucher (NJ-1065-V). Form PART-100, Partnership Filing Fee and Tax Payment Return, which had been used to report both the gross income tax filing fee and the CBT, has been retired. Partnerships with nonresident owners who are subject to the State's CBT (N.J.S.A 54:10A-15.11) must file the new NJ-CBT-1065. Law firm partnerships that reported nonresident withholding through the PART-100 will now be required to complete NJ-CBT-1065. Payments due must be remitted with Form NJ-CBT-V, Corporation Business Tax-Partnership Payment Voucher. Instructions for both sets of forms are available on the NJ Division of Taxation's website. New Jersey regulations set to expire on February 17, 2016, were readopted effective January 21, 2016, as they pertain to New Jersey resident and nonresident partners. The regulations have codified the Division's position that medical expenses that are disallowed for federal income tax purposes are disallowed for gross state income tax purposes and amended N.J.A.C. Section 18:35-4.1 to provide that no credit for income taxes paid to other states is available for payments of Texas margins tax because that tax is not considered an income tax. Law firm partnerships with nonresident and resident partners of New Jersey who generate source income from the State will be required to file both the NJ 1065 and NJ-CBT-1065, along with any composite filings the law firm might file on behalf of its nonresident electing members. Further, resident partners of New Jersey who have historically taken an out-of-state tax credit against their New Jersey income tax for their portion of the Texas margin tax paid to Texas may no longer apply the credit given New Jersey's position that the margin tax is not considered a tax on income.
Document ID: 2016-0361 | |||||
