On October 4, 2019, the New Jersey Division of Taxation (DOT) notified¹ taxpayers that it has come to its attention that some vendor software used by taxpayers to file their 2018 New Jersey Corporation Business Tax (NJ CBT) returns may repeat the inclusion of foreign-derived intangible income (FDII) in their returns.

Both FDII and global intangible low-taxed income (GILTI) are reported on different lines for New Jersey and federal income tax purposes. In order to avoid double inclusion of the income, the DOT said "the amounts reported on any other lines must be reduced by the amount of the FDII and GILTI included on lines 10a and 10b of the 2018 Schedule A when transferring income data reported on the federal [Form] 1120 onto the New Jersey Schedule A."

Implications

Taxpayers should review their 2018 NJ CBT returns to ensure that FDII income has not been double counted on the NJ CBT-100 form, especially if specific reductions to the amounts of FDII-related income included in lines 1 through 9 on the NJ CBT Schedule A were not made. To ensure that FDII income is only counted once, lines 1 through 9 of Schedule A will need to be reduced accordingly in an amount equal to the FDII inclusion on line 10(a) to prevent the double inclusion of FDII income.

The DOT stated that the tax preparation software providers with this double counting of FDII income are aware of the issue and are currently attempting to remedy it. Returns that have already been prepared may need to be recomputed after this matter is corrected in updated versions of the affected tax preparation software.

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¹ N.J. Div. of Tax., NOTICE: Reporting FDII on Schedule A, (available on the internet here (last accessed Oct. 4, 2019)).