Jul 23 New Jersey’s Corporate Transit Fee
New Jersey Governor Phil Murphy has recently signed various tax bills as part of the annual budget process, including the imposition of a 2.5% corporate transit fee.
2.5% Corporate Transit Fee: SB 3513/AB 4704 imposes a 2.5% surtax, referred to as the Corporate Transit Fee (the “Fee”), on certain Corporation Business Tax (CBT) payers that have allocated New Jersey taxable net income in excess of $10 million for privilege periods beginning on and after January 1, 2024 through December 31, 2028 (e.g., five privilege periods).
Like the surtax that New Jersey imposed from privilege periods beginning on or after January 1, 2018 through December 31, 2023, the Fee functions as a 2.5% rate of tax in addition to the 9% CBT rate imposed on each taxpayer that has allocated New Jersey taxable net income in excess of $10 million.
- Given that the Fee is added to the 9% CBT tax rate to impose a total tax of 11.5% on the entire allocated taxable net income of affected taxpayers, the Fee is not limited to the allocated taxable net income in excess of $10 million but is imposed on the entire taxable net income base.
- For combined groups, the Fee is applied to the entire group’s allocated taxable net income.
- For purposes of calculating the $10 million threshold, a combined group is treated as one taxpayer.
- Taxable net income, which is used to calculate the $10 million threshold, is defined in N.J.R.S. Section 54:10A-4(w), which provides for the subtraction of prior net operating loss (PNOL) conversion carryforwards and net operating loss (NOL) carryforwards.
- No credits will be allowed against the Fee liability except for credits for installment payments, estimated payments made with a request for an extension of time for filing a return, or overpayments from prior privilege periods.
- The Fee does not apply to either New Jersey S corporations as defined in N.J.R.S. Section 54:10A-4(p), which do not elect to be treated as a C corporation, or public utilities as defined in N.J.R.S. Section 54:10A-4(q).
Unlike prior CBT legislation with retroactive effect, the Fee legislation does not provide for underpayment penalty or interest abatement.
For questions regarding this new legislation, please reach out to SAX’s State and Local Tax Leader, Rich Goldstein, at [email protected].