Governor Signs NJCPA-Supported Tax Administrative Changes Bill
by Jeff Kaszerman, NJCPA Government Relations Vice President –
December 23, 2022
On Dec. 22, Governor Phil Murphy signed NJCPA-supported legislation (A4295) that makes important administrative changes to the gross income tax and corporation business tax.
The bill adopts the new federal partnership audit regime, ends COVID-related extensions concerning certain state taxes and eliminates the requirement to affirmatively elect New Jersey S corporation status. The bill also provides for an opt out of the automatic S corporation election.
The S-election changes are effective for calendar year taxpayers beginning in 2023. The other provisions are effective immediately.
Below is more information on the three main provisions in the legislation.
View NJCPA's letter to the Senate Budget and Appropriations Committee
- Removes taxpayer inequity caused by continuance of COVID State of Emergency — The bill ends the imposition of an unfair burden on taxpayers caused by the fact that although the COVID Public Health Emergency has ended, the State of Emergency has not. The bill ends the extension of time for the statute of limitations on tax due that was enacted in response to the COVID-19 pandemic. The bill also ends the extension for the provisions regarding New Jersey’s payment of interest on a taxpayer’s overpayment of tax. This bill restores the parity that has always been in place by changing the end dates for the extension of time for the statute of limitations and payment of interest so that the extensions are tied to the end of the Public Health Emergency, as is the case with the extension for refunds.
- Changes S corporation tax filing process —The bill eliminates the requirement that a taxpayer that chooses S corporation status for federal tax purposes must also affirmatively choose S corporation status for New Jersey. The bill also allows a company that has chosen federal S corporation status to opt out from being classified as an S corporation for New Jersey purposes.
- Adopts partnership audit regime — The bill adapts the New Jersey Income Gross Income Tax to the new federal partnership audit regime that audits the partnership for greater efficiency instead of auditing individual partners.