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New Jersey State Tax
Volume 38, Number 3
Fall 2009
A Quarterly Newsletter ISSN 1073-6808
Tax Amnesty
inside
Amnesty program was $647.1
million. This revenue outcome
Program – Record- resulted in New Jersey’s having the
tax amnesty program ................ 1 Setting Success most successful State Tax Amnesty
After the final accounting, total col- program in the history of the country,
nj economic stimulus act.............2
lections from the 2009 Tax Amnesty which has seen more than 50 such
employer phone filing Program implemented by the Divi- programs across dozens of states.
discontinued............................. 3 sion of Taxation amounted to $746.3
Tax Amnesty Administrator, Mark
tax assessors’ calendar.................4 million. The Amnesty program,
Wintermute, reported that more than
which began on May 4, 2009, and
fur clothing tax repealed ........... 4 108,500 payments were made during
ended on June 15, 2009, offered a
the 43-day Tax Amnesty period, of
small business workshops .............5 waiver of all penalties, referral cost
which nearly 90% were processed
fees, and one-half of the balance of
criminal enforcement ................ 5 electronically through Web-based
the interest that remained due as of
payment modules or through au-
interest rate 7% ....................... 5 May 1, 2009.
tomated payment processes by the
public auction information ........ 6 Based on past Tax Amnesty experi- Division of Revenue. Of the total
ences in New Jersey and other states, amount collected, more than 56%
enforcement summary stats ........6
and considering the economic cli- was from corporate tax liabilities,
tax briefs....................................7 mate at the time, initial projections nearly 12% from gross income tax,
sales tax information ..................8 for revenue were conservative. The and about 19% from sales and use
Administration set the goal for ad- tax, with the remainder from the oth-
in our courts ............................ 9 ditional revenue related to Tax Am- er taxes and fees administered by the
current amnesty programs ........10 nesty at $100 million. Two weeks Division. During the Tax Amnesty
into the program, based on the rate period, a dedicated telephone hotline
in our legislature .................... 13 of response, the State Treasurer re- answered 117,411 phone calls, and a
tax calendar .......................... 13 vised the revenue estimate upwards special Amnesty Web site recorded
to $200 million. By June 11, the goal more than 53,000 hits.
important phone numbers ....... 14
of $200 million had been reached. As
Multiple factors contributed to the
with other Tax Amnesty programs,
success of the program. Most impor-
most payments were received in the
tant was a comprehensive advertis-
last few days leading up to June 15.
ing and public relations program,
On June 12 alone, a one-day revenue
which emphasized outreach to the
total of $201 million was recorded.
tax professional community. In any
An analysis to consider what portion Tax Amnesty program, success is
of the Amnesty revenue would have dependent upon participation by
been collected through normal com- large business taxpayers and ensur-
pliance and enforcement activities ing they understand, with the help
by the Division of Taxation (absent of their tax advisors, the economic
a Tax Amnesty program) determined benefit the program offers. The pro-
that the additional (net) revenue ben- gram also included direct outreach
efit to the State as a result of the Tax continued on page 2
2
Fall 2009
tax amnesty program - from pg. 1 Taxes and Surcharges
news
by mail to taxpayers with known
This portion of the Act authorizes New Jersey State Tax
special taxes and surcharges to fund
tax liabilities to New Jersey. This redevelopment activities and certain
comprehensive outreach resulted in programs.
more than 700,000 mailings.
Municipalities with a population
Taxpayers who failed to settle their over 100,000 and a commercial is published quarterly by the:
outstanding tax debts during the Tax airport with over ten regularly sched-
Amnesty period now face the rein- New Jersey Division of Taxation
uled flights per day may impose a Technical Services
statement of the original penalties, 5% tax on the rental fee of motor Information & Publications Branch
interest, and fees, plus the imposition vehicles to mainly fund redevelop- PO Box 281
of an additional 5% penalty. Acting ment plan activities. Trenton, NJ 08695-0281
Director Cheryl Fulmer advises,
“The Tax Amnesty program was Second class cities with a major The State Tax News is published on the
designed to help taxpayers who had place of amusement are allowed to Division of Taxation’s Web site at:
fallen behind during tough economic impose a surcharge up to $2 on each www.state.nj.us/treasury/taxation/
times get a fresh start, while collect- admission charge subject to New publnews.shtml
ing money that New Jersey could Jersey sales tax and a $2 charge on Subscribe to NJ Tax E-News on our Web
use for needed programs and ser- parking at that place of amusement site to be notified when new issues become
vices. The program also reduced our for the benefit of senior citizen available.
backlog of delinquent and deficient and youth health and recreational This publication is designed to keep tax-
payers, tax practitioners, and the general
taxpayers and allows our audit and purposes.
public informed of developments, problems,
investigative teams to concentrate questions, and matters of general interest
their efforts on the truly hard-core Modifications to the Emerging and
concerning New Jersey tax law, policy, and
tax evaders.” Biotechnology Credit Transfer procedure. The articles in this newsletter are
Program not designed to address complex issues in
An eligible entity may surrender any detail, and they are not a substitute for New
credit which cannot be applied to its Jersey tax laws and/or regulations.
NJ Economic liability, or surrender any unused net
Stimulus Act operating loss carryover to certain Division of Taxation
Acting Director: Cheryl Fulmer
The New Jersey Economic Stimulus other corporations.
News Coordinators for This Issue:
Act of 2009 (P.L. 2009, c.90) was
A recipient of surrendered tax ben- Audit Peggy Cook
an omnibus bill, consisting of eight
efits must pay at least 80% (formerly Compliance Marita Sciarrotta
actions, designed to reinvigorate
75%) of the value of such benefits. Crim. Investigation Lee Roach
New Jersey’s economy. There are
Property Admin. Michael Vrancik
numerous technical and administra- The Economic Development Au-
Legislation John Kelly
tive changes in this Act; six of which thority is limited annually to $60
affect the Division of Taxation. million of credit transfer approvals Contributors: Jeffrey Adams, Dorothy M.
and, along with the Division of Taxa- Aicher, Pam Allen, El-Rhonda Williams
Economic Redevelopment and Alston, Marlene Barnhart-Mohr, William G.
tion, must manage the allocation of Bittner, Diane Breyer, Kevin Curry, Russell
Growth Grant Program
the credit transfer approvals pursu- Glenn, Debra Lewaine, Trygve Myklebust,
This portion of the Act authorizes the
ant to a modified formula. Frank Papp, Charles Peters, Patrick Ryan,
awarding of State and local incen- and Mitchell C. Smith.
tive grants to developers in qualify- The innovation zone portion of the
ing economic redevelopment and Staff: J. Donald Byrnes, Lauren D. Higgins,
credit allocation increases to $10 Terry A. McWilliams, Sara E. Murphey,
growth grant incentive areas to fill million (formerly $5 million) and Erin J. Toth, Kelly J. Warboys.
in their project financing gap. is specifically set aside for emerg-
ing technology and biotechnology Editor: Sheri B. Silverstein
Authorization For Certain Mu-
nicipalities to Impose Special
continued on page 3
Fall 2009 3
nj economic stimulus act - from page 2 workers and include out-of-state • I n v e s t N J B u s i n e s s
residents. Grantees may not qualify
companies; unused portions of the for an Urban Transit Hub tax
emerging technology and biotech- • A business may use an affiliate to credit.
nology transfer credit program may satisfy the employment or capital
be allocated outside of the desig- investment requirements. • The Statewide full-time work-
nated innovation zones. force reduction trigger requiring
• The definition of “Urban transit mandatory forfeiture of an annual
The maximum lifetime value of hub” is expanded to include: (1) tax credit is now 20%.
credit transfers for any one eligible property located within one-half
corporation increases from $10 mil- mile of an interstate rail station; • Business headquarters property
lion to $15 million. (2) property adjacent to, or con- may now become a qualified in-
nected by rail spur to, a freight vestment facility if it meets cer-
The Act allows for a credit recapture rail line if the business utilizes tain criteria.
program to recoup the remaining that freight line for loading and
value of the surrendered credit if the unloading freight cars on trains; • S corporation shareholders and
entity fails to use the proceeds for its and (3) all light rail stations. limited liability corporation mem-
statutorily intended purposes. bers may no longer be permitted
• The capital investment threshold to participate in the program.
Expansion of Eligibility and Tax is reduced from $75 million to A qualified individual who is a
Credit Limits Under the Ur- $50 million for an owner of a holder of a credit may sell it under
ban Transit Hub Tax Credit Act qualified business facility, and the tax credit transfer certificate
(UTHTCA) from $50 million to $17.5 million program pursuant to the guide-
• A business must demonstrate at for a tenant that occupies a leased lines established in the Act.
the time of its application that area of the qualified business.
the State’s financial support will • Casino licensees now only qualify
yield a net positive benefit to • Tenant investment may be in- for benefits for casinos.
both the State and the eligible cluded in the capital investment
municipality. calculation for the qualified busi- • The credit shall be reduced by
ness facility. 20% if there are fewer than 200
• All credits approved under the employees.
program are now capped at $1.5 • The Act allows for the aggrega-
billion. tion of up to three tenants to meet • Forfeiture may occur if the busi-
the 250 employee requirement. ness reduces its workforce by
• The “full-time employee” re- more than 20%.
quirement may consist of contract
• The New Jersey Economic Devel-
opment Authority is required to
Telephone Filing Discontinued for set standards to encourage “green
building.”
Forms NJ-500, NJ-927, and NJ-927-H
Relief to Certain Developers and
Effective January 1, 2009, employers and others who withhold New Jer-
Municipalities
sey gross income tax and unemployment/disability contributions are no
This portion of the Act provides
longer able to file their returns and make the related payments by phone
relief to certain developers oth-
through the Division of Taxation’s Business Paperless Telefiling System.
erwise subject to the Statewide
Telephone filing has been discontinued for monthly and quarterly returns
Non-Residential Fee Act and grants
(Forms NJ-500/NJ-927) as well as the annual return for domestic employ-
to municipalities for affordable
ers (Form NJ-927-H).
housing.
For information on electronically filing returns due after December 31,
The Act temporarily exempts prop-
2008, or amending a return that was previously filed by telephone, go to
erty that received a site plan approval
Tax & Employer Filings and Payments on the Division of Revenue’s Web
site.
continued on page 4
4
Fall 2009
economic stimulus act - from pg. 3 postconsumer material manufactur- • Table of Equalized Valuations for
ing facility for use or consumption State School Aid promulgated by
before July 1, 2010, and a permit for directly and primarily in the produc- Director, Division of Taxation.
construction prior to July 1, 2011, tion of tangible personal property,
from the 2.5% nonresidential devel- other than energy, are exempt from October 1–
opment fee imposed by the State- the State sales and use tax and • All real property in taxing district
wide Non-Residential Fee Act (P.L. certain transitional energy facility valued for tax purposes (pretax
2008, c.46). N.J.S.A. 40:55D-8.1 assessment (TEFA) charges during year).
through 40:55D-8.7. These amend- the period beginning on or after
ments to the Act are not intended to • $250 veteran’s property tax de-
January 1, 2010, but ending on or duction eligibility established
change the provisions of N.J.S.A. before January 1, 2017.
40:55D-8.7, which void and prohibit (pretax year).
municipal ordinances that seek to During the period for which the • $250 real property tax deduc-
impose obligations on nonresidential sales tax and TEFA exemptions are tion for senior citizens, disabled
development for the purposes of granted, the seller of such energy persons, or surviving spouses/
providing affordable housing. and utility service to an eligible civil union partners eligibility
postconsumer material manufactur- established (pretax year).
Developers may apply to the ap- ing facility must charge the sales
proving authority for full or partial tax and TEFA on such purchases. • Added Assessment List and
fee refunds. The eligible postconsumer material duplicate filed with County Tax
$15 million is appropriated to the manufacturing facility may then file Board.
New Jersey Affordable Housing a claim for refund with the Division
• Omitted Assessment List and
Trust Fund from the General Fund, of Taxation pursuant to the guide-
duplicate filed with County Tax
and the Act permits the transfer of a lines established within the Act.
Board.
portion of the appropriation to the Ur-
ban Housing Assistance Fund estab- • Limited Exemption and Abate-
lished by N.J.S.A.52:27D-329.7. local property tax ment Audit Trail report filed with
Property Administration and the
Sales Tax Exemption on Energy Tax Assessors’ County Tax Board.
and Utility Services Calendar
The Act also allows a sales tax ex- October 1 (on or before)– October 25 (on or before)–
emption for the purchase and use of • Agricultural land values for farm- • Added assessments certified for
energy and utility service by certain land assessed under Farmland As- fire districts on Form CNC-3.
postconsumer material manufactur- sessment Act published by State November 1–
ing facilities. Farmland Evaluation Advisory • Initial Statements, Forms I.S., and
Committee (F.E.A.C.). Further Statements, Forms F.S.,
Receipts from the sale or use of
energy and utility service to or by a for property tax exemption filed
with tax assessor.
• Notice of Disallowance of farm-
land assessment issued by tax
Fur Clothing Retail Gross Receipts Tax and Use assessor.
Tax Repealed Effective January 1, 2009 • Deadline for filing proposed com-
P.L. 2008, c.123, repealed the Fur Clothing Retail Gross Receipts Tax pliance plans with Division of
and Use Tax effective January 1, 2009. The final return for the quarter Taxation and County Tax Board.
ending December 31, 2008, was due January 20, 2009. Beginning Jan- • Form CNC-3 completed by asses-
uary 1, 2009, sales of fur clothing are subject to sales tax at the rate of sor and forwarded to collector.
7%. For more information see the Notice to Fur Clothing Sellers Effective
January 1, 2009.
continued on page 5
Fall 2009 5
tax assessors’ calendar - from page 4 December 20–
• County Tax Board certifies to
Criminal
November 15– Director, Division of Taxation the Enforcement
• Deadline for taxing districts’ ap- aggregate decline, if any, in the Criminal enforcement over the past
peals of Table of Equalized Valu- true value of vacant land, compar- several months included:
ations to New Jersey Tax Court. ing current year to base year. • On June 1, 2009, Paul Sarris, 52,
December 1 (on or before)– December 31 (on or before)– of Jersey City, was sentenced
• Appeals from added assessments • Legal advertisement of avail- to 8½ years in State prison by
filed with County Tax Board, or ability of Tax List for public Superior Court Judge Darlene J.
30 days from the date collector of inspection. Pereksta in Mercer County. Sarris
the taxing district completes bulk pled guilty on March 31, 2009, to
mailing of tax bills for added as- • Applications for veterans’ deduc- a second-degree charge of theft by
sessments, whichever is later. tions and senior citizens, disabled deception. He was also ordered to
persons, and surviving spouses/ pay restitution of $282,902, rep-
• Appeals from omitted assess- civil union partners property tax resenting his share of the amount
ments filed with County Tax deductions for 2010 must be filed stolen from the State, plus penal-
Board, or 30 days from the date with assessor during the pretax ties and interest.
collector of the taxing district year, thereafter with collector
completes bulk mailing of tax during the tax year. In pleading guilty, Sarris admitted
bills for the omitted assessments, that he conspired with his business
whichever is later. • Last date for veterans’ deduc- partner, Achilles “Butz” Amante,
tions and senior citizens, disabled 57, formerly of Jersey City, in a
• Assessors in Highlands mu- persons, and surviving spouses/ fraudulent scheme in which they
nicipalities certify to County Tax civil union partners property tax filed 745 false homestead rebate
Board a report of assessed values deductions for 2009 to be filed applications with the State of
of vacant land in base year and with collector. New Jersey between August 2001
assessed value changes of such
and September 2003, including
land in current year attributable to
multiple applications for each of
successful appeals, revaluations,
or reassessments. Small Business 15 residential and commercial
addresses they rented in Jersey
Workshops City.
Interest 7.00% The Division of Taxation peri-
odically conducts free workshops The State’s investigation re-
The interest rate assessed on amounts throughout New Jersey designed to vealed that the defendants filed
due for the period January 1, 2009 – help small businesses better under- the applications using names and
December 31, 2009, will be 7.00%. stand their State tax obligations. The social security numbers obtained
The assessed interest rate history is seminars are a half day in duration from tax preparation clients with-
listed below. and cover the following topics: out permission of the clients.
The defendants laundered the
Effective Interest • Business registration
Date Rate $573,383 in stolen funds by de-
1/1/05 8.00% • Meeting employer positing the rebate checks in vari-
responsibilities ous commercial bank accounts
10/1/05 9.50%
maintained for their businesses.
1/1/06 10.00% • Reporting business income Sarris specifically admitted that
10/1/06 11.25% he deposited 371 checks totaling
• Filing sales and use tax returns
1/1/07 11.25% more than $282,000 into six bank
1/1/08 10.50% For more information, including accounts he maintained and con-
the current workshop schedule, trolled on behalf of his business,
4/1/08 9.00%
visit the Division’s Web site at: Sarris Financial Services.
1/1/09 7.00% www.state.nj.us/treasury/taxation/
continued on page 6
smallbus.shtml
6
Fall 2009
criminal enforcement - from pg. 5 • On June 12, 2009, in the City of Neumann was the owner of
Newark, Municipal Court Judge Cabbage Rose, L.L.C., and
Three of Amante’s children and Roslyn Holmes-Grant awarded Chelsea Manor Unlimited.
his sister, all of Jersey City, pre- the State of New Jersey one Cabbage Rose, L.L.C., was a
viously pled guilty and were sen- cigarette vending machine and its furniture store located in Fair
tenced last year for participating contents, $156 in U.S. currency, Haven, New Jersey. Chelsea
in the scheme. Amorito “Angelo” and 7.3 cartons of Delaware- Manor Unlimited was a business
A. Amante, 35, and Aloysius M. stamped cigarettes. The vending which sold furniture through
Amante, 33, were each sentenced machine was seized from the the Internet. The investigation
to five years in State prison after defendant, Ademir DeSouza, at revealed that Neumann received
pleading guilty to theft by de- his restaurant, Brasilia Grill, on furniture orders and subsequently
ception. Amorito Amante was April 21, 2008. This forfeiture obtained deposits for merchan-
ordered to pay $80,173 in resti- of property was presented to and dise pursuant to generated in-
tution, while Aloysius Amante accepted by the judge as condi- voices. The investigation further
was ordered to pay $40,794 in tion of DeSousa’s plea agreement. revealed that from January 2004
restitution. Aristides Amante, 29, DeSouza was fined and penalized until January 2007, Neumann re-
also pled guilty to theft by decep- a total of $1,123. This vintage ceived payments from customers
tion and was ordered to serve five “pull knob” style cigarette vend- totaling over $297,000 and failed
years’ probation, conditioned on ing machine has a resale value of to deliver any of the merchandise
serving 30 days in the sheriff’s $3,000 and will be auctioned to or submit refunds. Additionally,
labor program. He was ordered the public through the New Jersey from 2003 until 2006, Neumann
to pay $78,000 in restitution. Department of the Treasury. failed to file New Jersey gross
Matilda Amante Ramos, 58, pled income tax returns.
guilty to theft by deception and • On June 19, 2009, William C.
was ordered to serve five years’ Neumann, Jr., 62, of Leonardo, • On June 22, 2009, the New Jersey
probation and pay $35,851 in res- New Jersey, was sentenced to a Division of Taxation received a
titution. Matilda Amante Ramos five-year State prison term for the forfeiture check in the amount
ran a travel agency, while all of crimes of second-degree theft by of $21,432.50 from the Passaic
the other defendants operated deception and third-degree failure County Prosecutor’s Office. This
their own financial service com- to file State taxes. As a condition amount is derived from a seizure
panies offering tax preparation of the sentence, Neumann must of U.S. currency during a cigarette
services. pay full restitution of $297,724.26 inspection conducted at the China
to a total of 82 victims. Neumann Garden restaurant in Paterson,
Charges are pending against Butz must also pay $9,075.66 in penal- New Jersey, on September 9,
Amante, who is a fugitive. An ar- ties to the New Jersey Division of 2008. (This inspection had also
rest warrant has been issued for Taxation. Neumann pled guilty to resulted in the seizure of 3,298.5
him. the charges on March 9, 2009. cartons of contraband cigarettes.)
continued on page 7
Public Auction Enforcement Summary Statistics
Information Second Quarter 2009
Announcements of upcoming Following is a summary of enforcement actions for the quarter ending
public auctions of seized prop- June 30, 2009.
erty are published on the Divi-
sion of Taxation’s Web site under • Bank Levies 1,386 • Seizures 64
“Auctions.” Select the name of • Certificates of Debt: • Auctions 7
the business for details about Total Number 979
that auction. Total Amount $15,451,157
Fall 2009 7
criminal enforcement - from page 6 efforts of OCI, USPIS, Bureau • On July 27, 2009,
of Alcohol, Tobacco, Firearms Naeem Khan, t/a Gar-
The owner of the aforementioned and Explosives, and Internal den State Fuels, of Egg Har-
establishment, Fen Shou Chen, Revenue Service-Criminal In- bor Township, New Jersey, pled
is currently awaiting sentencing vestigation, and was assisted at guilty to possession of contraband
in United States District Court in different junctures by personnel cigarettes and failure to examine/
Camden. from the New Jersey State Police return. Egg Harbor Municipal
• On July 15, 2009, the New Jersey (NJSP), Essex Anti-Crime Task Court imposed $2,841 in fines,
Division of Taxation received a Force/NJSP Metro North Unit, fees, and penalties. A total of 86
forfeiture check in the amount Newark Police Department Vice cartons of unstamped and Del-
of $22,189.64 from the United Unit, Paterson Police Department aware-stamped cigarettes were
States Postal Inspection Service Narcotics Unit, Passaic Police seized from the business.
(USPIS). The amount is derived Department, and West New York
from multiple seizures of U.S. Police Department.
currency and items recovered • On July 24, 2009, Gilroy Campbell Tax Briefs
during the 2007 execution of of Atlantic City, New Jersey, was Corporation Business Tax
Federal search warrants and arrest sentenced to three years’ proba- Schedule I, Certification of Inac-
warrants connected to the Office tion, 138 days in the Atlantic tivity — An accountant wrote to
of Criminal Investigation (OCI) County Jail, and forfeiture of the Division on behalf of a client
case of Xiao Qi. This individual $323 in seized currency and a who has an S corporation based in
and his associates had conspired 1996 GMC Safari van, which New York City. All of the business
to defraud the State of New Jer- will be auctioned by the State. activity and sales were in New York
sey of cigarette tax through the Campbell pled guilty to charges during 2008.
trafficking of contraband ciga- of possession and sale of contra-
rettes throughout primarily Essex, However, the client rented a ware-
band cigarettes and possession
Union, and Passaic Counties in house in New Jersey in 2008.
and sale of counterfeit CDs and
New Jersey. The case investiga- The client received a notice that
DVDs in August 2008.
tion was anchored by the joint a corporation business tax return
(Form CBT-100S) must be filed with
the State of New Jersey. Reviewing
Form CBT-100S, the accountant
Pay NJ Taxes Electronically inquired about Schedule I, Certi-
fication of Inactivity, which may
Electronic Check (E-Check) be filed with the first five pages of
www.state.nj.us/treasury/taxation/ the tax return. On Schedule I the
corporation certifies that throughout
the tax period the “taxpayer had no
business activities, no income, no
Make a payment directly
assets and…made no distributions,
from your bank account
and did not have any change in own-
ership.” The accountant asked, “Can
this form be used if there were sales
Credit Card* in New York only and no income or
1-800-2PAYTAX www.officialpayments.com activity in New Jersey other than the
rental of the warehouse?”
The Division responded that the
Schedule I, Certification of Inactiv-
* Fee of 2.49% of tax payment applies.
ity, cannot be used by the client.
continued on page 8
8
Fall 2009
tax briefs - from page 7 provided by an employer to an The New Jersey gross income tax ex-
employee. The Federal exclusion clusion is for “commuter transporta-
Renting a warehouse in New Jersey applies to employer reimbursement tion benefits” provided to employees
creates nexus and constitutes busi- for reasonable expenses incurred by for their use of “alternative means
ness activity. Therefore, all pages the employee for the purchase of a of commuting.” Further, the gross
of Form CBT-100S must be com- bicycle and bicycle improvements, income tax exclusion provides that
pleted and filed (with tax payment repair, and storage, if such bicycle those terms are defined in N.J.S.A.
as instructed). is regularly used for travel between 27:26A-3, which provides, in perti-
Gross Income Tax the employee’s residence and place nent part:
Bicycle Commuter Transportation of employment.
Alternative means of commut-
Benefit — An employer inquired The New Jersey Gross Income Tax ing include, but are not limited
whether New Jersey has a commuter Act, at N.J.S.A. 54A:6-23, provides to, public transportation, car
transportation benefit for bicycle a limited exclusion for certain com- pools, van pools, bus pools,
commuters similar to the newly- muter transportation benefits. One ferries, bicycling, telecommut-
adopted Federal income tax benefit limitation is that the benefit be pro- ing, and walking….
for commuters using a bicycle. vided to the employee “in addition
to and not in lieu of compensation.” The Division determined that if
Beginning with the 2009 tax year, commuter benefits for bicycling
Federal IRC Section 132(f) pro- In other words, the New Jersey
commuter transportation benefit are excludable for Federal income
vides a limited Federal income tax, they are also excludable for
tax exclusion for “any qualified exclusion does not apply to a benefit
provided through a salary reduction New Jersey gross income tax pur-
bicycle commuting reimbursement” poses, assuming they are not pro-
agreement.
vided through a salary reduction
agreement.
Sales Tax Information
P.L. 2005, c.126, effective October 1, 2005, conformed the New Sales and Use Tax
Jersey Sales and Use Tax Act to the Streamlined Sales and Use Tax “Cash for Clunkers” Credit To-
Agreement. More information is available at: wards Car Purchase — A taxpayer
Streamlined Sales and Use Tax buying a car inquired about the
“Cash for Clunkers” payments.
P.L. 2006, c.44, increased the New Jersey sales and use tax rate from More specifically, the buyer asked
6% to 7%, effective July 15, 2006. The rate change affects all retail whether the program payment cred-
sales of taxable merchandise or services. For more information on ited towards the motor vehicle pur-
the rate increase visit: chase was subject to sales tax.
Information for all Sales and Use Tax Vendors
Cash for Clunkers payments are
Additional provisions of P.L. 2006, c.44, effective October 1, 2006, made under the Consumer Assis-
extended the sales and use tax to new services, limited some existing tance to Recycle and Save Act of
exclusions and exemptions, and encompassed product categories 2009. If a buyer’s application is
that have come into being with new technologies. More informa- successfully approved by the Fed-
tion is available at: eral government, the government
Information Regarding Sales and Use Tax Changes Effective
will issue a financial credit to the
October 1, 2006
dealer (subject to fund availability
P.L. 2008, c. 123, revised the New Jersey Sales and Use Tax Act and approval of all aspects of the
to conform with various provisions of the Streamlined Sales and application).
Use Tax Agreement (SSUTA). The amendments took effect on
The Division replied that the amount
January 1, 2009, and include changes in telecommunications,
credited as the program payment
direct mail, fur clothing, the definition of sales price, and the
was subject to sales tax. The Federal
medical products exemption. More information is available at:
Amendments to Sales and Use Tax Act Effective January 1, 2009
continued on page 9
Fall 2009 9
tax briefs - from page 8 any place of business, property, em- another security, and thus
ployees, agents, or representatives in a qualifying asset, prior to
funds provided to the dealer under New Jersey. the 2006 amendment. The Court
this program are directed towards the stated that there was no language
purchase or lease of a new vehicle. BIS LP filed a 2003 corporation in the statutes or regulations which
Those funds are deemed to be con- business tax return on which it would have disqualified the limited
sideration paid by a third party. The elected to be treated as an investment partnership interest from qualify-
amount of third-party consideration company because it qualified with its ing as another security in 2003.
must be included in the sales tax base limited partnership interest in Solu- Additionally, the Court refused to
when calculating the applicable sales tions. Audit denied the investment allow retroactive application of the
tax due on the transaction. The funds company status on the basis that BIS regulation as that would be unfair
are not treated as part of the trade-in LP did not have a qualifying asset. to taxpayers.
value that a dealer offers a buyer. Additionally, the auditor found that
BIS LP had a unitary relationship Moreover, the Court also held that
Tree Removal Service — A home- with the business conducted by So- BIS LP was not subject to corpora-
owner asked whether services to lutions and provided BIS LP with tion business tax in 2003, noting that
cut down and remove a tree and the enough constitutional presence in BIS LP and Solutions were separate
stump are subject to sales tax. The New Jersey to be subject to tax. entities and that BIS LP received
Division responded that these ser- 100% of its income from its limited
vices are subject to sales tax. The Court reviewed the statutes partnership interest in Solutions.
and regulations. In 2006 there was BIS LP is a holding company that
In the Sales and Use Tax Act, the a regulatory amendment that stated
definition of landscaping services was a passive investor and not in the
that qualified investment assets do same line of business as Solutions.
includes “clearing and filling land.” not include the direct investment in
That term includes the services of The Court stated this situation was
a non-publicly traded pass-through akin to the Division’s regulation,
removing a tree and its stump. The entity, if that entity would not sat-
business that provides the service N.J.A.C. 18:7-7.6, example IV.
isfy the definition of an investment Therefore, BIS LP and Solutions
must charge and remit sales tax. company had it been organized as were not integrally related.
a corporation. Prior to the amend-
ment, there was no language in the Nexus and Software License –
In Our Courts statutes or regulations that suggested AccuZIP, Inc. v. Director, Division
Corporation Business Tax that an interest in a limited partner- of Taxation, Tax Court No. 005744-
Regular Place of Business – BIS LP, ship could not be considered as a 2003, decided August 13, 2009;
Inc. v. Director, Division of Taxation, qualifying asset for purposes of the Quark, Inc. v. Director, Division of
Docket No. 007847-2007, decided investment company election. Taxation, Tax Court No. 004692-
July 30, 2009. 2002, decided August 13, 2009.
The Court held that BIS LP’s 2003
BIS LP was a wholly-owned sub- limited partnership interest in Solu- The Division determined that both
sidiary of BISYS, Inc. BISYS, tions was an investment contract plaintiffs were subject to corpora-
Inc. and BIS LP entered into a lim- and therefore would be considered tion business tax (CBT) because
ited partnership agreement whereby continued on page 10
BISYS, Inc. became a 1% general
partner and BIS LP was a 99% lim- New Jersey tax forms at your fingertips!
ited partner of Solutions. BIS LP did From your fax machine’s phone, dial
not have the right or obligation to
participate directly or indirectly in
the active management of Solutions. 609-826-4500
BIS LP’s sole interest in New Jersey
was its limited partnership interest
NJ TaxFax
NJ Tax Forms & Publications
in Solutions, which is in the data 24 Hours – 7 Days a Week
processing business. It did not have
10
Fall 2009
in our courts - from page 9 companies were involved for the The Court upheld the Director’s
purpose of creating a tax benefit. denial of the S corporation’s refund
they retained title to licensed soft- claim for corporation business tax
ware where the license was sold, As to the Division’s alternative (CBT) and affirmed the Director’s
used, and located in New Jersey. nexus arguments, the Court refused assessment of personal income tax
For example, Quark’s license stated to adopt the significant economic against the individual, Peter Polites,
that a customer did not receive presence test (as applied in the West because the plaintiff’s contentions
title to the software but rather was Virginia case concerning MBNA) were based on the president of the
granted a nonexclusive license to noting that it was not adopted by company’s self-serving testimony
use the software subject to terms and New Jersey and therefore was not and not supported by any docu-
restrictions. binding. As to economic benefit, mentary evidence that was definite,
the Court found that although the positive, and certain in quantity and
The Tax Court ruled that neither plaintiffs may receive a slight benefit
plaintiff was subject to CBT due quality to overcome the Division’s
from the New Jersey judicial system, presumption of correctness.
to the sale of software. The Court that alone is not a substantial eco-
found that the property at issue was nomic benefit that would satisfy the The Court held that GSJ did not
tangible and not intangible, citing substantial nexus requirement. maintain a regular place of business
the Sales and Use Tax Act, as well in a room of its president’s residential
as Federal law which states that In conclusion, the Court held that apartment in Pennsylvania because
prewritten computer software is AccuZIP was not subject to CBT be- GSJ did not provide documentary
considered tangible property even cause it did not meet the substantial evidence that showed GSJ’s direct
though it is characterized as a licens- nexus requirement of the Commerce responsibility for the expenses, it
ing agreement. Therefore, the buyer Clause as it was not doing business was not identifiable as an office of
acquires ownership of the physical in New Jersey. On the other hand, GSJ, and the alleged home office
property containing the intellectual Quark was found to be doing busi- was not regularly occupied when the
property for its own use. The Court ness in New Jersey because of the president was not there. Therefore,
reasoned that to find that the plain- activities of its one sales representa- the Court concluded that it did not
tiffs owned property in New Jersey tive; however, those activities were matter whether the income was de-
would lead to illogical results. protected by P.L. 86-272 and Quark termined to be operational as all the
was therefore only subject to the income was allocated to New Jersey
The Court distinguished the Lanco minimum tax.
ruling emphasizing that the Court under Section 6; however, the Court
gave great weight to the fact that Subjectivity/Nexus – GSJ Corpora- noted that even if the income was
Lanco was licensing intangible prop- tion and Peter Polites v. Director, determined to be nonoperational, the
erty, that income (royalty payments Division of Taxation, Docket No. income should be assigned to New
or licensing fees) was generated 007680-2004. Jersey because all GSJ’s business
in New Jersey from the use of in- occurred in New Jersey. Finally, the
tangible property, and that holding Court denied GSJ’s request for Sec-
tion 8 relief stating that there was no
documentary evidence that GSJ ever
filed any income tax report or return
in another state.
Current Amnesty Programs
The following state(s) are conducting tax amnesty program(s). During the As to the personal income tax as-
designated amnesty periods, taxpayers have a chance to pay back taxes sessed against the plaintiff, the Court
with reduced (or eliminated) penalty and/or interest. For more information, held that the income earned from a
including eligibility requirements, or to obtain an application, visit the Web settlement and arbitration award was
site(s) listed below. sourced to New Jersey and therefore
taxable to Polites, a nonresident
ME Sept. 1 – Nov. 30 www.state.me.us/revenue/ of New Jersey. Plaintiff failed to
VA Oct. 7 – Dec. 5 www.getsquareva.com/
continued on page 11
Fall 2009 11
in our courts - from page 10 The Tax Court ruled that “the goal in Division contended that
offering a tax credit for taxes paid to land is not a depreciable
provide any cogent evidence to sup- other jurisdictions is to avoid double asset and the plaintiffs’ personal
port his contentions. taxation of money taxed and actu- expenses of interest on the loans to
ally paid to both New Jersey and a purchase the property and pay yearly
Section 338(h)(10) Election – foreign jurisdiction.” Vassilidze v. property taxes are not deductible and
McKesson Water Products Company Director, Division of Taxation, 24 therefore the taxpayer’s basis for the
v. Director, Division of Taxation, N.J. Tax 278, 290 (Tax 2008). calculation on the sale of the land
Docket No. A-5423-06T3, decided is the taxpayer’s Federal adjusted
July 16, 2009. Judge Bianco compared the facts in basis under N.J.S.A. 54A:5-1(c).
Mannino with the facts in the Allen The taxpayers also asserted Moroney
The Appellate Division upheld the case:
Tax Court ruling that the gain de- v. Director, Division of Taxation;
rived on a deemed asset sale pursu- The Allen case states that both Denitzio v. Director, Division of
ant to a Section 338(h)(10) election amounts would be subtracted Taxation, 2005 N.J. Super LEXIS
is not subject to corporation business from the numerator only if 83, (2005).
tax because it is not operational both amounts were deductible There is no statutory provision
income as defined under N.J.S.A. in both states. The Manninos’ which allows and provides for the
54:10A-6.1(a). deductions are not deductible deductions claimed by the plaintiffs.
in both states and therefore Plaintiffs sold a piece of vacant land
Gross Income Tax cannot be deductible from the
Credit for Taxes Paid to Other which was held by the plaintiffs in
numerator. their individual capacity for invest-
Jurisdictions – Mannino, Philip
& Joanne v. Director, Division of Judge Bianco also stated that to ment purposes. No improvements
Taxation, Docket No. 009142-2007, reduce the credit numerator by the were made on this land. Plaintiffs
decided July 8, 2009. partnership expenses allowed by had borrowed money to purchase the
New Jersey and California would property and thus had to pay interest
This case essentially confirmed or result in double taxation. on the personal loan. Plaintiffs paid
denied whether Mannino rose to the property taxes on this property. This
level of a previously decided case, Deduction of Personal Expenses property was not income produc-
Allen v. Director, Division of Taxa- – Sitar, William and Margaret v. ing. For the 1998 tax year, plaintiffs
tion, 14 N.J. Tax 385 (1994), aff’d, Director, Division of Taxation, filed their Federal 1040 income tax
15 N.J. Tax 704 (App. Div. 1996). Docket No. A-3323-07T1, decided return, and on Schedule A they de-
In Allen, the taxpayer had a capital August 4, 2009. ducted interest paid on the loan to
loss that was deductible in New purchase the said property and the
The issue presented in this matter
Jersey but not in New York and a real estate taxes paid on the property
is the correctness of the methodol-
loss from rental property deductible in the amount of $1,710,158. These
ogy employed by the Division of
in New York that was not deduct- Schedule A expenses were personal
Taxation in denying the deduction
ible in New Jersey. The Court held expenses which were not related to
of personal expenses from the gain
that reducing the credit numerator taxpayers’ being involved in a trade
on the sale of land held purely for
by both categories of income would or business. In Gilligan v. Director,
investment purposes. The plaintiffs,
result in double taxation. Therefore, Division of Taxation, 11 N.J. Tax
William and Margaret Sitar, asserted
the taxpayer was only required to 414, (1991) such expenses are not
that since personal expenses (inter-
reduce his credit numerator by the deductible from the plaintiff’s gross
est on a loan and property taxes)
greater of the two amounts. income.
incurred in connection with the land
In the Mannino case, the taxpayer they held for investment purposes Thus, the Division wrote in the final
had partnership expenses that were were deductible Federally, but not determination that the plaintiffs must
deductible in New Jersey and not in for New Jersey purposes, then pur- use the Federal adjusted basis to
California and partnership expenses suant to Koch, the New Jersey gross compute gain from sale of the land
deductible in California that were income tax assessment denying a
not deductible in New Jersey. basis adjustment was invalid. The continued on page 12
12
Fall 2009
in our courts - from page 11 in a fashion that would qualify for in that the duties and responsibilities
exemption as a parsonage under described by him in his undisputed
in this case, and that the tax on the N.J.S.A. 54:4-3.6. testimony ‘sound like those per-
gain from the sale of land was not a formed by congregational leaders
tax on a return of capital nor a tax on In September 2005, the Randolph of all religious denominations.’”
fictitious, phantom income. Township zoning administrator ob- The rabbi testified that his responsi-
served activity which he believed bilities included providing religious
The New Jersey Superior Court, demonstrated that the Chabad of services, religious education, prayer
Appellate Division, in affirming the Randolph’s parsonage property services, sermons, weekly Torah
Tax Court stated: was being used as a Hebrew school. readings, and officiating at various
However, the zoning administrator religious rituals such as marriages
Finally, we reject plaintiffs’ admitted that while he observed
argument that the computation and funerals, overseeing preschool
a large number of people enter- and adult religious educations,
of the basis for purposes of ing and leaving the premises, he
the GIT is the same as that for hiring staff, and overseeing the
had no personal knowledge as to organization’s finances. The judge
federal income tax purposes. what they were doing at the house.
Plaintiffs’ seek to “have it maintained that Randolph Township
Randolph Township also contended had not proven that the premises
both ways” - to take a personal that Chabad was using the property
deduction for federal purposes were being used in a manner that
as a Jewish community center in violated the zoning ordinance. Judge
and take the same expenses violation of the zoning ordinance,
and capitalize them for pur- Kuskin’s decision was based on his
and therefore was not entitled to a assessment of the rabbi’s testimony,
poses of the GIT. The disparate tax exemption.
treatment of these expenses is as well as the Township’s lack of
what the GIT seeks to avoid. In October 2005, the Township tax proof. The record contains evidence
Nothing in Koch or Moroney assessor denied the Chabad a par- of one zoning violation which was
suggests that such conduct is sonage exemption for the residence resolved by paying a $250 fine and
envisioned by the GIT. occupied by the religious organiza- moving the religious school to an-
tion’s rabbi. The Township main- other location. There was no proof
Local Property Tax tained that the Chabad committed that the Chabad violated the zoning
Property Tax Exemption for several zoning violations, and that ordinance in any other way. Judge
Parsonage Residence – Chabad “there was no proof that the rabbi Kuskin concluded that the Chabad
of Randolph, Inc. v. Township of was in fact installed over an estab- carried its burden of proving that
Randolph, New Jersey Superior lished congregation.” The Chabad the rabbi’s Chabad-owned residence
Court, Appellate Division, Docket appealed the tax assessor’s denial was entitled to a parsonage exemp-
No. A-3244-07T3, decided Decem- of the property tax exemption to the tion as per N.J.S.A. 54:4-3.6, which
ber 31, 2008. Morris County Tax Board. On ap- exempts from taxation “the build-
peal, the Morris County Tax Board ings, not exceeding two, actually
The Township of Randolph appealed
affirmed the assessor’s decision to occupied as a parsonage by the of-
from a judgment entered by the State
deny the parsonage exemption. ficiating clergymen of any religious
Tax Court which granted the Chabad
corporation of this State.”
of Randolph, Inc. a property tax ex- The Chabad appealed to the Tax
emption for a parsonage residence. Court of New Jersey, where it The Township of Randolph then
The New Jersey Appellate Division reversed the Morris County Tax appealed the Tax Court’s decision to
affirmed the Tax Court’s decision. Board’s decision. Judge Kuskin, the New Jersey Appellate Division.
J.T.C., found that the rabbi’s testi- The Appellate Division agreed with
The issues raised by the Township of
mony on the issue of “officiating the Tax Court and held that “the
Randolph concerning the Chabad of
clergyman” was credible, and that evidence overwhelmingly supports
Randolph’s application for a prop-
the property was used as a parsonage the conclusion that his residence is
erty tax exemption were whether
within the meaning of the statute. a ‘parsonage’ within the meaning of
the rabbi met the definition of “of-
Judge Kuskin concluded that the N.J.S.A. 54:4-3.6.” With this ruling
ficiating clergyman” and whether
the premises in question was used rabbi “was an officiating clergyman continued on page 13
Fall 2009 13
in our courts - from page 12 Miscellaneous 3. Modifications to the
Expansion of Neighborhood Revi- current Emerging and
the Chabad of Randolph was granted talization State Tax Credit — P.L. Biotechnology Credit Transfer
a property tax exemption for the 2009, c.120, signed into law on Program;
parsonage residence. August 18, 2009, and effective im-
4. Expansion of eligibility and
mediately, extends the Neighbor-
Sales and Use Tax tax credit limits under the Ur-
hood Revitalization State Tax Credit
Statute of Limitations – Trump ban Transit Hub Tax Credit Act
Program eligibility to areas that
Plaza, Trump Marina, and Trump (UTHTCA);
are adjacent to current qualifying
Taj Mahal Associates v. Direc- neighborhoods and that share similar 5. Relief to certain developers oth-
tor, Division of Taxation, Docket socioeconomic characteristics with erwise subject to the Statewide
Nos. 008825-2006; 008827-2006; those eligible neighborhoods. The Non-Residential Fee Act and
008826-2006, decided June 19, eligible neighborhoods qualified due grants to municipalities for af-
2009. to receipt of aid under the Special fordable housing;
In this case, the Court found that Municipal Aid Act or because they
were coextensive with an Abbott 6. Sales tax exemption on the re-
there was no cause to allow an ex-
district as designated pursuant to ceipts for the use of energy by
ception to the four-year statute of
the Comprehensive Educational certain postconsumer material
limitations involving refund claims
Improvement and Financing Act of manufacturing facilities.
for sales tax erroneously charged to
the Trump Entities by Atlantic City 1996. This Act permits tax credits
Electric (ACE). The Court found that to businesses located in a depressed
the argument to extend the statute neighborhood bordering a munici- Tax Calendar
of limitations was not compelling pality that is currently eligible to The following three calendars pro-
and that “the Director, on behalf of participate in the program. The cap vide listings of filing and payment
all other taxpayers should not be of $10 million remains the same. dates for tax year 2009 ( Jan-
ordered to waive its protection.” uary 1, 2009 – December 31, 2009)
The New Jersey Economic Stimu-
and tax year 2010 (January 1, 2010 –
lus Act of 2009 — P.L. 2009, c.90,
December 31, 2010) for businesses
signed into law on July 28, 2009,
and individuals:
In Our Legislature became effective immediately with
Gross Income Tax the exception of sections 9 and 11, • Chronological List of Filing
Checkoff for Community Food which became effective on October Deadlines — This calendar is
Pantry Fund and Cat and Dog 1, 2009. This was an omnibus bill, for use by both businesses and
Spay/Neuter Fund — P.L. 2009, consisting of eight actions, designed individuals. If you are respon-
c.124, enacted on September 8, to reinvigorate New Jersey’s econ- sible for a return that is not
2009, effective immediately, and ap- omy. There are numerous technical listed in this calendar, please
plicable to taxable years beginning and administrative changes in this refer to the instruc tions that
on or after January 1, 2010, estab- Act; six of which affect the Division accompanied the return, or con-
lishes the Community Food Pantry of Taxation. The Act provides the tact the Customer Service Center
Fund and the Cat and Dog Spay/ following: at 609-292-6400 for the appropri-
Neuter Fund. It gives New Jersey ate filing deadline.
1. An Economic Redevelopment
taxpayers the opportunity to make
and Growth Grant Program; 2009 2010
voluntary contributions on their tax
returns in support of community 2. Authorization for certain mu- • Alphabetical Summary of Due
food pantries and for pet spaying nicipalities to impose special Dates by Tax Type
and neutering. taxes and surcharges to fund
redevelopment activities and 2009 2010
certain programs;
continued on page 14
14
Fall 2009
tax calendar - from page 13
• Payment Dates for Weekly important
Payers — An employer or phone
other withholder of New Jersey
gross income tax is designated numbers
a “weekly payer” if the amount Customer Service Ctr....609-292-6400
of tax they withheld during the Automated Tax Info ...1-800-323-4400
previous tax year was $10,000 or ........................................609-826-4400
Homestead Rebate Hotline
more. for Homeowners .....1-888-238-1233
Homestead Rebate Hotline
2009 2010
for Tenants .............1-888-213-8623
Property Tax Reimbursement
Hotline ....................1-800-882-6597
Earned Income Tax Credit
Information...............609-292-6400
NJ TaxFax ......................609-826-4500
Business Paperless Telefiling
System ....................1-877-829-2866
Speaker Programs .........609-984-4101
Alcoholic Bev. Tax .........609-588-3932
Corp. Liens, Mergers, Withdrawals
& Dissolutions...........609-292-5323
Director’s Office ............609-292-5185
Inheritance Tax ..............609-292-5033
Local Property Tax ........609-292-7974
Motor Fuels Tax
Refunds .....................609-588-3688
Public Utility Tax ...........609-584-4337
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