New Jersey enacts significant tax changes

In brief

A.B. 5323, enacted on July 3, makes several major changes to New Jersey’s Corporation Business Tax (CBT) and other taxes. Many of these changes are applicable for periods ending on and after July 31, 2023, unless otherwise noted. The changes include, but are not limited to: 

• allowing an effective 95% deduction for GILTI income 
• repealing the GILTI and FDII IRC Section 250 deduction 
• applying IRC Section 163(j) limitations on a consolidated basis 
• modifying IRC Section 174 treatment for R&D expenses used to compute the New Jersey R&D credit 
• adopting the federal 80% NOL limitation 
• allowing taxpayers to apply a DRD before applying an NOL deduction 
• allowing PNOL deductions to be shared with group members 
• changing from Joyce to Finnigan apportionment method 
• codifying the Division’s position that foreign entities are included in a water’s edge group to the extent of effectively connected income not protected by treaty 
• repealing intangible and interest expense related-party addbacks 
• adopting a bright-line economic nexus threshold for CBT purposes 
• modifying the annual net deferred tax liability deduction by extending the net deferred tax liability deduction period. 

The New Jersey Division of Taxation, on July 11, issued TB-107, which summarizes significant provisions of A.B. 5323. 

[A.B. 5323 (7/3/23)]