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Analysis

New Jersey law establishes a tax amnesty program

Multistate Tax alert | July 25, 2018

This tax alert summarizes the parameters of this pending New Jersey tax amnesty, applicable to any state tax due on or after February 1, 2009, and prior to September 1, 2017.

Overview

On July 1, 2018, Governor Murphy signed Assembly Bill No. 34381 (A3438) which includes the following modifications to New Jersey law:

  • Establishes an amnesty period not to exceed 90 days.
  • Creates a non-abatable five percent penalty for eligible taxpayers who fail to pay during the amnesty period.

Amnesty period and eligibility

A3438 establishes a tax amnesty period “not to exceed 90 days” and to end “no later than January 15, 2019.” The amnesty will apply to New Jersey tax liabilities for tax returns that are due on or after February 1, 2009, and prior to September 1, 2017, and permits eligible taxpayers who previously failed to pay any state tax to pay the tax due and half of the interest due as of November 1, 2018.

Eligible taxpayers will not be required to pay the other half of the interest due as of November 1, 2018, as well as recovery fees, delinquency fees, and related penalties due to late payment. However, criminal and civil fraud penalties will not be waived. In order to qualify for amnesty, the taxpayer must file a return for the tax due on or before the last day of the amnesty period. Taxes paid under amnesty are final and not subject to refund, review or appeal.2

On July 17, 2018, the New Jersey Division of Taxation posted a notice, indicating that the amnesty will not begin until after November 1, 2018, and will end by January 15, 2019.

Taxpayers under criminal investigation at the time of payment are not eligible.

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Five percent penalty for eligible taxpayers who fail to pay during the amnesty period

A3438 also provides that New Jersey tax liabilities eligible to be satisfied during the amnesty period that is not satisfied by the end of the amnesty period are subject to a five percent penalty. This penalty cannot be waived and is in addition to the tax owed, all other penalties, interest, and collection costs.

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Considerations

Eligible taxpayers should review existing exposures for relevant New Jersey tax types and periods, including whether New Jersey tax exposures exist relative to tax types other than sales and use tax that may have been impacted by the US Supreme Court decision in South Dakota v. Wayfair, Inc., et al.3 (holding that a sales-based nexus statute did not violate the “substantial nexus” element of the dormant Commerce Clause,) and consult with their tax advisors regarding participation in this pending New Jersey tax amnesty.

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Contacts:

If you have questions regarding A3438 or other New Jersey tax matters, please contact any of the following Deloitte professionals:

Norman Lobins, managing director, Deloitte Tax LLP, Parsippany, +1 973 602 5373

Michael Bryan, managing director, Deloitte Tax LLP, Philadelphia, +1 215 977 7564

Kevin Friedhoff, manager, Deloitte Tax LLP, Parsippany, +1 973 602 4216

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Multistate Tax alert archive

The Multistate Tax alert archive includes external tax alerts issued by Deloitte Tax LLP's Multistate Tax practice during the last three years. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons.

View the list of archived Multistate Tax alerts.

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References

1 NJ A.N. 3438 (July 1, 2018). A copy of the adopted law is accessible here.

2 Id.

3 South Dakota v. Wayfair, Inc., et al., No. 17-494 (June 21, 2018) 585 US. For additional information on the potential nexus implications of Wayfair for state income tax purposes, see our June 28, 2018, MTS alert, available here. For additional discussion of economic presence nexus considerations as they may exist relative to New Jersey Corporate Business Tax, please see the New Jersey Division of Taxation, TAM 2011-6 (January 10, 2011), available here.

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