Press Room: Tax Release

March 05, 2014

New Jersey Announces Two Voluntary Disclosure Initiatives

New Jersey Announces Two Voluntary Disclosure Initiatives Affecting Non-Compliant Partnerships and Entities Licensing Intangibles in New Jersey

The New Jersey Division of Taxation recently announced the launch of two important voluntary disclosure initiatives, giving companies and partnerships with outstanding tax liabilities in New Jersey the chance to avoid potentially large penalties.

Intangible Asset Nexus Initiative

The first initiative is the Intangible Asset Nexus Initiative, whereby companies that own intangible assets and have derived income from the use of those assets in New Jersey may come forward and voluntarily comply with their corporation business tax filing requirements. The Division will waive all penalties for taxpayers who enter the program successfully. Further, operating companies or those companies that have paid royalties and added the same back to their New Jersey entire net income may submit amended returns for any period for which the statute of limitations remains open in order to claim an exception to the add-back.

Partnership Tax and Partner Fees Initiative

The second initiative, the Partnership Tax and Partner Fees Initiative, allows partnerships that have New Jersey-sourced income but have not filed tax returns and paid taxes and fees to come forward and voluntarily comply with their Corporation Business Tax and Gross Income Tax filing requirements. Similarly, individual partners that have not filed and paid New Jersey taxes may also seek relief under this initiative. All penalties would be waived upon successful compliance with the initiative.

Both initiatives will run for a brief two month period, from March 15, 2014 through May 15, 2014. For the Intangible Asset Nexus Initiative, the look-back period is limited to the periods beginning after July 1, 2010, or the date business commenced, whichever is later. For the Partnership Tax and Partner Fees Initiative, the look-back period is limited to the periods beginning on or after January 1, 2010.

Taxpayers who enter either program should be mindful of some additional requirements in order for all penalties to be waived. All returns must be filed and taxes paid, including interest, within 45 days of signing the voluntary disclosure agreement.

Taxpayers who fit into the above categories and believe they may have tax liabilities in New Jersey should act now to take advantage of this beneficial program. The limited look-back period combined with penalty abatement should be a strong incentive to comply under this initiative.