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Tax Law

Legal Alert – New Jersey fixes “trapped dividend exclusion” problem

The New Jersey Division of Taxation issued a notice on November 5th solving the “trapped dividend exclusion” issue faced by many taxpayers as they prepared to file their first New Jersey combined Corporate Business Tax (CBT) returns for the 2019 year. The issue arose due to New Jersey’s adoption of combined reporting and its proposed method for calculating the dividend received exclusion. Specifically, a combined group that includes a member with a zero allocation factor would not be able to utilize that member’s dividend exclusion.

The Division issued its notice one day after Governor Murphy’s approval of a technical corrections bill, Assembly 4809, which among other things, amended the definition of “taxpayer” to include “any combined group filing a mandatory or elective New Jersey combined return.”

Read the full Legal Alert here.