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On September 29, 2020, Governor Philip Murphy signed A. 4721, the bill extending and retroactively increasing New Jersey’s Corporation Business Tax (“CBT”) surtax.
Instead of eliminating the surtax after December 31, 2021, as was previously scheduled, A. 4721 increases the CBT surtax rate to 2.5% and extends the surtax through December 31, 2023 for corporations with allocated taxable net income over $1 million for tax periods beginning on or after January 1, 2018 through December 31, 2023. This increase effectively returns the surtax to the rate imposed in 2018 and 2019 and results in a total corporate tax rate of 11.5% for corporations that are subject to the surtax. If, however, the federal corporate tax rate is increased to a rate of at least 35% of taxable income (the pre-Tax Cuts and Jobs Act rate), then the surtax will be suspended following the conclusion of the tax period corresponding with the increase to the federal corporate income tax rate.
The bill applies retroactively to tax periods beginning on or after January 1, 2020, but also provides that the Director of the Division of Taxation is prohibited from imposing penalties caused by retroactive imposition of the increased surtax.