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Passing-through the SALT Deduction Cap: New Jersey Edition

By 3 Mins Read

In response to the federal $10,000 cap on the state and local tax deduction, New Jersey recently enacted an elective pass-through entity tax. By taxing pass-through entities, the law shifts the tax burden from individuals subject to the federal deduction limitation to entities that are not subject to the limitation, which deduction then flows through to the pass-through entities’ owners without limitation. While uncertainty remains about the federal deductibility of such state pass-through entity taxes by individual owners, New Jersey joins a growing number of states to pass similar legislation in the wake of the SALT deduction cap, including Connecticut, Louisiana, Oklahoma, Rhode Island, and Wisconsin.

New Jersey Legislature Approves Amendments to Key Corporation Business Tax Provisions

By , and 13 Mins Read

On September 27, 2018, the New Jersey Senate and General Assembly passed legislation amending certain provisions of the New Jersey Corporation Business Tax (“CBT”) reform bill that was enacted earlier this year (“Technical Amendments”). In July, Governor Phil Murphy and the New Jersey Legislature enacted a $37.4 billion budget package (the “Budget Bill”) that implements sweeping changes to the CBT.  Among these changes are mandatory unitary combined reporting, market-based sourcing, and a new four-year surtax on corporations with over $1 million of allocated taxable net income. The Technical Amendments, which are awaiting Governor Murphy’s signature, make several changes to the Budget Bill.  A summary of the most noteworthy provisions contained in the Budget Bill and Technical Amendments is below.

U.S. Supreme Court Hears Oral Arguments in South Dakota v. Wayfair

By 3 Mins Read

Baker McKenzie attended the U.S. Supreme Court’s oral arguments yesterday in South Dakota v. Wayfair, Docket No. 17-494.  At issue in the case is whether the Court should abrogate the physical presence nexus standard that it first articulated in National Bellas Hess v. Dep’t of Revenue, 386 U.S. 753 (1967), and later affirmed in Quill Corp. v. North Dakota, 504 U.S. 298 (1992).  The Court’s decision could have a profound impact on sales and use tax nexus in the United States by altering the limitations currently imposed on a state’s ability to require out-of-state retailers to collect such tax.

Taxpayers and States Respond to Tax Reform’s Limitation on Individual SALT Deductions

By 7 Mins Read

With the 2017 Tax Cuts and Jobs Act (“Tax Reform”) fully enacted, taxpayers and practitioners are racing to find last-minute planning opportunities prior to the new year, and states are looking for ways to assist their residents prospectively.  The most talked about planning opportunity, currently, is prepaying property taxes for 2018 to create a 2017 tax benefit around Section 11042(a)(6), which limits the state and local tax deduction to $10,000 beginning in 2018.  However, imprecise wording contained within Section 11042(a)(6) could feasibly be interpreted to permit a deduction for state and local income taxes as well – depending on how you read the provision.

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