A recent amendment to the New Jersey Corporation Business Tax Act imposes a Corporation Business Tax for periods beginning on or after January 1, 2001 on New Jersey and foreign limited liability companies and limited partnerships classified as partnerships for federal income tax purposes unless certain partners or members consent in writing to be subject to taxation in New Jersey. Consents must be obtained from all corporate members or partners except corporations exempt from the Corporation Business Tax. Certain releases of the Division of Taxation (as well as the consent form itself) imply that, at present, only corporations must consent. There is a limited exception for investment partnerships having more than ten members or partners with no member or partner owning more than a 50% interest and that derive at least 90% of their gross income from certain specified sources including dividends and interest.
The consents described above must be obtained by the 15th day of the 4th month after the close of each tax year of a limited liability company or limited partnership and the consent may not be revoked after such date. Such consent is generally only good for one year and must be obtained each year on forms prescribed by the Director of the Division of Taxation. The Division requires that a declaration of exemption must also be obtained each year from a corporate member or partner claiming exemption from the Corporation Business Tax by use of the same form (as with the consent requirement described above, it is unclear whether taxpayers other than corporations must make a declaration of exemption).
In the event a limited liability company or limited partnership fails to obtain all necessary consents of the appropriate members or partners on or before the required date, it must pay a Corporation Business Tax on behalf of nonconsenting members or partners based on their share of the entity's New Jersey income.
A limited liability company or limited partnership must make an estimated tax payment of nonconsenting members' or partners' taxes for its tax year on or before the 15th day of the 4th month of its tax year. Such payment will generally be based on the entire net income for the prior tax year of the limited liability company or limited partnership. Special rules apply to taxpayers that did not have a prior tax year of 12 months. A limited liability company or limited partnership is not required to make an estimated payment for its tax year commencing in the 2001 calendar year. In addition, the tax liability of a limited liability company or a limited partnership shall be 45% of the amount otherwise due for its tax year commencing in the 2001 calendar year. Limited liability companies and limited partnerships may recover payments made on behalf of non-consenting members or partners.
