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New Jersey Transfer Pricing Initiative - NJ Taxpayers Have Limited Time to Participate

By Matthew DeLorenzo .

If you are a New Jersey corporate taxpayer that engages in intercompany transactions, transactions that lack economic substance, or transactions that are not at the fair market value, you may encounter some intercompany pricing issues (IPI). As a result, there is a risk that you may have inaccurately reported net income attributable to the state of New Jersey in your tax filings.

The NJ Division of Taxation developed the Transfer Pricing Initiative to assist taxpayers with any potential IPI. This program is available to all NJ corporate taxpayers who have filed corporate income tax returns within the statute of limitations (the prior three-year period). The program is designed to ensure a fair, consistent, and expedited resolution of any potential IPI, and to provide certainty and uniformity to taxpayers.

Taxpayers who engaged in any intercompany transactions or transactions with potential IPI may participate in this program to adjust or amend filed tax returns and otherwise resolve disputes resulting from IPI. Taxpayers that are under audit or taxpayers who have been notified of an upcoming audit, taxpayers with pending cases or appeals, and taxpayers engaging in intercompany transactions with related parties are all eligible to participate in this program. However, this program is not available to taxpayers involved in any stage of litigation with the state pursuant to these issues.

Taxpayers have until September 15, 2022, to elect to participate in this initiative. To participate, taxpayers must complete the Election to Participate in Transfer Pricing Initiative Form mailto:and e-mail the form to the NJ Division of Taxation at TaxationTPInitiative@treas.nj.gov. Taxpayers who opt to participate in this program must provide all required transfer pricing, tax, and financial information to the NJ Division of Taxation by October 31, 2022.

The NJ Division of Taxation will review all information provided and, within ninety days of its receipt, the Division will propose a settlement amount based on the regulations under the Internal Revenue Code (Section 482) and N.J.A.C. 18:7-5.10. Taxpayers will have 30 days to accept the proposed settlement and sign a closing agreement. Taxpayers may offer modifications or adjustments to the proposal within the 30-day timeframe, but an agreement between the taxpayer and the state must be reached by the end of 30 days. Taxpayers retain the right to opt out of the initiative at any time prior to signing the Closing Agreement.

Taxpayers considering participating in this program should discuss their options with their qualified tax provider prior to electing to participate. To learn more about the NJ Division of Taxation Transfer Pricing Initiative, please contact Matthew DeLorenzo at mdelorenzo@citrincooperman.com.

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