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NJ Releases a Technical Tax Bulletin to Explain Unitary Business Principle

NJ Division of Taxation issued a new Technical Bulletin (TB-93), which addresses the unitary business principle and provides taxpayers with guidance in determining the entities to be included in the combined reports filed for privilege periods ending on and after July 31, 2019.

Being a tax practitioner in New Jersey used to mean having to file separate state tax returns for every member of a consolidated corporate group, which meant breaking apart combined trial balances, while separately tracking carryforward attributes. With the passage of P.L. 2018, c. 48 and P.L 2018 c. 131, New Jersey has changed its rules to require mandatory unitary combined reporting for Corporation Business Tax purposes for tax years beginning on or after July 31, 2019. Fortunately, on October 17, 2019, the Division of Taxation released Technical Bulletin No. TB-93 (“TB-93”), giving much needed guidance on the topic.

TB-93 defines a “unitary business” as a single economic enterprise, which, despite different legal entities or active components, shares common ownership and a common economic relationship.1 For the purposes of the above definition, TB-93 defines a common economic relationship as “sufficiently interdependent, integrated and interrelated… so as to provide synergy and mutual benefit that produces a sharing or exchange of value.”

“Sufficiently interdependent” can be interpreted many different ways and will ultimately depend on the facts and circumstances. To aid taxpayers in determining whether or not their activities should be reported on a combined basis, TB-93 outlies two tests – the Interdependence of Functions Test and the Unity of Operations Test. 

Under the Interdependence of Functions test, any of the following seven circumstances would be indicative of a unitary business:

  1. Same Line of Business
  2. Vertically Structured Business
  3. Centralized Management
  4. Non-Arm’s Length Prices
  5. Existence of Benefits from Joined, Shared, or Common Activity
  6. Relationship of Joint, Shared, or Common Activity of Income-Producing Operations
  7. Exercise of Control

Assuming no overlap of control and direction exists, practitioners should look to the Unity of Operations and Use Test for answers. This test lists the following operational aspects, which, if shared, can be indicative of a unitary business:

  • Purchasing
  • Manufacturing Facilities
  • Advertising
  • Warehousing Facilities
  • Employees
  • Transportation Facilities
  • Accounting
  • Computer Systems and Support
  • Legal
  • Financing Support
  • Retirement Plan
  • Common Management
  • Insurance Coverage
  • Control of Major Policies
  • Marketing
  • Inter-entity Transactions
  • Cash Management
  • Common Policy or Training Manuals
  • Research and Development
  • Required Budgetary Approval
  • Offices
  • Required Capital Asset Purchase Approval

While the facts and circumstances will ultimately determine whether or not several businesses need to file a unitary tax return, the two tests above make clear that sharing common oversight and operations will be key factors in making this decision. TB-93 also lists several court cases, which can be relied upon if the tests above are not conclusive.

Lastly, TB-93 addresses the topic of holding companies. When several companies are owned by a holding company, there is a natural tendency to scrutinize the entire endeavor as a unitary group. The bulletin specifies that the tests outlined above should be applied to the holding company, as well as the underlying entities, and if enough criteria are met then, the holding company should be included within the unitary group for a combined filing. This would apply even if the holding company’s activities were simply passive. To help avoid this unitary reporting requirement, holding companies should be careful not to hold intangible assets that benefit multiple companies within the related group. 

While further guidance is still needed, TB-93 provides significant insight for companies looking to report on a unitary basis. Taxpayers can now rely on the tests outlined in the bulletin to make determinations as to whether or not they are a part of a unitary group and what income should be reported on a combined basis. By reporting their NJ income on a similar basis to how they report their Federal income, companies should now be able to more efficiently meet their tax reporting obligations and likewise, this should speed up collections for NJ. Both the taxpayers and the State should benefit from this change to the tax law. 

If you have any questions about the unitary business principle, or other state-related tax law, please contact Citrin Cooperman’s State and Local Tax (SALT) professionals. To reach Ray Owens, email and to reach Eugene Ruvere, email  

1N.J. Rev. Stat. §54:10A-4(gg). Common ownership is defined as an ownership structure where “more than 50% of the voting control of each member of a combined group is directly or indirectly owned by a common owner or owners. The term “voting control” holds the same definition for the purposes of the NJ statute as Federal IRC §318.

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