Combined reporting legislation would introduce significant complexity and uncertainty for taxpayers and should be rejected by the Senate when it is brought up for a vote, the New Jersey Business & Industry Association (NJBIA) said today.
“A combined reporting system will create winners and losers in the tax code, with taxable income increasing for some and decreasing for others,” said Andrew Musick, NJBIA’s director of Taxation and Economic Development. “Legitimate differences between taxpayers and tax collectors will result in expensive, time-consuming litigation for both companies and the state.”
Musick added that New Jersey already has a number of safeguards in place to ensure that companies pay accurate amounts of their NJ Corporation Business Tax. The Division of Taxation may require taxpayers to file consolidated tax returns with related members, and taxpayers are already prohibited from deducting interest and royalty expenses paid to affiliates.
“The current statutes already safeguard against taxpayers exporting taxable income beyond New Jersey’s reach,” Musick said. “New Jersey’s laws already achieve much of the same revenue effect as combined reporting.”
Because of these safeguards, New Jersey would likely see little, if any, additional revenue from combined reporting.
“Other states have examined combined reporting, and the National Conference of State Legislatures (NCSL) commissioned a report on the issue that found no evidence that combined reporting enhances tax revenues,” Musick said.
