New Jersey Changes Stance on S-Corporation Status Election

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New Jersey’s new tax law, A.B. 4295, which was enacted on December 22, 2022, includes key changes for corporations, including New Jersey’s position on a requirement for certain businesses to elect S-corporation status. Tax professionals are pointing to three key provisions of the new law:

It eliminates the requirement for businesses classified for federal tax purposes as S-corporations to elect to be treated as such by the State. It also allows a company to opt out of an existing New Jersey S-corporation status for a tax year at any time during the preceding tax year or at any time on or before the due date or extended due date of the S-corporation’s tax return.

It adopts the federal centralized partnership audit regime, making partnerships as opposed to individual partners the focus of an audit.

It ends the extension enacted in response to the COVID-19 pandemic for the statute of limitations on tax due and the State’s extension for paying interest on a taxpayer’s overpayment of tax.

In particular, the elimination of the requirement to elect S-corporation status for purposes of New Jersey state taxes is being hailed as providing significant relief to those companies as the new law simplifies compliance and eliminates potential pitfalls for unsuspecting taxpayers.

If you have questions on State and Local Tax matters, please contact the HBK SALT Advisory Group at hbksalt@hbkcpa.com.

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