NJ Amends Requirement for NJ S Corp Election

On December 22, 2022, New Jersey eliminated the requirement to affirmatively make a New Jersey S corporation election (tax law A.B. 4295). Instead, New Jersey will piggyback a federal S corporation election and treat a federal S corporation as a New Jersey S corporation, unless all the corporation’s shareholders elect not to be taxed as a New Jersey S corporation and file an opt out election. The new law is effective for tax years beginning on or after December 22, 2022.

Therefore, if a taxpayer is treated as an S corporation for federal tax purposes, then the taxpayer is automatically treated as a S corporation for New Jersey CBT and Gross Income Tax purposes.  Before A.B. 4295, failure to make the separate state S corporation election resulted in the taxpayer being subject to New Jersey’s Corporation Business Tax (CBT) as a C corporation.  A.B. 4295 eliminated that requirement.

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