NJ BAIT Clean-Up Bill Signed by Gov. Murphy

 – January 18, 2022
NJ BAIT Clean-Up Bill Signed by Gov. Murphy

To rectify the implementation issues with New Jersey’s Business Alternative Income Tax (BAIT), a clean-up bill was drafted which has been signed by Governor Murphy. The bill includes the following changes which are effective Jan. 1, 2022:

  • It modifies how the optional tax is calculated so that more income is subject to the tax, thereby allowing a larger credit to be obtained for paying the optional tax.
  • It changes the offsetting tax credit structure and permitted uses of the credits so that the credits are more generous.
  • The tax brackets are updated for the BAIT to better align with the most recent changes to the state’s gross income tax brackets
  • The treatment of overpayments of tax and excessive credits are modified so that they can be applied to tax liability in the successive year.

The bill also provides that entities will not be required to make a payment on the share of the income of each nonresident entity owner if the entity owner expects to get the money back in the form of a tax credit as a result of the entity paying the optional entity-level tax.

Apportionment of income

Additionally, we've received a few questions about the state changing the method of apportioning income of an S corporation from the three-factor formula to the single-factor formula.

The Division of Taxation has confirmed that, for tax year 2021, an S corporation will have the option to use three-factor on NJ-NR-A for purpose of the BAIT.

The Division's website guidance regarding important BAIT updates for tax year 2021 will be posted shortly. Please check back with the Division's website periodically.

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