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State of New Jersey - New Legislation 2014

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The Green Group
October 8th, 2014

Refunds of Partnership Payments on behalf of Nonresident Partners:

In response to the Tax Court decision in BIS LP, Inc. v. Director, Div. of Taxation, 2014 N.J. Tax (App. Div. Apr. 11, 2014), the new law clarifies the circumstances in which the tax paid by a partnership on behalf of its nonresident partners may be claimed.

In 2002, legislation was enacted to require NJ partnerships to make payments on behalf of their nonresident partners.

In the BIS decision the court interpreted this language to mean that a nonresident that was determined to have no filing obligation could be entitled to a refund of tax it did not pay, but that was paid on its behalf.

This (2014) new law clarifies that these payments are only refundable to a nonresident partner who files a New Jersey tax return and reports income that is subject to tax in this State (NJ). In that case, the nonresident partner may apply the tax that was paid by the partnership and credited to the nonresident partner’s partnership account against the partner’s tax liability.

The law also provides that a partnership that pays tax pursuant to this section is not entitled to claim a refund of payments credited to any of its nonresident partners.

 

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Taxonomy: 

Refunds of Partnership Payments on behalf of Nonresident Partners:

In response to the Tax Court decision in BIS LP, Inc. v. Director, Div. of Taxation, 2014 N.J. Tax (App. Div. Apr. 11, 2014), the new law clarifies the circumstances in which the tax paid by a partnership on behalf of its nonresident partners may be claimed.

In 2002, legislation was enacted to require NJ partnerships to make payments on behalf of their nonresident partners.

In the BIS decision the court interpreted this language to mean that a nonresident that was determined to have no filing obligation could be entitled to a refund of tax it did not pay, but that was paid on its behalf.

This (2014) new law clarifies that these payments are only refundable to a nonresident partner who files a New Jersey tax return and reports income that is subject to tax in this State (NJ). In that case, the nonresident partner may apply the tax that was paid by the partnership and credited to the nonresident partner’s partnership account against the partner’s tax liability.

The law also provides that a partnership that pays tax pursuant to this section is not entitled to claim a refund of payments credited to any of its nonresident partners.