Rutgers Law

New Jersey Statutes, Title: 54, TAXATION

    Chapter 10a:

      Section: 54:10a-5.22: Election as a New Jersey S corporation.

          3. a. (Deleted by amendment P.L.2022, c.133)

b. A New Jersey S Corporation and each shareholder shall consent to the following jurisdictional requirements:

(1) That this State shall have the right and jurisdiction to tax and collect the tax on each shareholder's S corporation income as defined pursuant to section 12 of P.L.1993, c.173 (C.54A:5-10) and, if applicable, the pass-through business alternative income tax pursuant to P.L.2019, c.320 (C.54A:12-1 et al.);

(2) That New Jersey's right and jurisdiction to tax the income as set forth in paragraph (1) of this subsection shall not be affected by a change of a shareholder's residency, except as provided by the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.; and

(3) If shareholders that are not initial shareholders of the corporation, while the corporation is a New Jersey S corporation, fail to consent to New Jersey's jurisdiction to tax S corporation income to such shareholders, this State shall have the right and jurisdiction to collect a payment of tax each year directly from the corporation equal to the S corporation income allocated to this State, as defined pursuant to section 12 of P.L.1993, c.173 (C.54A:5-10), of the nonconsenting shareholders for the accounting or privilege period multiplied by the maximum tax bracket rate provided under N.J.S.54A:2-1 for the accounting or privilege period. In such case, the corporation shall have the right, but not the obligation, to recover payments made by the corporation pursuant to this paragraph from each nonconsenting shareholder.

c. The consents to jurisdictional requirements shall be filed within one calendar month of the time at which a federal S corporation election would be required if such accounting or privilege period were a "taxable year" for which a federal S corporation election were to be made pursuant to section 1362 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1362. Such elections may only be opted out of or revoked pursuant to subsection d. of this section.

d. Notwithstanding any law or regulation to the contrary, any S corporation may elect not to be taxed as a New Jersey S corporation. This election shall have the consent of 100 percent of the shareholders of the S corporation on the date on which the election is made. An election to opt out under this subsection may be made for any taxable year at any time during the preceding taxable year or at any time on or before the due date or extended due date of the S corporation's tax return. An election to opt out made pursuant to this subsection shall be effective for the taxable year for which the election is made and for each succeeding taxable year until revoked. An election to opt out made pursuant to this subsection may be revoked if shareholders holding more than 50 percent of the shares of stock of the S corporation on the date on which the revocation is made consent to the revocation and such revocation shall be effective on the first day of the taxable year if made on or before the fifteenth day of the third month thereof; if the revocation is made after such date, the revocation shall be effective for the following taxable year, unless the shareholders revoke the revocation before December 31 of the current year. An election to opt out or revocation made pursuant to this subsection shall be made in a form and manner prescribed by the director. Any S corporation doing business in New Jersey, or having or exercising its franchise in New Jersey, or deriving receipts, engaging in contracts, or employing or owning capital or property in New Jersey, or registered to do business in New Jersey, that does not make this election to opt out will be taxed as a New Jersey S corporation.

e. A corporation shall report any change in its shareholders or their share of ownership to the Director of the Division of Taxation in a form and manner determined by the director.

L.1993, c.173, s.3; amended 2019, c.320, s.6; 2022, c.133, s.20.

This section added to the Rutgers Database: 2023-01-30 15:02:00.

Older versions of 54:10a-5.22 (if available):

Court decisions that cite this statute: CLICK HERE.