On Feb. 20, 2014, the New Jersey Department of the Treasury (Department) announced two new voluntary disclosure initiatives that will be open on March 15, 2014 and close May 15, 2014. The two initiatives are called the “Intangible Asset Nexus Initiative” and the “Partnership Tax & Partner Fees Initiative.”
The Intangible Asset Nexus Initiative is available for companies that have nexus with New Jersey as a result of having derived income from the use of intangible assets (such as intellectual property) in New Jersey. The look-back period for this initiative will be limited to the later of periods beginning after July 1, 2010, or the date the business commenced. In addition, as part of this initiative, affiliates of a taxpayer that added back royalty payments made to the taxpayer to such affiliate’s New Jersey entire net income may submit amended returns for any period for which the statute of limitations remains open to claim an exception to the add back.
The Partnership Tax & Partner Fees Initiative is available to:
- Partnerships that have New Jersey sourced income but have not filed the relevant returns or paid the relevant taxes and fees owed; and
- Individual partners who have not satisfied their New Jersey tax filing and tax payment requirements.
The look-back period for this initiative will be limited to the period beginning on or after Jan. 1, 2010.
For both initiatives, the taxpayer must file all required returns and pay the full tax liability owed within 45 days of signing the Voluntary Disclosure Agreement (VDA) and must pay all interest due within 30 days of assessment. The Department will waive all penalties for both initiatives, but reserves the right to audit the returns with respect to issues not covered in the VDA.
While voluntary disclosure programs can be beneficial to most businesses with an undisclosed tax liability, there are consequences and risks involved in using any voluntary disclosure program—i.e., they are not one size fits all programs. It is also vital to evaluate whether your business and the taxes you owe qualify for the respective program, among other important considerations. As such, McDonald Hopkins strongly urges taxpayers to seek professional advice before filing an application or communicating with the Department.