N.J. Admin. Code § 18:7-18.4

Current through Register Vol. 56, No. 21, November 4, 2024

Section 18:7-18.4 - Calculation of the alternative minimum assessment

(a) The computation of the alternative minimum assessment (AMA) based on New Jersey gross profits is calculated as follows:

1. If New Jersey gross profits are:

i. $ 1,000,000 or less, the AMA based on gross profits is zero;

ii. Greater than $ 1,000,000, but not over $ 10,000,000, the AMA is .0025 times the gross profits in excess of $ 1,000,000, multiplied by the AMA exclusion rate of 1.11111;

iii. Greater than $ 10,000,000, but not over $ 15,000,000, the AMA is the gross profits multiplied by .0035;

iv. Greater than $ 15,000,000, but not over $ 25,000,000, the AMA is the gross profits multiplied by .006;

v. Greater than $ 25,000,000, but not over $ 37,500,000, the AMA is the gross profits multiplied by .007; or

vi. Greater than $ 37,500,000, the AMA is the gross profits multiplied by .008.

(b) The computation of the AMA based on gross receipts is calculated as follows:

1. If New Jersey gross receipts are:

i. $ 2,000,000 or less, the AMA based on gross receipts is zero;

ii. Greater than $ 2,000,000, but not over $ 20,000,000, the AMA is .00125 times the gross receipts in excess of $ 2,000,000, multiplied by the AMA exclusion rate of 1.11111;

iii. Greater than $ 20,000,000, but not over $ 30,000,000, the AMA is the gross receipts multiplied by .00175;

iv. Greater than $ 30,000,000, but not over $ 50,000,000, the AMA is the gross receipts multiplied by .003;

v. Greater than $ 50,000,000, but not over $ 75,000,000, the AMA is the gross receipts multiplied by .0035; or

vi. Greater than $ 75,000,000, the AMA is the gross receipts multiplied by .004.

(c) For the first privilege period that the taxpayer pays the AMA, the taxpayer may select a computation method for the AMA, based either on gross profits or gross receipts. Once selected, that method must be employed for that privilege period and for the next succeeding four privilege periods.

(d) The maximum AMA for an individual corporation for a privilege period is $ 5,000,000. For an affiliated group of corporations, the maximum AMA is $ 20,000,000. If the $ 20,000,000 threshold is claimed by an affiliated group, the group must name a key corporation to act as a clearinghouse for adjustments to members of the group.

1. An affiliated group's AMA tax cannot be more than $ 20,000,000 less its corporation business tax (CBT) liability. Form 401 assists taxpayers in calculating the AMA threshold limit. Form 401, Column C, reflects the CBT liability of each corporation in the affiliated group, including the designated key corporation. Form 401, Column D, reflects the amount of AMA that each corporation in the group would be liable for in excess of each corporation's CBT liability. The total CBT liability is subtracted from $ 20,000,000. The resulting amount, if greater than zero, is the total AMA payable by the designated key corporation. Accordingly, if the amount is zero or less, all corporations are relieved of paying any AMA.

2. However, if for some reason an affiliated group does not elect to include one of its affiliate corporations on Form 401, even though it is part of the affiliated group, then the AMA cap for that corporation must be calculated separately and that corporation will not be considered in calculating the AMA cap for the group listed on Form 401. The AMA calculation for members of the group may be computed using either the gross receipts or the gross profits method.

3. If it wishes to do so, a group can change its key corporation each year to allow a different entity to pay the AMA on behalf of the group so that such entity will be due the credit for excess AMA payments in 2007 when the credit against CBT is calculated.

4. Examples:

Example 1. An affiliated group has 10 corporations. The total CBT liability of the group is $ 23 million. Therefore, there would be no AMA liability because the CBT liability is more than the cap of $ 20 million.

Example 2. An affiliated group has 10 corporations. The total CBT liability of the group is $ 7 million, of which the key corporation's CBT liability is $ 1 million. When the group calculates its AMA liability, the group discovers that its total AMA liability is $ 50 million of which $ 43 million is in excess of its CBT liability of $ 7 million. However, because of the $ 20 million cap and the reduction in the cap for CBT payments, the group's AMA liability cannot be more than $ 13 million ($ 20 million less the group's CBT liability of $ 7 million). The total tax, paid by the key corporation, for itself and the members of the group that are listed on Form 401 is $ 14 million. This is made up of its $ 1 million in key corporation's CBT liability plus the $ 13 million AMA. The key corporation would reflect its own CBT liability on line 13 of Form CBT-100, page 1 and the $ 13 million key corporation AMA payment on line 17 of Form CBT-100, page 1. Each of the other members of the group would list its own CBT liability on line 13 of Form CBT-100, page 1 of its own return. The total amount of CBT liability shown on the returns of the other members of the group is $ 6 million.

Example 3. An affiliated group has 10 corporations. The total CBT liability of the group is $ 7 million, of which the key corporation's CBT liability is $ 1 million. If the group's excess AMA had been $ 9 million instead of $ 43 million (as in Example 2) the key corporation would be liable for $ 9 million AMA since the $ 20 million cap was not reached. The total tax, paid by the key corporation, for itself and the members of the group that are listed on Form 401, is $ 10 million. This is made up of the $ 1 million key corporation's CBT liability plus the $ 9 million AMA. The key corporation would reflect its own CBT liability on line 13 of Form CBT-100, page 1 and the $ 9 million key corporation AMA payment on line 17 of Form CBT-100, page 1. Each of the other members of the group would list its own CBT liability on line 13 of Form CBT-100, page 1 of its own return. The total amount of CBT liability shown on the returns of the other members of the group is $ 6 million.

(e) If a taxpayer has a short period return, the thresholds and caps provided by statute and this subchapter are prorated. For example, a taxpayer whose privilege period is six months shall become subject to tax under the gross profits method when gross profits are $ 500,000 or greater and under the gross receipts method when gross receipts are $ 1,000,000 or more. Similarly, for an individual corporation having a six month privilege period, the maximum alternative minimum tax shall be $ 2,500,000 or for an affiliated group of corporations shall be $ 10,000,000.

N.J. Admin. Code § 18:7-18.4

Amended by 49 N.J.R. 1694(a), effective 6/19/2017