NJ Division of Taxation - Changes Affecting Entities Taxed as Partnerships

All partnership filers are required to remit tax except:

Partnerships listed on a United States National Stock Exchange
Qualified Investment Partnerships:
- More than 10 members or partners; and
- No member or partner holding more than a 50% interest; and
- At least 90% of income derived from investment income; and
- A "dealer in securities" (as defined by Sec 1236 IRC) cannot be included.

Tax calculation/rates

Calculated on all New Jersey allocated income of nonresident non-corporate partners (individual, estates and trusts) and nonresident corporate partners (including partnerships that are partners);
Allocation rules pursuant to the Corporation Business Tax apply N.J.S.A. 54: 10A-6 (i.e. double weight the receipts fraction);
Partnership determines the tax for the nonresident non-corporate partners in accordance with the highest rate for New Jersey Gross Income Tax purposes (6.37% rate), unless hedge fund status is met (see #6 below);
Partnership determines the tax for the nonresident corporate partners at the 9% corporate rate, unless they maintain a regular place of business in New Jersey or they are an exempt corporation pursuant to N.J.S.A. 54:10A-3;
Payment is due on or before the 15th day of the 4th month subsequent to the close of the tax year;
Payment must be remitted along with PART-100 or PART-200-T (for extensions) Vouchers.
Do not include the payment with the NJ-1065.

Partnership Filing Fee

The $150/partner fee is not to exceed $250,000 for each partnership with more than 2 partners:
- Assessed on partnerships with more than two partners AND having income or loss derived from New Jersey sources;
- Includes each partner receiving a K-1 or having an ownership interest;
- A partner is an individual, estate, trust or other entity;
- Partners having both general and limited partnership interest shall be counted twice when determining the total partnership fee owed;
- Fee is due on or before the 15th day of the 4th month following the end of the partnership's tax year;
- Tiered partnerships - each partnership pays the filing fees required for its partners;
- Filing fee payment remitted with Form PART-100, Partnership Voucher;
- Extensions available - Payment is remitted with Form PART-200-T, due on the original due date of the return;
- Each partnership required to remit the partnership fee must, at that time, make an installment payment of 50% of the current year's filing fee (unless it is the partnership's final return), which is creditable against the following year's fee payment;
- Apportionment is available where nonresident partners have no physical nexus with New Jersey and the partnership has an office outside the State - see N.J.A.C. 18:35-11.2;
- Partnership Forms, including Form NJ-1065 and PART-100, are available online.

Partnership Fee Waived For Investment Clubs Below $60,000

Investment clubs are usually small groups of individuals who pool their money to invest in stock or other securities for enjoyment, learning or investment growth. The club often operates informally with members pledging to pay a regular amount into the club monthly. Some clubs have a committee that gathers information on securities, selects the most promising securities, and recommends that the club invest in them. Most clubs require all members to vote for or against all investments, sales trades, and the other transactions.
Treasury will waive the $150 tax form processing fee for investment clubs with fewer than $60,000 in shared capital assets.
The $60,000 in shared assets is based on an average quarterly cost or market value.
Legislation (P.L. 2003, c. 256) passed on January 14, 2004, raised the $150 filing fee exemption to $35,000 in assets per partner to a maximum of $250,000 in assets. Investment clubs that fall under this new limit are still subject to filing an NJ-1065 return. The market value of the total assets of $250,000 or $35,000 per partner was raised for the 2005 tax year due to inflation to $265,200 or $37,200 per partner for investment club partnerships. In sum, investment club partnerships with less than $60,000 in assets are not subject to filing an NJ-1065 return. Investment club partnerships with more than $60,000 in assets but less than $265,200 in assets (or $37,200 per partner, whichever is lower) are not subject to the filing fee but must still file an NJ-1065 return. Investment clubs with more than $265,200 in assets (or $37,200 per partner, whichever is lower) during tax year 2005 are subject to the $150 filing fee and they must file a NJ-1065 return.
The completed Form should state that the partnership is an investment club.

Partnership Tax Payment
Partnerships must remit payments of tax on nonresident partner's share of New Jersey income. For tax years beginning on or after January 1, 2002 (NOTE: different rules apply for tax payments for years beginning on and after January 1, 2001 and before January 1, 2002):

For calendar year businesses - the due date is April 15, 2003 (the due date for the partnership return);
Payment is credited to the nonresident partner's 2002 income tax liability as of the date the Division receives the tax from the partnership entity;
Payment made by partnership on behalf of the nonresident partner does NOT relieve the nonresident partner of their requirement for making estimated or installment payments;
The tax paid by the partnership can be claimed by the nonresident partner on the New Jersey tax return by attaching a copy of the NJ-K1;
The New Jersey source amount in the distributive share of partnership income/loss in Column F of the Partners Directory may differ from the nonresident partner's share of New Jersey income in Column I;
Fiscal filers - will receive credit when the tax payment is received;
Tiered partnership - payment is required for a partnership holding a partnership interest.

Partnerships that meet Hedge Fund Status:

Partnerships meeting "hedge fund" status under N.J.S.A. 54A:5-8(c) are not required to remit tax payments on behalf of nonresident non-corporate partners;
What qualifies as a hedge fund? - see the instructions to the NJ-1065;
The entity, not the partner, must make the determination of hedge fund status.

Partnership Dissolution

A partnership that indicates it is filing a "Final Return" (Form NJ-1065) is not required to make the 50% installment payment (prepayment) of the partnership filing fee for the next year;
Partnership is required to pay the $150/partner filing fee for the year of the final return-the fee may NOT be prorated if the period is shorter than a year.

Electronic Filing

NJ-1065 filers that have ten or more partners are required to file by electronic means;
10 or more partners may consist of both residents and nonresidents;
Paid tax preparers who prepare Form NJ-1065 returns for partnerships that are subject to the provisions of the Corporation Business Tax are required to file all partnership returns and payments by electronic means.
To obtain the electronic filing and payment formats or to obtain additional information on electronic filing and payment options visit the New Jersey Division of Revenue Website or call the Alternate Filing Branch at 609-633-1132;
NJ-1065 filers that have less than ten partners have the option to file and make payment by electronic means or on paper.

For more Information

Regulations - available on the Division's Web site: ("The Special Adoption and Concurrent Proposal Pursuant to the Business Tax Reform Act" dated 02/28/03")

Partnership Filing Requirements