The federal Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, includes a one-time repatriation transition tax on earnings and profits accumulated abroad.
The law requires a specified foreign corporation (as defined in the Internal Revenue Code (IRC)) that has accumulated post-1986 deferred foreign income to report such income as a deemed repatriation dividend, which will be taxed to the recipient at a reduced effective federal tax rate. Regardless of whether the earnings and profits are brought back, the repatriation transition tax is imposed on the deemed repatriation dividends for the last tax year beginning before January 1, 2018.
For New Jersey Corporation Business Tax purposes, the deemed repatriation dividends will be excluded from entire net income, as provided in the Corporation Business Tax Act (N.J.S.A. 54:10A-4(k) (5)). If a corporation does not meet the ownership thresholds, the deemed repatriation dividends will be included in entire net income to the extent provided in the Act.
For New Jersey Gross Income Tax purposes, dividends are an enumerated category of income. Thus, deemed repatriation dividends reported under IRC Section 965 must be included in New Jersey gross income in the same tax year and in the same amount as reported for federal purposes.