Transfer Pricing Initiative
Beginning June 15, 2022 and continuing through March 2, 2023, we are implementing a voluntary initiative to work with corporate taxpayers (taxpayer) to expedite the resolution of corporate intercompany pricing issues (IPI).
The purpose of this initiative is to:
- Fairly and consistently expedite the resolution of IPI subject to adjustment under N.J.S.A. 54:10A-10 and N.J.A.C. 18:7-5.10;
- Provide certainty and uniformity to taxpayers;
- Reduce time in disputes; and
- Form an efficient basis for resolution of this corporate tax issue for all open tax years.
Certain New Jersey corporate taxpayers may engage in transactions between members of an affiliated group (intercompany transactions). Intercompany transactions that lack economic substance or are not at fair market value can cause a taxpayer to inaccurately report net income attributable to New Jersey. If we determine a taxpayer has an IPI, we may re-determine the New Jersey net income of the corporation properly attributable to its business carried on in New Jersey. This initiative provides taxpayers with potential IPI an opportunity to fairly and expeditiously resolve all tax years, within the statute of limitations, for which the taxpayer has filed a return.
Scope and Eligibility
The initiative applies to all filed corporate income tax returns within the statute of limitations that have intercompany transactions that would be subject to adjustment under the applicable laws.
- Taxpayers currently under audit;
- Taxpayers notified of upcoming audit;
- Taxpayers with a case pending before the Conference and Appeals Branch; and
- Unidentified taxpayers with related party intercompany pricing.
The initiative does not apply to matters in any stage of litigation.
By September 15, 2022, taxpayers must agree in writing to participate in the initiative by completing and emailing an Election to Participate form to TaxationTPInitiative@treas.nj.gov.
To successfully complete participation in this initiative, the taxpayer must comply with all of the following terms and conditions:
- By October 31, 2022, taxpayers must provide all required transfer pricing, tax, and financial information and documentation to us;
- Cooperate fully in this Initiative;
- Taxpayers will have 30 days to accept our proposal. Taxpayers may offer modifications or adjustments to the proposal within this time frame, but an agreement must be reached by the end of 30 days. Extensions to this 30-day deadline will be allowed on a case by case basis at our sole discretion;
- Sign a Closing Agreement no later than thirty (30) days after we propose a settlement amount as described under the "Division Responsibilities;"
- Pay all New Jersey tax and interest as determined under the Closing Agreement;
- Waive all rights to review or refund of any amounts paid for the period covered under this Initiative except for refunds due as a result of federal corrections.
For taxpayers successfully completing this initiative, we agree to:
- Propose a settlement amount and methodology based on information provided and principles in the regulations under Internal Revenue Code section 482 and N.J.A.C. 18:7-5.10 within ninety (90) days of receipt of all information described on the Election to Participate form.
- The settlement amount and methodology may be applied, at the mutual agreement of the parties, to all open tax years, including years currently under audit;
- We will attempt to settle any corporate tax issues for the tax periods covered by this initiative;
- We will waive all applicable penalties;
- We will waive all rights to assess any additional tax, interest or penalties except for adjustments relating to federal corrections for all settled tax types.
Rights of Participation
This Election to Participate is nonbinding. The taxpayer retains the right to opt out of the initiative at any time prior to signing the Closing Agreement.
We retain the right to disqualify from this initiative any taxpayer that fails to:
- Provide documents or information as requested;
- Disclose all transactions; or
- Fulfill any of the terms of this initiative.
Consequences of Not Participating
For taxpayers that do not elect to participate in this initiative by September 15, 2022, or do not successfully complete the initiative, we will take the following actions:
- Assess all applicable penalties;
- Not waive any penalties;
- Audit according to our regular audit schedule and we will not agree to a methodology or settlement for any unaudited open tax years.
Frequently Asked Questions
For taxpayers under audit:
- Call Colleen Chipman at 609-571-0464; or
- Email email@example.com
For taxpayers not under audit:
- Call Jill Butler at 609-322-6209; or
- Email firstname.lastname@example.org
Applicable Laws and Rules
N.J.S.A. 54:10A-10, N.J.A.C. 18:7-5.10, N.J.S.A. 54:49-18, N.J.A.C. 18:32-1.1, Internal Revenue Code section 482