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Bill

A 5039

Requires combined groups to be determined on world-wide basis under corporation business tax.

2026-2027 Regular Session Introduced by Shama Haider and 1 co-sponsor

New Jersey moves to require world-wide basis for CBT combined groups starting after July 31, 2026, unless the managerial member opt‑elects an affiliated group basis.

Introduced, Referred to Assembly Commerce and Economic Development Committee
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WeVote Research Nonpartisan
Bill Summary · A 5039

Bill Overview

  • Bill: A 5039
  • Session: 222
  • Jurisdiction: New Jersey
  • Purpose: Change how NJ determines the members of a combined group for corporate business tax purposes, by mandating a world-wide basis for combined returns (with an option to elect an affiliated group basis). The bill also amends several sections of P.L.2018, c.48 to align with the world-wide approach and to address related tax rules, credits, losses, and intercompany transactions.

Main Purpose and Intent

  • To require that, for privilege periods beginning on or after July 31, 2026, the combined group used for New Jersey Corporation Business Tax purposes must be determined on a world-wide basis unless the managerial member elects to file on an affiliated group basis.
  • This replaces the current default water's-edge approach (with optional world-wide or affiliated group elections) and eliminates the water's-edge path as a standard option going forward.

Key Provisions and Changes

  • World-Wide Basis Determination (Section 18 changes):

    • A taxable member’s entire net income (ENI) from the unitary business is its share of the ENI of the entire combined group, calculated via a combined unitary tax return.
    • For US-incorporated members: ENI includes the member’s ENI as determined under the Corporation Business Tax Act.
    • For foreign members: ENI is determined from foreign branch/corporation profits and losses, translated to US dollars, with GAAP adjustments and possible director-approved reasonable baselines.
    • Several detailed rules apply to foreign income, treaty considerations, treatment of partnership income, dividends between group members, intercompany transactions, charitable deductions, net operating loss (NOL) handling, and credits.
    • Charitable deductions, NOL conversions, and NOL carryovers are addressed with specific pooling, sharing, and tracing rules, including post-2023 pooling and mechanisms if members depart the group.
    • Intercompany dividends are eliminated within the group; intercompany income may be deferred and later restored under defined events.
    • Insurance and certain regulated utilities exclusions remain, but the scope of what is included in the combined return is clarified.
    • The director is empowered to issue regulations to implement these provisions.

  • Affiliated Group Basis (Section 23 changes):

    • For privilege periods ending on and after July 31, 2026, the managerial member may elect to determine the combined group on an affiliated group basis. If no election is made, the default is world-wide (not water's-edge).
    • An affiliated group election requires inclusion of all members of the affiliated group (domestic and otherwise) as if they were one unitary business, regardless of unitary status.
    • The election is binding for the current privilege period and the five following periods, with a possible revocation for reasonable cause.

  • Effective Date:

    • The act takes effect immediately, with the world-wide mandatory approach taking effect for periods beginning after July 31, 2026, unless an affiliated group election is chosen.

Who and What Is Affected

  • Taxpayers subject to New Jersey Corporation Business Tax (CBT), specifically those filing as part of a combined group under P.L.2018, c.48.
  • Managerial members of combined groups who will decide between world-wide and affiliated group filing methods.
  • Foreign and domestic entities within New Jersey’s CBT framework, including entities with foreign operations, income, or ownership structures.
  • Taxpayers with intercompany transactions, NOL carryovers, and tax credits within a combined group.

Procedural and Timeline Aspects

  • Introduction and referral in May 2026.
  • Mandatory world-wide basis unless an affiliated group election is filed by the managerial member for privilege periods starting after July 31, 2026.
  • Elections under the affiliated group basis are binding for five subsequent privilege periods.
  • The director is directed to promulgate rules and regulations to implement these provisions.

Note: This summary focuses on substantive provisions and implications for combined group taxation under New Jersey’s CBT, without political commentary.

Compiled from official sources — confirm details with the bill’s official record.

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