• NOLs. The proposal provides detailed guidance concerning the sharing of PNOLs and NOLs among members of a combined group. There are also new provisions concerning the ordering of the NOL deduction relative to the dividend exclusion.
• Carryovers of tax attributes. Consistent with New Jersey statutory amendments, the proposal states that the ability to adjust NOL carryovers from closed years is limited to 10 years after the return was filed. In a departure from federal law, the Division’s proposal also suggests that credit carryovers will be disallowed unless the taxpayer filed a credit form with an original or amended return.
• Sales fraction. New Jersey adopted market sourcing effective for the 2019 privilege period and the proposal provides additional examples concerning sourcing of receipts from services. In particular, the proposal describes situations in which a taxpayer may be entitled to estimate their New Jersey receipts using reasonable approximation. The existing and proposed regulations provide taxpayers with significant flexibility—even compared to other market sourcing states—and allow taxpayers to use census, GDP, IP address, and third-party datasets. If your company makes sales of services or technology, it should evaluate its customary sourcing method and whether it would benefit from an alternative method.
• Net deferred tax liability deduction. The proposal confirms that taxpayers have flexibility to postpone indefinitely the timing of their net deferred tax liability deduction. This may be helpful for taxpayers that might otherwise need to establish a valuation allowance for other types of attributes.

The deadline for submitting written comments concerning the Division’s proposal is April 19.

Client Alert 2025-054