In a decision released today, the New Jersey Tax Court determined in Infosys Limited of India Inc.1 that a foreign corporation was not subject to New Jersey corporation business tax (“CBT”) on its income from sources outside the United States.
Background
Infosys was a multinational corporation headquartered and incorporated in India. It had originally reported its New Jersey CBT using worldwide income. But Infosys amended its returns to exclude foreign-source income and claim the benefits of the U.S.-India tax treaty. (Under the treaty, Infosys was subject to federal income tax only on profits attributable to its business in the United States conducted through a permanent establishment.) As amended, therefore, Infosys computed its New Jersey CBT based on the income it reported on Line 29 of its federal income tax return on Form 1120-F.
The New Jersey Division of Taxation (“Division”) denied the requested refund. Relying on its regulation,2 the Division determined that the CBT base includes “all income from sources outside of the United States which has not been included in computing taxable income.” The Division also determined that it was not bound by the U.S.-India tax treaty.