To mitigate the financial-statement impact of New Jersey’s shift from separate-company reporting to combined reporting, public companies are entitled to an offsetting deduction. Under the statute, this “net deferred tax impact deduction” will be allowed annually beginning in 2023 for calendar-year taxpayers and is pro-rated over 10 years.

In order to qualify, however, taxpayers must electronically submit a reporting statement (Form DT-1) by July 1. Future deductions will be capped by the amount reported on this form and no adjustments will be allowed for subsequent events. So, before filing Form DT-1, taxpayers will need to carefully consider any potential issues and practicalities.

Reed Smith lawyers David Gutowski and Matthew Setzer have recorded a short webinar to help taxpayers prepare their Form DT-1 and maximize their deduction. The webinar can be viewed on our YouTube channel and the slide deck is available on reedsmith.com.

Client Alert 2020-401