Approximately 9 months after its issuance, the New Jersey Division of Taxation released a statement retracting Technical Bulletin TB-85, which provided a bizarre method to attribute to New Jersey Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII).  As a result of the August 20, 2019, retraction, New Jersey corporate taxpayers are no longer required to allocate an amount of their GILTI and FDII to New Jersey “equal to the ratio of New Jersey’s gross domestic product (GDP) over the total GDP of every US state (and the District of Columbia) in which the taxpayer has economic nexus.” 
 
Background

The Division’s adoption of the GDP percentage method came at the behest of Professor Darien Shanske, with whom the Division consulted for its now defunct guidance. See Darien Shanske, “New Jersey Gets It Right on Taxing GILTI,” State Tax Notes, March 4, 2019, p. 771.  No other state has adopted this arbitrary method of assigning income.  New Jersey’s dumping of the GDP method makes it less likely that any other state will adopt it.
  
TB-85 has been subject to criticism from the day it was issued.  New Jersey Division of Taxation Acting Director John Ficara met with representatives from the Council On State Taxation (COST) and its member companies.  Mr. Ficara should be applauded for engaging with the business community on these important issues. 
 
New attribution method

New Jersey’s new method will require taxpayers to include their net GILTI (the amount of GILTI as calculated under IRC. § 951A less the deduction of up to 50% of GILTI allowed in IRC. § 250) in the denominator of the receipts factor.  The move to a net-GILTI inclusion in a taxpayer’s receipts factor numerator is similar to other states treatment of assigning GILTI.  The Division’s retraction also advises that taxpayers are to include their net FDII amounts in the receipts factor “numerator (if applicable) and denominator.” 

The Division indicated that it will release a new Technical Bulletin this week with additional details.

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