[15700]
February 26, 2003
TO: TAX COMMITTEE No. 9-03
RE: NEW JERSEY PROPOSED REGULATIONS
The New Jersey Division of Taxation has released proposed regulations1 with respect to
the Business Tax Reform Act2 that was passed on July 2, 2002 and is effective for periods beginning on
and after January 1, 2002.
The proposed regulations incorporate guidance from a recent private ruling3 that clarified that a
Regulated Investment Company (“RIC”) is not subject to New Jersey’s new Alternative Minimum
Assessment (“AMA”) if the RIC is also an Investment Company as defined in the New Jersey Statute. In
order to claim the Investment Company exemption from the AMA, a statement indicating that the RIC
qualifies as an Investment Company should be attached to the RICs tax return.
The proposed regulations specifically address nexus with respect to management companies and
indicate that “[a]n entity regularly providing asset management services . . . from a location outside New
Jersey to customers within New Jersey is subject to tax in New Jersey.”4 Receipts with respect to asset
management services provided to a RIC, shall be allocated to New Jersey to the extent that shareholders
of the [RIC] are domiciled in New Jersey . . . ”5 Moreover, receipts with respect to asset management
services provided directly or indirectly to a pension plan, retirement account or institutional investor
“shall be allocated to New Jersey to the extent the domicile of the beneficiaries of the plan [or account] is
in New Jersey.”6 The proposed regulations indicate that asset management services include “the
rendering of investment advice, making determinations as to when sales and purchases are to be made,
or the selling or purchasing of assets and related activities.”7
1 The proposed regulations are available at http://www.state.nj.us/treasury/taxation/pdf/cbtreform.pdf and are attached to
the electronic version of this memorandum.
2 P.L. 2002, c. 40.
3 See, Institute Memorandum to Tax Members No. 9-03, dated February 5, 2003.
4 Section 18:7-1.6(c).
5 Section 18:7-8.10(3).
6 Section 18:7-8.10(2).
7 Section 18:7-8.10(4)(i). Related activities, under the proposed regulations, include “administration services, distribution
services, management services and other related services.” Id.
2
A conference call has been scheduled for tomorrow, February 27th at 2:30 (EST), to discuss
the proposed regulations. Please complete the attached response form if you would like to join the call.
Catherine Barré
Assistant Counsel
Attachment (NJ CBT Cover Letter)
Attachment (NJ CBT Proposed Regs)
Attachment (Response Form)