As states continue to find ways to increase revenues to make up for budget shortfalls, taxpayers generally bear the burden in the form of increased tax rates and/or the broadening of the underlying tax base. States also tend to get more aggressive in the area of enforcement. Through enforcement, states seek to uncover noncompliant taxpayers who do business in the state, or otherwise derive income from state sources, but do not file the required tax returns or reports.
New Jersey is looking to increase revenue through enforcement by offering Voluntary Disclosure Agreement ("VDA") initiatives to noncompliant taxpayers. Under VDA programs, noncompliant taxpayers are more likely to come forward and disclose their delinquent tax liabilities because states will generally provide incentives to do so.
The current New Jersey VDA initiatives begin on March 15, 2014 and run through May 15, 2014, and cover Intangible Asset Nexus and Partnership Compliance. Both initiatives limit the look-back period to tax years beginning after July 1, 2010, and waive all penalties. The Intangible Asset VDA initiative applies to companies that have nexus with New Jersey due to having derived income from the use of intangible assets in the state. The Partnership VDA initiative applies to partnerships that earned income from New Jersey sources but have not filed the appropriate returns.
If you feel your company may have exposure for New Jersey taxes related to either of the VDA initiatives currently available, please contact a member of our SALT team to discuss your options.
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