June 2000

New Jersey Reverses Position on New York City UBT

Also Revises Interpretation of Philadelphia Business Privilege Tax

By Mark H. Levin, CPA

New Jersey recently reversed its long-standing position regarding the New York City unincorporated business tax (UBT) and the Philadelphia business privilege tax (BPT). Previously, New Jersey had not considered the UBT and BPT as income taxes imposed on an individual proprietor's business income or an individual partner's distributive share of the partnership's business income. Thus, neither tax could be included in New Jersey's calculation of credit for taxes paid to other jurisdictions.

Effective immediately, New Jersey will treat both the UBT taxable income and the BPT net income as income taxes. This treatment will allow both taxes to be included in New Jersey's calculation of credit for taxes paid to other jurisdictions, thus preventing the same income from being taxed more than once.

The New Jersey Division of Taxation will accept amended returns as long as they are received within the statutory period. New Jersey also will permit the credit for the UBT and BPT for all cases currently pending before the state's tax court and the Conference and Appeals Branch if the cases involved denied the taxpayer a New Jersey gross income tax credit for either tax. *

Mark H. Levin, a member of the NYSSCPA New York State, Municipal, and Local Taxation Committee, is with the firm H.J. Behrman & Co. LLP.