September 26, 2002
Tax attorney: New Jersey tax changes may turn New York into 'tax haven'
Recent corporate tax increases in New Jersey may make New York State look like a "tax haven" in comparison, a state and local tax practitioner has argued.
New Jersey's recent tax increases on businesses "drastically alter New Jersey's corporate tax landscape, making it inhospitable to large corporations," Glenn Newman wrote in an article entitled Did New Jersey Turn New York Into a Tax Haven?
"Moreover, a comparison of New Jersey's new regime with New York's corporate tax system, which for more than 50 years has been structured to accommodate and attract such companies to locate their headquarters in New York, could encourage a migration across the border to the tax haven of New York," Newman wrote.
Newman, former deputy commissioner for audit and enforcement for the New York City Department of Finance, is now an attorney with Roberts & Holland LLP, which describes itself as the largest law firm in the nation concentrating in tax law. The article was published August 12 on the firm's Web site, www.robertsandholland.com.
The article outlined five key changes to New Jersey tax law, including adoption of an alternative minimum assessment (AMA) on New Jersey gross receipts or New Jersey gross profits (gross receipts minus cost of good sold).
"The AMA is particularly onerous to businesses with high volume and low profit margins," Newman wrote.
Taxpayers may choose which to use, but this election becomes "locked in" for five years, he noted. The AMA is capped at $5 million in tax for a single corporation and at $20 million for an affiliated group with five or more taxpayers, the article added.
Changes in New Jersey tax law also create new restrictions on the deduction for interest on certain inter-company debt in cases in which parents companies borrow centrally and re-lend to affiliates, Newman noted.
New Jersey also changed how it apportions corporate income for purposes of taxes in a way that will effectively increase income apportioned to New Jersey even though sales were made in other states, Newman wrote.
"Although New York's corporate tax policies may not be in perfect harmony with every taxpayer s wishes, considering the tenor and far-reaching impact of New Jersey's new CBT, New York might be considered by some large multinational corporations to be an attractive tax haven," Newman concluded.