New Jersey Ends COVID-related Extension for State Tax Assessments
New Jersey Ends COVID-related Extension for State Tax Assessments
On December 22, 2022, Governor Murphy signed P.L.2022, c.133 (A4295/S2876) that eliminates the requirement to affirmatively make a New Jersey S corporation election; ends the New Jersey COVID-related extensions for State tax assessments and refund interest and adapts New Jersey Partnership Audit Rules to the new federal partnership audit rules.
This article addresses the recent New Jersey changes ending the New Jersey COVID-related extension for State tax assessments and refund interest.
Background. For most taxes, the original assessment time period is within 4 years of the date that a tax return was filed. The original assessment time period is shorter for Gross Income Tax returns, which must be assessed within 3 years of the date that a tax return was filed. A taxpayer may consent to an additional period of time beyond the 3- or 4-year period.
On March 9, 2020, Governor Murphy issued Executive Order No. 103, declaring both a COVID-19 related Public Health Emergency and a State of Emergency. Effective June 4, 2021, Governor Murphy rescinded the Public Health Emergency. However, the State of Emergency continues and has not been rescinded.
On April 14, 2020, Governor Murphy signed P.L.2020, c.19 (S2338) the “COVID-19 Fiscal Mitigation Act” which included an extension of the statute of limitations to assess taxes by 90 days following the conclusion of the state of emergency declared by the Governor under Executive Order No. 103 of 2020. The COVID-19 Fiscal Mitigation Act extended both the original assessment time period and the consent period within which a state tax extension could be made by an additional 90 days after the lifting of the COVID-19 State of Emergency.
Under the COVID-19 Fiscal Mitigation Act, if either the original assessment time period or the consent period would have ended on or after April 14, 2020, the Division could make an assessment on or before the expiration of the extended assessment time period. If the original assessment time period or the consent period would have ended before April 14, 2020, the Division was out of time to make an assessment beyond the 3- or 4-year time limitations period.
Extension for Tax Assessments. The extensions enacted in response to the COVID-19 pandemic for the statute of limitations on the time within which a state tax assessment could be made ended as of December 22, 2022, the enactment date of P.L.2022, c.133.
Any assessment of State tax that was allowed as a result of the COVID-19 extension of the statute of limitations but that was assessed after December 22, 2022 is void. The Division of Taxation is to return any amounts collected from a taxpayer as a result of such assessment made after December 22, 2022.
Extension for Tax Refund Claims. Executive Order No. 170 tied the extension date for various statutes of limitations regarding the filing of a claim for refund or credit to the end of the Public Health Emergency. P.L. 2021, c.103 specifically extended EO-170 until January 1, 2022, unless EO-170 is revoked or modified by the Governor. The January 1, 2022 extensions were further extended following EO-275 (signed November 23, 2021); those further extensions ended April 1, 2022.
Extension for State Tax Protests and Appeals. In response to the COVID-19 emergencies, on March 19, 2020, the Chief Justice of the Supreme Court of New Jersey extended the 90-day period to file an administrative protest (N.J.S.A. 54:49-18) or a Tax Court appeal (N.J.S.A. 54:51A-14) of a State Tax final determination. If the 90-day period to file a protest or a court appeal expired after March 19, 2020, taxpayers were allowed until 30 days after the COVID-19 State of Emergency ended to file a protest with the Conference and Appeals Branch or an appeal to the New Jersey Tax Court. On April 14, 2022, the Court issued an order ending the extension of time for filing an administrative protest or a New Jersey Tax Court appeal. The extensions ended effective May 1, 2022.
Interest on State Tax Overpayments. Generally, interest, at the prime rate, is allowed upon overpayments of State tax that has not been refunded six months and one day after the later of the last date prescribed or permitted by an approved application for an extension of time to file the return or the date on which the return requesting the refund. The COVID-19 Fiscal Mitigation Act extended for six months after the conclusion of the COVID-19 State of Emergency provisions governing the payment of interest on State Tax overpayments. P.L.2022, c.133 ended the COVID-19 extensions regarding the State’s payment of interest on a taxpayer’s overpayment of tax as of December 22, 2022, the new law’s effective date.