On January 18, 2022, Governor Murphy signed legislation to rectify the issues related to New Jersey’s Business Alternative Income Tax (BAIT) regulations.  The legislation becomes effective as of January 1, 2022.  The major changes to the BAIT, which were included in the legislation are as follows:

• A modification was made to include more income that will be subject to the BAIT, which will then result in a larger tax credit.
• A more generous tax credit will be generated, as a result of changes that were made to the method that offsetting tax credits were applied to the BAIT.
• The tax brackets were updated, so they more closely align to the NJ Gross Income Tax brackets.
• Overpayments of the BAIT and other tax credits can now be applied as estimated tax payments for the following year.
• Entities will no longer be required to make BAIT payments on the shares owned by non-resident owners, if the entity owner expects to receive a refund of the BAIT, had the entity paid it.

S Corporations will have the option to use the three-factor apportionment formula, when calculating the BAIT, on Form NJ-NNR-A, for 2021.

The New Jersey Division of Taxation will be posting important guidance on the new legislation, in the coming days.

For more information about the changes to the NJ BAIT and how it may impact your business, please contact us to speak with a member of our tax department.

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