§ 54A:5-10 — Definitions

12. For the purposes of the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.: "New Jersey S corporation" means a corporation that has made a valid election to be an S corporation for federal tax purposes for the taxable year, and that has not made a valid election pursuant to subsection d. of section 20 of P.L.2022, c.133 (C.54:10A-5.22). "Pro rata share" means the portion of any items attributable to an S corporation shareholder for a taxable year determined in the manner provided in, and subject to any election made under subsection (a) of section 1377 or subsection (e) of section 1362 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1377 and s.1362. "Pro rata share of S corporation income" means the sum of the shareholder's proportionate share of: For a New Jersey S corporation, the S corporation income allocated to this State of all New Jersey S corporations; and the S corporation income not allocated to this State. "S corporation" means a corporation that has elected to be an "S corporation" pursuant to section 1361 of the federal Internal Revenue Code, 26 U.S.C. s.1361, for the taxable year. "S corporation income" means the net of an S corporation's items of income, loss or deduction taken into account by the shareholder in the manner provided in section 1366 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1366; provided however that: a. S corporation income shall be determined without the exclusion, deduction or credit of: (1) any dividend exclusion or deduction otherwise allowed pursuant to paragraph 5 of subsection (k) of section 4 of P.L.1945, c.162 (C.54:10A-4); (2) taxes paid or accrued to the United States, a possession or territory of the United States, a state including this State, a political subdivision thereof, or the District of Columbia on or measured by profits or income, or business presence or business activity, of the corporation; (3) any income taxes paid or accrued to the United States, a possession or territory of the United States, a state including this State, a political subdivision thereof, or the District of Columbia paid or accrued by the S corporation on behalf of, or in satisfaction of the liabilities of, shareholders of the corporation; (4) interest income on obligations of any state other than this State, or of a political subdivision thereof, or of the federal government, except as deducted pursuant to subsection b. of this section; or (5) interest on indebtedness incurred or continued, expenses paid and incurred to purchase, carry, manage or conserve, and expenses of collection of the income or gain from obligations the income or gain from which is deductible pursuant to subsection b. of this definition; and b. S corporation income shall be determined after deduction of: (1) any gains or income derived from obligations which are referred to in N.J.S.54A:6-14 or from securities which evidence ownership in a qualified investment fund as defined in section 2 of P.L.1987, c.310 (C.54A:6-14.1), and any interest excluded from gross income pursuant to N.J.S.54A:6-14, or distributions excluded from income pursuant to section 2 of P.L.1987, c.310 (C.54A:6-14.1); and (2) (a) in the case of a taxpayer that is a cannabis licensee, an amount equal to any expenditure that is eligible to be claimed as a federal income tax deduction but is disallowed because cannabis is a controlled substance under federal law; (b) for purposes of this paragraph, "licensee" means the same as that term is defined in section 3 of P.L.2021, c.16 (C.24:6I-33); and c. The character of any S corporation item taken into account by a shareholder of an S corporation shall be determined as if such items were received or incurred by the S corporation and not its shareholder. "S corporation income allocated to this State" means that portion of the S corporation income that is allocated to this State by the allocation factor of the corporation for the fiscal or calendar accounting period pursuant to sections 6 through 10 of P.L.1945, c.162 (C.54:10A-6 through 54:10A-10), reduced by any tax imposed pursuant to paragraph (3) of subsection (c) of section 5 of P.L.1945, c.162 (C. 54:10A-5). "S corporation income not allocated to this State" means S corporation income less S corporation income allocated to this State. L.1993,c.173,s.12; amended 2022, c.133, s.22; 2023, c.50, s.2.