54:10A-4.5 Carryover of net operating loss for privilege period as deduction; exceptions.
27. a. Notwithstanding any provision of subsection (k) of section 4 of P.L.1945, c.162 (C.54:10A-4) or of the federal Internal Revenue Code, including but not limited to 26 U.S.C. s.381 or any successor or equivalent provision, that permits a corporation to use the net operating losses of another for federal income tax purposes following certain transactions, including but not limited to those qualifying as reorganizations under the provisions of subparagraph (A), (C), (D), (F) or (G) of paragraph (1) of subsection (a) of section 368 of the federal Internal Revenue Code, 26 U.S.C. s.368, a net operating loss for a privilege period ending after June 30, 1984, may be carried over and allowed as a deduction only by the corporation that sustained the loss; provided, however, that in the case of a merger of two or more corporations pursuant to statute of this State or any other jurisdiction, the net operating loss may be carried over only by the corporation that sustained the loss and that is also the surviving corporation following the merger. The net operating loss may not be carried over by a taxpayer that changes its state of incorporation.
b. Subsection a. of this section shall not apply: (1) between members of a combined group reported on a combined return in New Jersey, or (2) between members of an affiliated group reported on the elective combined return in New Jersey, or (3) if corporations that were parties to the merger would be members of the combined group reported on a combined return in New Jersey within one group privilege period subsequent to the date of the merger, unless there is an unforeseen delay due to required approvals from federal or other state regulatory authorities that delays the finality of the merger or acquisition. In a situation where there is delay due to the regulatory approval requirements of federal or other state regulatory authorities, the corporations may petition the director, in a form and manner prescribed by the director, documenting that the corporations' plan to be a combined group filing a New Jersey combined return upon approval of the merger or acquisition by the federal or other state regulatory authorities. Within 180 days of approval by the federal or other state regulatory authorities of the merger or acquisition, the corporations shall notify the Division of Taxation of the approval and the director shall issue a stamped certificate of attestation attesting that the net operating loss carryovers are not extinguished. The provisions of this paragraph (3) shall only apply to mergers and acquisitions occurring on or after the effective date of P.L.2020, c.118 (C.54:10A-5.46 et al.) and shall not apply to a binding agreement in effect prior to the effective date of P.L.2020, c.118 (C.54:10A-5.46 et al.).
c. For privilege periods beginning on and after January 1, 2020, the provisions of the federal Internal Revenue Code, the federal rules, limitations, and restrictions, thereto, governing federal net operating losses, federal net operating loss carryovers with regard but not limited to: mergers, acquisitions, reorganizations, spin-offs, split-offs, dissolution, bankruptcy, or any form of cessation of a business, or any other provision that limits or reduces federal net operating losses and federal net operating loss carryovers, shall apply to New Jersey net operating loss carryovers under subsection (v) of section 4 of P.L.1945, c.162 (C.54:10A-4) and the New Jersey net operating loss carryover provisions of subsection h. of section 18 of P.L.2018, c.48 (C.54:10A-4.6).
The federal rules and regulations governing federal consolidated return net operating losses and net operating loss carryovers shall apply to New Jersey net operating loss carryover provisions of subsection h. of section 18 of P.L.2018, c.48 (C.54:10A-4.6) as though the combined group filed a federal consolidated return, regardless of how the members of the combined group filed for federal purposes to the extent consistent with the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.).
L.2002, c.40, s.27; amended 2018, c.48, s.25; 2020, c.118, s.5.