By Mark H. Levin

New Jersey recently reversed its long-standing position regarding the New York City Unincorporated Business Tax (UBT) and the Philadelphia Business Privilege Tax (BPT). Previously, New Jersey had not considered the UBT and BPT as income taxes imposed on the individual proprietor’s business income or an individual partner’s distributive share of the partnership’s business income. Thus, neither the UBT nor the BPT could be included in New Jersey’s calculation of the credit for taxes paid to other jurisdictions.

Effective February 28, New Jersey treats both taxes as income taxes, which allows taxpayers to include the UBT and the BPT in New Jersey’s calculation of the credit for taxes paid to other jurisdictions, thus preventing the same income from double taxation.

The New Jersey Division of Taxation will accept amended returns received within the three-year statutory period. The credit for the UBT and the BPT will also be allowed for all cases pending before the New Jersey Tax Court and the Conference and Appeals Branch to the extent that the matter involved denied the taxpayer a New Jersey gross income tax credit for the UBT or BPT.