Does NJ Accept Federal S Election? New Jersey S Corporation Tax Law Changes

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With the enactment of A.B. 4295 on December 22, 2022, New Jersey amended tax laws to automatically conform to the federal S corporation election. Historically, most states recognized the federal election; New Jersey required a separate election. Effective for years after December 22, 2022, the federal S corporation election automatically means S corporation for New Jersey CBT (Corporation Business Taxes) and gross income taxes.

S corporations and QSSSs (Qualified Subchapter S Subsidiaries) electing C corporation treatment for New Jersey tax purposes must adhere to combined reporting requirements per N.J.S.A. 54:10A-5.22.b.

Businesses must update registrations on the New Jersey Treasury website. The online SCORP application is used to file a New Jersey S Corporation Election.

To do business in New Jersey and qualify for an S corporation, you must register with the NJ Division of Revenue and Enterprise Services. The federal S corporation status is granted by the IRS and does not automatically apply in New Jersey, thus requiring separate application and approval in the state.

To create an S-Corp in New Jersey, you must:

  1. Form a business name, ensuring it will enable you to develop a strong brand identity.
  2. Hire a Registered Agent for your business.
  3. File your Certificate of Formation with the state.
  4. Create an operating agreement.
  5. Request an Employer Identification Number (EIN) from the IRS, which is generally required for S Corps filing federal tax returns or hiring employees.
  6. File a form 2553 with the IRS for federal S corporation status.
  7. Register with the NJ Division of Revenue and Enterprise Services.
  8. Have a Certificate of Incorporation or Certificate of Authority.
  9. File the NJ S Corporation Election within 3 1⁄2 months from the start of your fiscal year.

To obtain an EIN and a thorough understanding of the requirements, you may refer to a guide on New Jersey’s Business Name Search for proper naming conventions and additional steps to ensure compliance as an S-Corp in the state. Without filing for S Corp status in New Jersey, your business will be treated as a standard C corporation with the applicable tax rates.

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