The FAQs state that although an entity electing to be taxed under the BAIT must pay quarterly estimated tax, it must also withhold taxes and pay estimates for its nonresident partners/shareholders, to the extent otherwise required by the pass-through entity. New Jersey’s most recent guidance addresses some issues regarding estimated tax payments and calculating the BAIT. Unlike Connecticut, which enacted its Pass-Through Entity Tax as a mandatory entity-level tax (but with an alternative base option for calculating the tax), New Jersey allows pass-through entities (other than single member LLCs) to determine whether the BAIT will be tax-advantageous to the entity’s owners. Similar to states like Rhode Island and Louisiana, New Jersey enacted its tax as an alternative to paying the tax on the business income of the pass-through entity at the individual owner level, allowing individuals to potentially reduce their overall tax bill by limiting the impact of the federal SALT cap created by the 2017 Tax Cuts and Jobs Act. On September 29, 2020, the New Jersey Division of Taxation issued some clarifications and FAQs for its new elective Pass-Through entity tax passed earlier this year.
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