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Employee Retention Tax Credit

The federal Employee Retention Tax Credit (ERTC) is a refundable payroll tax credit taken against employment taxes that encourages businesses impacted by the pandemic to keep employees on payroll. The ERTC provides a refundable credit on qualified wages paid by an eligible employer whose business has been financially impacted by the coronavirus (COVID-19) pandemic. The ³Ô¹ÏºÚÁÏ tax treatment of a partnership, S corporation, or C corporation that qualifies for the federal ERTC is as follows:

Partnership

For partnerships completing the NJ-1065, ³Ô¹ÏºÚÁÏ does not permit an additional deduction for expenses that were disallowed for federal income tax purposes even though the taxpayer cannot claim the ERTC for ³Ô¹ÏºÚÁÏ Gross Income Tax purposes.

S corporations

For ³Ô¹ÏºÚÁÏ S corporations completing the CBT-100S, New Jersey does not permit an additional deduction for disallowed expenses that were included in federal taxable income even though the taxpayer could not claim the ERTC for ³Ô¹ÏºÚÁÏ Corporation Business Tax purposes.

Corporation Business Tax

For C corporations completing the CBT-100, CBT-100U, or the BFC-1, ³Ô¹ÏºÚÁÏ does not permit an additional deduction for disallowed expenses that were included in federal taxable income even though the taxpayer could not claim the ERTC for ³Ô¹ÏºÚÁÏ Corporation Business Tax purposes.