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Division of Taxation

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 New Jersey 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, New Jersey 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 New Jersey Gross Income Tax purposes.

S corporations

For New Jersey 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 New Jersey Corporation Business Tax purposes.

Corporation Business Tax

For C corporations completing the CBT-100, CBT-100U, or the BFC-1, 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 New Jersey Corporation Business Tax purposes.


Last Updated: Friday, 03/25/22