Division of TaxationA supplemental FAQ to support TB-115(R)
What is the Mediation Pilot Program?
The Mediation Pilot Program is a new initiative that will be launched by the New Jersey Division of Taxation in October of 2025. It is intended to provide a faster, cost-effective alternative for the resolution of certain tax controversies. Mediation allows both the taxpayer and the Division to actively participate in finding a mutually agreeable resolution.
What is mediation?
Mediation is a dispute resolution process in which the mediator facilitates negotiations between the parties to help them reach a mutually acceptable settlement. The major distinction of mediation is that a mediator does not make decisions about the outcome of the case. Instead, the parties, with the assistance of the mediator, work toward a resolution of the controversy to which both parties can agree.
What are the goals of the Mediation Pilot Program?
Key goals include:
What types of cases are eligible to apply for the Mediation Pilot Program?
Only controversies involving Corporation Business Tax and Sales and Use Tax are eligible at this time. Associated penalties and interest may also be mediated.
Are there any dollar thresholds for mediation eligibility?
Yes, the tax amount in controversy must be at least $5,000, excluding penalties and interest.
Can existing cases in the Conference and Appeals Branch (CAB) be mediated?
No. Only new matters are eligible for mediation. Cases already pending in CAB are excluded.
My audit assessment is more than I can pay. Can I enter mediation?
If your case involves only the ability to pay (without any other mitigating factors), it is not something that can be mediated. Mediation is a process for dispute resolution. If you believe there are factors that warrant consideration that you were unable to resolve during the audit, mediation may be an option for you to consider. Once a settlement is reached, payment will be expected before the closing agreement is fully executed.
Are refund claims eligible to be mediated?
Yes, provided the refund involves Corporation Business Tax or Sales and Use Tax and the amount is at least $5,000.
How much does it cost to participate in the Mediation Pilot Program?
Mediation with the Division of Taxation is free. However, taxpayers are responsible for the cost of any professionals they hire (e.g., attorneys or accountants).
Do I need to initiate mediation, or does the Division of Taxation automatically enroll me in it?
Only the taxpayer can initiate mediation. Division personnel will inform eligible taxpayers about the option during post-audit conferences.
Is participation in mediation mandatory?
No. Mediation is completely voluntary for all parties.
How do I know whether mediation is an appropriate option for me?
If your tax controversy is $5,000 or more (excluding penalties and interest) and involves Corporation Business Tax or Sales and Use Tax, and you want to work towards a mutually acceptable settlement, mediation may be a good choice for you.
Some pros that mediation can offer are:
It's also important to point out that mediation is not a process in which you can bring your case before a mediator and expect a "win." The process is only effective when the parties work together to resolve the controversy. Additionally, mediation is not a time to present new information or raise new issues. You must have provided your auditor with the information during the audit. Not every case will be accepted for mediation. Cases in which a taxpayer was not compliant in providing information or documentation during an audit may be rejected.
Ultimately, only you can decide if mediation is the right choice for you. However, we will remind you that entering mediation does not negate the administrative and judicial remedies available to you. So if you try mediation and cannot come to a resolution, you would still be able to pursue an appeal through the Conference and Appeals Branch and/or Tax Court.
How do I apply for mediation?
Instructions and addresses for submission will be provided at the post-audit conference. However, you will need to submit:
*Sample versions are online for informational purposes only. All relevant material will be provided to eligible taxpayers at the post-audit conference.
How will I know if my application for mediation has been accepted?
You will receive written notification (within 30 calendar days) stating whether your application is accepted or rejected.
If accepted, the notice will include the name of your assigned mediator and information about scheduling your first session.
If rejected, you will receive an explanation of why your case was not accepted. The case will be returned to the Division's Audit Branch where the audit will be finalized. However, applying for mediation does not affect your right to either protest or file a complaint regarding an Audit Assessment, if you disagree with its findings.
Will the audit assessment increase during mediation?
The assessment will continue to accrue interest (thereby increasing the bill but not the assessment).
What happens in a mediation session?
Mediation sessions will flow in an organic fashion based on the facts and circumstances of each specific case. However, in general, you can expect the following to occur:
Is there anything I should do to prepare for my mediation session?
To maximize the benefits of mediation, all participants should be prepared to follow these principles:
Mediation works only if the parties can agree to an outcome. Everyone that comes to the mediation has the ability to withdraw from the mediation at any time. So be prepared to compromise in order to come to a mutually agreeable resolution.
How long will mediation take?
This depends on many factors (e.g., the complexity of the situation, coordination of schedules of the parties, etc.) We request consent for 210 days from the date of application and expect to complete most cases within 180 days. However, extensions may be granted if both sides agree.
Do I need to have a representative in mediation?
Taxpayers can represent themselves or retain professionals (e.g., attorneys, accountants, or subject matter experts) to represent or accompany them.
Remember, the mediator is not an advocate for either side and is only there to facilitate constructive dialogue between the parties. Whereas a tax professional can provide advice on settlement options or even suggest options for you. Even if you have a representative, we encourage you to actively participate in the mediation process, as it is ultimately your case and potential resolution.
Anyone who is entering mediation (you or your professional) must be willing to cooperate with the mediator and want to work to resolve the controversy. The goal of mediation is to reach a resolution that both parties can accept.
If you are assigning a representative the authority to obligate, bind, and/or appear on your behalf before the New Jersey Division of Taxation, they must provide Form M-5008-R , Appointment of Taxpayer Representative, that covers the period of the controversies.
Who facilitates the mediation?
A trained, neutral Taxation mediator who does not advocate for either party but guides discussions toward resolution. However, we do want to be transparent with the fact that the mediator is an employee of the Division of Taxation.
Can Division employees be impartial mediators and act as a neutral?
The short answer is yes.
The longer explanation is that mediators are statutorily required to be impartial and serve as neutrals under the New Jersey Uniform Mediation Act (N.J.S.A. 2A:23C et seq.). Each mediator in the Pilot Mediation Program has completed Civil Mediation Training with the New Jersey State Bar Association in a course approved by the Supreme Court of New Jersey. These employees cannot take a position in support or in opposition of the issues under consideration. They will not side with one party over the other. They have subject matter expertise but understand that their role as a mediator is to assist the parties to resolve their tax controversy.
When applying for mediation, the Mediation Agreement requires you to acknowledge that the mediator is a Division employee. The Uniform Mediation Act provides that a mediator may serve, even where a conflict exists, if the conflict is timely disclosed by the mediator to the mediation parties. See N.J.S.A. 2A:23C-9 (Mediator's Disclosure of Conflicts of Interest; Background). Further, we ask that anyone entering mediation review the Uniform Mediation Act (N.J.S.A. 2A:23C-1 et seq.) so the process can be fully understood by all parties.
What happens if we can't resolve the issue in mediation?
Mediation does not negate the administrative and judicial remedies that have always been available to a taxpayer. If the mediation is terminated without a successful resolution, you retain the right to protest or file a complaint regarding an Audit Assessment if you disagree with its findings.
Is the outcome of mediation binding?
Mediation results are only binding if and when they are memorialized in a signed closing agreement.
Will the results of mediation impact prior or future tax years?
No. Results are not precedent setting and are limited to the tax years addressed in the mediation.
Is the mediation process confidential?
Yes. Mediation communications are confidential under N.J.S.A. 2A:23C-8 and privileged under N.J.S.A. 2A:23C-4 and other laws or rules of this State. Meaning that communications made in mediation are confidential and cannot be disclosed without consent from all parties.
Can I use the mediation notes if I decided to pursue an administrative or statutory remedy?
No. Mediation communications are privileged and confidential and cannot be used for any other purpose. Additionally, neither the mediator nor the mediator's notes are subject to subpoena or public disclosure, including under OPRA.
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