N.J.A.C. 18:7-21.8 - Reporting the Income of Certain Members

(a) For a member not incorporated in the United States and where the foreign corporation did not file a Federal Form 1120-F, the income to be included in the entire net income of the combined group shall be reported, as follows:

1. The combined group may complete and attach a 1120-F, as though the member had filed the return with the Federal government; or

2. If the other members of the combined group have a Form 5471 that was filed for Federal purposes reporting the income from that non-U.S. member, the combined group shall use the income information reported on Federal Form 5471 and attach a copy of the form that was filed with the Federal government.

(b) The International Financial Reporting Standards (I.F.R.S.), that are issued by the International Accounting Standards Board (I.A.S.B.), qualify as an acceptable method that "reasonably approximates income" pursuant to the Corporation Business Tax Act for the purposes at N.J.S.A. 54:10A-4.6.b, if that is the only method of accounting the specific entity used.

(c) Non-U.S. corporations that are members of combined groups (filing on an affiliated group or water's-edge group basis) are not required to add back the items of income (or loss) not included in Federal taxable income because those items are excluded from Federal taxable income as the result of the tax treaty between the nation of incorporation and the United States. The member must report such income items and amounts reported to the Federal government by providing a copy of the form 8833 filed with the Federal government to the managerial member to attach to the combined return. In the event that the member did not file any return or form with the Federal government but the member is treaty protected, a pro forma form 1120-F and a pro forma form 8833 must be prepared and attached to the combined return for that member.

(d) Where there are material differences in accounting methods between U.S. G.A.A.P. and I.F.R.S. that cause a material numerical difference, taxpayers must include an explanation for the difference in their books, records, and work papers, which shall be made available to the Division of Taxation upon request.