P.L. 2011, c. 59, signed on April 28, 2011, amended N.J.S.A. 54:10A-6 to replace the three-fraction allocation formula of the Corporation Business Tax allocation factor with a single sales fraction formula. The change is phased in over three years, beginning with privilege periods beginning on or after January 1, 2012.

For privilege periods beginning on or after January 1, 2012 but before January 1, 2013, the sales fraction will account for 70% of the allocation, and the property and payroll fractions will each account for 15% of the allocation. For privilege periods beginning on or after January 1, 2013 but before January 1, 2014, the sales fraction will account for 90% of the allocation, and the property and payroll fractions will each account for 5% of the allocation. For privilege periods beginning on or after January 1, 2014, the sales fraction will account for 100% of the allocation.

Example 1: Company A is on a calendar year tax year that begins January 1 and ends December 31. For the tax year beginning January 1, 2012, the sales fraction will account for 70% of the allocation, and the property and payroll fractions will each account for 15% of the allocation. For the tax year beginning January 1, 2013 the sales fraction will account for 90% of the allocation, and the property and payroll fractions will each account for 5% of the allocation. For the tax year beginning January 1, 2014 the sales fraction will account for 100% of the allocation.

Taxpayers with a tax year that begins prior to January 1, 2012 must continue to use the allocation factor consisting of the property fraction, twice the sales fraction, and the payroll fraction, for their 2011-2012 tax year. For the taxpayer’s tax year beginning after January 1, 2012, the sales fraction will account for 70% of the allocation, and the property and payroll fractions will each account for 15% of the allocation. For the taxpayer’s tax year beginning after January 1, 2013, the sales fraction will account for 90% of the allocation, and property and payroll fractions will each account for 5% of the allocation. For all the taxpayer’s tax year beginning after January 1, 2014 and succeeding years, the sales fraction will account for 100% of the allocation. A Supplemental Schedule J is required to be completed and attached to Form CBT-100.

Example 2: Company B has a tax year that begins August 1, 2011, and ends on July 31, 2012. For the Company B’s tax year that begins August 1, 2011, Company B will continue to use the double weighted sales fraction allocation method, and attach the Supplemental Schedule J to the Form CBT-100 return. For Company B’s tax year beginning August 1, 2012, the sales fraction will account for 70% of the allocation, and the property and payroll fractions will each account for 15% of the allocation, and the company will attach the Supplemental Schedule J to the Form CBT-100 return. For Company B’s tax year beginning August 1, 2013 the sales fraction will account for 90% of the allocation, and property and payroll fractions will each account for 5% of the allocation, and the company will attach the Supplemental Schedule J to the Form CBT-100 return. For Company B’s tax year beginning August 1, 2014 and all subsequent years, Company B will use the 100% sales fraction formula without the use of Supplemental Schedule J.

P.L. 2011, c. 59 also modified the sales fraction formula for airlines for privilege periods beginning on or after January 1, 2012. The law provides that the sales fraction for airlines for privilege periods beginning on or after January 1, 2012 shall be determined as the ratio of an airline’s revenue miles in New Jersey divided by an airline’s total revenue miles. Where an airline is engaged in the transportation of passengers, the transportation of freight, or the rental of aircraft, the ratio shall be determined by an average of a passenger revenue mile fraction, freight revenue mile fraction, and rental revenue mile fraction weighted to reflect the taxpayer’s relative gross receipts from passenger transportation, freight transportation, and rentals.

Revenue miles means passenger revenue miles for passengers, ton revenue miles for freight, or aircraft revenue miles for aircraft rentals, as defined by the United States Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics: Air Carrier Statistics.

The passenger revenue mile fraction is determined by multiplying the number of revenue-paying passengers aboard the aircraft by the distance traveled in New Jersey divided by the number of revenue paying passenger aboard the aircraft multiplied by the distance traveled everywhere.

The freight revenue mile fraction is determined by dividing the revenue freight ton miles in New Jersey by the revenue freight to miles everywhere. A freight revenue ton mile is equal to one ton carried one mile.

The rental revenue mile fraction is determined by dividing the number of rental miles flown in New Jersey by total rental miles flown.