Starting with the combined group’s first tax year beginning on or after Jan. 1 of the fifth year after the combined reporting rules are effective and continuing for the next 10 years, a combined group of publicly traded companies is entitled to a deduction from the combined group’s entire net income. The deduction is equal to one-tenth of the amount necessary to offset the increase in the net deferred tax liability or the decrease in the net deferred tax asset, or the aggregate change from a net deferred tax asset to a net deferred tax liability. A Division of Taxation Technical Bulletin, TB 96, explains the eligibility requirements and addresses certain questions related to the deduction.
In March 2020, the division released Form DT-1, “Statement of Net Deferred Tax Liability Deduction,” for taxpayers to use to obtain the net deferred tax liability deduction. The form includes step-by-step instructions for computing the future deduction amount.
Completed forms must be filed electronically with the division. The division’s system for accepting completed forms is expected be available no later than May 15, 2020.
Form DT-1 must be filed by July 1, 2020. No filing extensions will be granted. Taxpayers that fail to timely file the form will lose the deduction.