To be taxed as an S corporation in New Jersey, your corporation must register with the Division of Revenue and Enterprise Services, submit proof of its federal S election to the Division of Taxation, and file a Shareholder Jurisdictional Consent signed by every shareholder. Since December 22, 2022, the state no longer requires the old standalone election form (CBT-2553), but the three requirements above are still mandatory. Skip any of them and New Jersey will tax your corporation as a C corporation, even though the IRS treats it as a pass-through.1New Jersey Division of Taxation. P.L. 2022, c. 133, New Jersey S Corporation Procedural Changes
The Three Steps That Replaced CBT-2553
P.L. 2022, c. 133 eliminated the separate state election form. New Jersey now recognizes the federal S election automatically, but only once you have completed each of the following.
Register with DORES as an 1120 filer. The corporation must be registered with the Division of Revenue and Enterprise Services. For a new entity, that means filing a certificate of formation or authorization (the fee is $125 for for-profit entities) and completing the NJ-REG tax and employer registration.2State of NJ – Department of the Treasury. Division of Revenue and Enterprise Services – Getting Registered
Submit proof of federal S corporation status. Provide the IRS acceptance letter, typically a CP261 or 385C notice, confirming that the federal S election was accepted.
File the Shareholder Jurisdictional Consent. Every shareholder must sign a document consenting to New Jersey’s authority to tax their share of S corporation income.3New Jersey Division of Taxation. TB-105(R) – Corporation Business Tax and Gross Income Tax Guidance Regarding S Corporations and Qualified Subchapter S Subsidiaries
You can deliver the federal acceptance letter and the shareholder consent in three ways: during initial business registration through DORES, when filing the first S corporation return on Form CBT-100S, or through the online S Corporation Election system at njportal.com/dor/scorp.1New Jersey Division of Taxation. P.L. 2022, c. 133, New Jersey S Corporation Procedural Changes
When the Consent Is Due
The Shareholder Jurisdictional Consent must be filed within three and a half months from the beginning of the corporation’s fiscal year. For a calendar-year corporation, that date is April 15.4New Jersey Division of Taxation. Electing S Corporation Status The timing mirrors federal practice: the IRS deadline for Form 2553 is two months and fifteen days after the start of the tax year, and New Jersey allows one additional calendar month.5Justia Law. New Jersey Revised Statutes 54:10A-5.22 – Election as a New Jersey S Corporation
If you miss the deadline but file before the tax year ends, the election takes effect for the following tax year. A timely consent is retroactive to the first day of the current year. The Division of Taxation sends notice within 30 days of filing whether the election is accepted.4New Jersey Division of Taxation. Electing S Corporation Status
Who Must Sign, and What They Are Agreeing To
The eligibility rules for a New Jersey S corporation match the federal standards. The corporation must be domestic, have no more than 100 shareholders, limit shareholders to individuals and certain trusts and estates, exclude nonresident aliens, and issue only one class of stock.6Office of the Law Revision Counsel. 26 U.S. Code 1361
The state-specific requirement is the Shareholder Jurisdictional Consent itself. It does more than acknowledge the election. Each signer affirms New Jersey’s right to tax their proportional share of S corporation income regardless of where they live, and that consent survives a later change of residency.5Justia Law. New Jersey Revised Statutes 54:10A-5.22 – Election as a New Jersey S Corporation Every shareholder has to sign. A federal Form 2553 consent does not substitute for the New Jersey document.
What Happens If a Shareholder Will Not Sign
A refusal does not kill the S election. Instead, the corporation itself pays tax on that shareholder’s proportional share of New Jersey-sourced income at the state’s highest gross income tax rate, currently 10.75%.7FindLaw. New Jersey Code 54:10A-5.23 – Shareholder Consent The payment is due no later than the return filing deadline for that period.
The corporation may try to recover these amounts from the non-consenting shareholder, but is not required to. On its CBT-100S return the corporation completes Schedule K to calculate what it owes on behalf of each non-consenting shareholder and prepares Form NJ-1040-SC for each one.8State of NJ – Department of the Treasury – Division of Taxation. S Corporations Are Responsible for Payment of New Jersey Income Taxes Owed by Non-Consenting Shareholders This is where out-of-state investors often become an issue. They resist consenting to another state’s taxing authority, and the cost of their refusal lands on the company.
Fixing a Missed Election for Earlier Years
Corporations that held federal S status before December 22, 2022, but never filed the old separate New Jersey election were treated as C corporations by the state for those years. The 2022 law created a retroactive fix.1New Jersey Division of Taxation. P.L. 2022, c. 133, New Jersey S Corporation Procedural Changes
To claim retroactive S status for pre-2022 periods, use the DORES online S Corporation Election system and submit:
- The IRS acceptance letter (CP261 or 385C) confirming federal S status
- A Shareholder Jurisdictional Consent (Schedule SJC) signed by every shareholder who held stock during any retroactive period
- A reasonable-cause explanation for why the separate New Jersey election was never filed
A $100 fee applies for each privilege period before December 22, 2022, that is included in the request. No fee applies for periods beginning on or after that date.1New Jersey Division of Taxation. P.L. 2022, c. 133, New Jersey S Corporation Procedural Changes The reason the state still demands shareholder consent for closed years is simple: without it, New Jersey has no basis to collect tax on the distributive shares attributed to those earlier periods.
What a Successful Election Does and Does Not Eliminate
A common misreading of S corporation status is that it ends New Jersey corporate tax the way it ends most federal corporate tax. It does not. The entity-level tax is reduced to a minimum, not erased.
Every New Jersey S corporation owes a minimum Corporation Business Tax based on New Jersey gross receipts:9State of NJ – Division of Taxation. Corporation Business Tax Overview
- Under $100,000: $375
- $100,000 to $249,999: $562.50
- $250,000 to $499,999: $750
- $500,000 to $999,999: $1,125
- $1,000,000 or more: $1,500
A corporation that is part of an affiliated or controlled group with total payroll of $5 million or more pays a $2,000 minimum regardless of gross receipts.9State of NJ – Division of Taxation. Corporation Business Tax Overview The minimum tax is reported on Form CBT-100S.
Separately, S corporations may elect annually into the Pass-Through Business Alternative Income Tax (BAIT), which lets the entity pay state tax on members’ distributive shares and claim a federal deduction that gets around the $10,000 SALT cap. BAIT is reported on Form PTE-100 and is a separate election from the S election itself.10New Jersey Division of Taxation. Pass-Through Business Alternative Income Tax (PTE/BAIT)
Reversing or Declining the Election
New Jersey offers two mechanisms for getting out of S corporation treatment, and a third situation ends it automatically.
Voluntary revocation. Submit a letter of revocation together with a copy of the original election through the online SCORP application. Shareholders holding more than 50% of outstanding shares on the day of the revocation must sign, and the filing must occur on or before the last day of the first tax year of the election.4New Jersey Division of Taxation. Electing S Corporation Status
Opting out. A federal S corporation can also elect not to be taxed as a New Jersey S corporation at all. Opting out requires 100% shareholder consent and can be made at any time during the preceding tax year or before the due date (including extensions) of the S corporation return. It remains in effect for that year and all later years until shareholders holding more than 50% of shares vote to revoke it.5Justia Law. New Jersey Revised Statutes 54:10A-5.22 – Election as a New Jersey S Corporation A corporation that opts out is taxed as a C corporation in New Jersey while remaining an S corporation federally, which means maintaining two sets of tax calculations.
Automatic termination. Losing federal S status ends the New Jersey S election automatically. Typical triggers include crossing 100 shareholders, issuing a second class of stock, or an ineligible shareholder acquiring shares. The state election lasts only as long as the federal one.