The New Jersey regulations in place have required income taxation on the composite New Jersey nonresident gross income tax returns (Form NJ-1080C) at the highest rate. However, for tax years beginning before 2013, the Division of Taxation allowed the use of two rates in order to encourage nonresident individuals to elect to participate in a composite return.

Entities with New Jersey sourced income of less than $250,000 were able to use the 6.37% rate, and taxpayers with New Jersey sourced income of $250,000 or more were required to apply the highest tax rate, which was 8.97% in 2012.

The Division of Taxation has decided to enforce the regulations already in place for years beginning on and after January 1, 2013. Therefore all composite income will be taxed at the current highest rate of 8.97%.

Some composite return entities may receive a Notice for failure to make the required estimated payments. If the two tiered tax rate calculation was used during 2013, the State should not enforce a penalty.