Carriers can get foreign tax credit for N.J. tax

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OTTAWA, Ont. — Canadian carriers operating in New Jersey can now claim the corporate business tax they pay there as a foreign tax credit in Canada.

The news comes as the Canadian Trucking Alliance continues its efforts to mitigate the effects of the New Jersey business tax, which had enforcement officials in New Jersey seizing trucks for unpaid bills there.
CTA learned carriers would be eligible for the foreign tax credit via a letter from Canadian Customs and Revenue, which states:

” … it is our view that the NJCBT paid by Canadian trucking companies is an “income or profits tax”, within the meaning of subsection 126(7) of the (Canadian Income Tax) Act, because it is determined as a percentage of Allocated Net Income. As a result, the payments are eligible for foreign tax credit in subsection 126(2) of the Act, assuming that all of the other conditions of application are therein met… However, the US$200 minimum tax paid to the State of New Jersey pursuant to the NJCBT is not eligible for a foreign tax credit in Canada pursuant to subsection 126(2) of the Act because it is not determined as a percentage of income and is therefore not an ‘income or profits tax’. But, the minimum fee is deductible from income pursuant to paragraph 18(1)(a) of the Act because it is incurred for the purpose of gaining or producing income.”

“This is of significant benefit to any carrier operating into and out of New Jersey. What it means is that they will get a tax credit for any NJCBT they pay,” says CTA CEO David Bradley. “If I can be so bold, it is also another example of why all carriers should support their associations. These efforts do not come cheap.”

While slugging it out on a state-by-state basis is tough going, CTA continues to lobby on behalf of Canadian carriers on those reprehensible state taxes on corporations that fall outside the purview of NAFTA and the Canada-US Tax Convention. New Jersey is the latest in a list of states including New York, Michigan and Pennsylvania, where CTA has waded in on behalf of the Canadian industry.

Last month, CTA combined forces with Canadian consulate officials in New York City to convince the State of New Jersey to suspend its program of seizing trucks (at least for Canadian carriers) for non-payment of the NJ Corporate Business Tax, in order that discussions with CTA on back tax provisions similar to those reached with the other states can commence. The first such meeting will take place in the state capital next week.

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