September 2025

New Jersey's Pilot Mediation Program for Tax Disputes: The New Jersey Division of Taxation is starting a pilot mediation program on October 1, 2025. Mediation will offer a new option, allowing taxpayers to resolve certain types of cases and decreasing the number of protests progressing to the Conference and Appeals Branch (CAB) and the complaints filed with the New Jersey Tax Court.

The pilot program will run for 24 months and end on September 30, 2027. It is limited to matters involving corporate business tax and sales and use tax, including penalties and interest associated with these types of taxes. Technical Tax Bulletin TB-115 states:

"Mediation will involve an informal meeting between Taxation representatives from Audit and a taxpayer or taxpayer representative with a trained Taxation mediator who will guide the discussion and process. The mediator will not be empowered to impose a settlement on the parties, but will actively facilitate and encourage a discussion between parties, thereby offering participants an opportunity to arrive at a mutually agreeable resolution of the pending tax controversy. The assigned mediator, although employed by Taxation, will not advocate for or work to sustain Taxation's position. The assigned mediator will serve as an unbiased and impartial facilitator working to enable the opposing parties to reach a fair and equitable settlement that both parties can voluntarily accept – understanding both the advantages and disadvantages of resolving the controversy."

To be eligible for the program, the tax liability must be at least $5,000, the taxpayer must agree to extend the statute, and, generally, the mediation must conclude within 180 days. Documents and communications disclosed in the mediation are confidential. If the case is resolved in mediation, there will be a closing agreement to finalize the resolution. This agreement is not precedential.

Mediators used in the program will be trained as mediators in a program offered by the New Jersey State Bar Association. Per TB-115: "During the pilot program, the personnel serving as mediators will consist of a cadre of Taxation personnel from various functions with a variety of technical backgrounds and subject matter expertise appropriate to address tax matters arising during a mediation assignment. Where needed and appropriate, a mediator may seek assistance from a subject matter expert within Taxation."

June 2025

New Jersey Finalizes Regulations Narrowing P.L. 86-272 Protections for Online Business Activities: New Jersey released final regulations on income tax nexus (N.J.A.C. 18:7-1.6 et. seq.). These regulations adopt portions of the Multistate Tax Commission's (MTC) guidelines on P.L. 86-272. P.L. 86-272 provides protection to companies engaged in certain sales solicitation activities in interstate commerce. New Jersey will now consider certain internet activities, such as providing post-sale assistance through email or placing cookies on a customer's computer that gather market research for sale to third parties, to exceed the protections of P.L. 86-272. The MTC and the states have been expanding income tax nexus post-Wayfair. Wayfair broadened nexus for sales and use taxes. There will be significant litigation over the scope of income tax nexus in coming years as states broaden the reach of income tax. The U.S. House passed restrictions on states' ability to expand nexus in the context of P.L. 86-272 in the Budget Reconciliation Bill. However, the Senate version does not contain this provision.

* Baker Donelson professional admitted to the practice of law in Michigan and Virginia; Maryland bar application pending.