NJ Tax Refund for Out-of-State Limited Partner

The Tax Court of New Jersey has held that an out-of-state limited partner was the proper party to whom refunds should be issued regarding taxes paid by the limited partnership on income passed through to the limited partner.  Under New Jersey’s taxation structure, limited partnerships must pay a tax on income attributable to non-resident limited partners.  In the case at hand, a New Jersey appellate court upheld a Tax Court decision that found the limited partner did not have New Jersey nexus based solely on its ownership interest in the limited partnership.  The decision was then remanded to determine the proper party to whom any potential refunds should be issued.  The Director argued that the partnership was the proper party to whom refunds should be issued, but that the statute of limitations had run on any such claims.  The Tax Court disagreed, and found that following the Director’s reasoning would result in negating the Court’s prior rulings, and would allow New Jersey to improperly retain funds to which it was not entitled.  Further, the New Jersey statute clearly provides that payments made on behalf of non-resident partners will be deemed to have been paid by the respective partner.  Accordingly, the limited partner was the proper party to whom the refunds should be issued. 

(BIS LP, Inc. v. Director, Division of Taxation, Tax Court of New Jersey, Dkt. No. 007847-2007, 10/25/2012.)


Gary Bingel's expertise focuses on state and local income taxation, and sales and use tax consulting. He has significant experience serving clients in the manufacturing, retail, pharmaceutical, biotechnology, technology and service industries.

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