New Jersey Tax Court Rejects Alternative Apportionment Formula

The New Jersey Tax Court rejected the Division of Taxation’s application of a five-factor alternative apportionment formula as invalid rulemaking under New Jersey’s Administrative Procedures Act (APA). The Tax Court previously determined that an application of the statutory apportionment formula in effect prior to 2011 for companies without a “regular place of business” outside New Jersey did not fairly reflect the taxpayer’s in-state business activities and remanded the case to the Division so that other apportionment methods could be considered. The Division then proposed a modified five-factor formula. The Tax Court found that while the five-factor formula could be an acceptable exercise of the Division’s discretionary authority to adjust the taxpayer’s apportionment formula, it nevertheless constituted an impermissible “de facto rule-making” in violation of the APA.


Canon Fin. Servs., Inc. v. Director, Div. of Taxation, No. 000404-2014 (N.J. Tax Ct. Dec. 5, 2018).



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