{"id":1549,"date":"2018-07-12T09:09:05","date_gmt":"2018-07-12T13:09:05","guid":{"rendered":"https:\/\/www2.law.temple.edu\/10q\/?p=1549"},"modified":"2018-07-12T09:09:05","modified_gmt":"2018-07-12T13:09:05","slug":"nj-appellate-court-affirms-decision-denying-interest-expense-addback-exception","status":"publish","type":"post","link":"https:\/\/law.temple.edu\/10q\/nj-appellate-court-affirms-decision-denying-interest-expense-addback-exception\/","title":{"rendered":"NJ Appellate Court Affirms Decision Denying Interest Expense Addback Exception"},"content":{"rendered":"

The New Jersey Superior Court, Appellate Division, has affirmed the Tax Court\u2019s decision in Kraft Foods Global Inc<\/em>., in which a taxpayer\u2019s deduction for related-party interest expense was disallowed for corporation business tax purposes (decision available here<\/a>).<\/p>\n

Background<\/strong><\/p>\n

The only issue before the court was whether the Division of Taxation (the \u201cDivision\u201d) properly added back interest that the taxpayer had paid to its corporate parent. The taxpayer\u2019s position was that it qualified for the so-called \u201cunreasonableness exception\u201d to New Jersey\u2019s related-party interest expense addback, because the interest paid by the taxpayer to its parent was effectively funding the parent\u2019s third-party interest expense. At the trial court level, the Tax Court ruled in favor of the Division, reasoning that the taxpayer had not guaranteed the parent\u2019s third-party debt. (For our analysis of the Tax Court\u2019s decision, see our prior alert<\/a>.) In today\u2019s unpublished decision, the appellate court affirmed the Tax Court\u2019s ruling without providing any further analysis of the issue.<\/p>\n

Takeaways<\/strong><\/p>\n

Despite the appellate court\u2019s decision, many taxpayers may still qualify for an exception to New Jersey\u2019s related-party interest expense addback:<\/p>\n