New Jersey's Division of Taxation has issued a technical bulletin finding that resident New Jersey CRTs and certain nonresident CRTs are subject to New Jersey's gross income tax.
Editor's Note: In general for income tax purposes, a CRT is a resident of the state where the trustmaker resided at the time the trust was created. A nonresident trust, generally a trust that is not a resident of a state but which owns real property or a small business interest in the state, may be taxed on activity occurring within the state.
A charitable remainder trust (CRT) is exempt from Federal income tax under Internal Revenue Code (IRC) § 664. However, this Federal exemption does not necessarily translate into a state income tax exemption.
In June 2009, the New Jersey Division of Taxation issued a Technical Bulletin (TB-64) which states:
"A Charitable Remainder Trust, in contrast to a charitable trust, has 'noncharitable' beneficiaries and does not operate exclusively for charitable purposes. Accordingly, a Charitable Remainder Trust is not an exclusively 'charitable trust' exempt from New Jersey income tax under N.J.S.A. §54A:2-1 and income that is not distributed and which is not deemed to be permanently and irrevocably set aside or credited to a charitable beneficiary is taxable income to the trust." [emphasis added]
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