The Tax Clearance Procedure When Dissolving a New Jersey Corporation
Once it has been determined to shut down a New Jersey corporation, certain steps must be accomplished.[1] Today, the easiest way to go through the process is online, beginning at the “Annual Reports and Change Services” page of the website of Division of Revenue and Enterprise Services of the New Jersey Department of the Treasury (“Division of Revenue”). Alternatively, the necessary forms can be downloaded, filled out, and mailed to the Division of Revenue.[2]
As part of the first step, the corporation fills out an application for dissolution for filing with the Division of Revenue. The particular form depends on how the dissolution is being approved by the corporation.[3] If all of the shareholders agree, then the dissolution can be accomplished by consent of the shareholders, without a meeting, who file Form C-159D (Application For Dissolution, Without a Meeting of Shareholders) with the Division of Revenue.[4] If the dissolution cannot be accomplished by consent of the shareholders, then the corporation’s board of directors must first resolve that the corporation be dissolved and the matter then put to a vote of the shareholders at a meeting noticed and called for that purpose.[5] In that event, application for dissolution is filed with the Division of Revenue on Form C-159S (Application For Dissolution, Pursuant to Action of Board and Shareholders).
The corporation must submit three other items along with the appropriate application for dissolution. First, the corporation must pay $120, of which $95 is a dissolution fee and $25 is a tax clearance certificate application fee.[6] Second, the corporation must submit a Form A-5088-TC (Application for Tax Clearance Certificate) for filing with the Division of Taxation of the New Jersey Department of the Treasury (“Division of Taxation”). Third, the corporation must also submit a Form A-5052-TC (Estimated Summary Tax Return), with schedules completed on an estimated basis for the current period, along with an affidavit of a corporate officer covering various items[7] and a separate payment for any taxes due.[8] This part of the process will require the assistance of the corporation’s accountant, who should be consulted well in advance of submitting the necessary paperwork with the State to ensure that the corporation’s desired timeline for ending the business can be met.
In step two of the process, if the corporation did not file returns for all years and/or periods for all of its taxes (corporation business tax, sales and use tax, gross income tax withheld, etc.), then the corporation must file all of those returns and pay any amounts due.[9]
If all of the corporation’s tax obligations have been satisfied, then, in step three of the process, the Division of Taxation issues a Tax Clearance Certificate for the corporation to the Division of Revenue.[10] The effective date of the corporation’s dissolution is the date the Division of Revenue receives the Tax Clearance Certificate.[11] In step four of the process, final tax returns must be filed within 30 days of the date of dissolution.[12]
After the corporation has filed the appropriate application for dissolution but before the dissolution becomes effective upon the Division of Revenue’s receipt of the Tax Clearance Certificate, the corporation is only in a “dissolved, pending tax clearance” status and is required to file any annual report and associated filing fee that comes due during that period.[13] If annual reports are not filed, the corporation will no longer be in good standing, which could delay the dissolution process.
[1]The steps are described in Form A-5033-TC (Procedure for Dissolution, Cancellation, or Withdrawal) published by the Division of Taxation of the New Jersey Department of the Treasury.
[2]See Form A-5033-TC, Step 1.
[3]See N.J. Stat. Ann. § 14A:12-1 (methods of dissolution of a New Jersey corporation).
[6]See Form A-5033-TC, Step 1.
[7]See Form A-5052-TC (Instructions for Completing Form A-5052, item 3).
[8]See Form A-5033-TC, Step 1.
[9]See Form A-5033-TC, Step 2.
[10]See Form A-5033-TC, Step 3; N.J. Stat. Ann. § 54:50-15.
[11]See Form A-5033-TC, Step 3.
[12]See Form A-5033-TC, Step 4.
[13]See NJ Treasury Dep’t of Taxation, Corporate Filing Responsibilities. The annual report and fee are also filed online.