Business interest limitations in New Jersey don’t apply to gross income and partnership tax returns. The NJ Division of Taxation has advised that, for NJ gross income tax purposes, NJ doesn’t conform to the business interest expense limitation for partnership tax returns provided by the Internal Revenue Code. A partnership can deduct 100% of the interest expense within the taxable year on indebtedness, and should report the amount disallowed for federal purposes as an “other subtraction” on its NJ 1065 return. In the year that the partnership uses the carried forward deduction amount for federal purposes, the partnership must add back that amount as an “other addition” on the 1065 return. © 2019