N.J. Admin. Code § 18:35-2.2

Current through Register Vol. 56, No. 19, October 7, 2024

Section 18:35-2.2 - Qualified investment fund distributions

(a) Gross income shall not include the portion of any distribution from a qualified investment fund paid on or after January 1, 1987, which is attributable to interest or gain from the following:

1. Obligations that are issued by, or on behalf of, New Jersey or any county, municipality, school or other district, agency, authority, commission, instrumentality, public corporation (including one created or existing pursuant to agreement or compact with this or any other state), body corporate, and politic or political subdivision of New Jersey; or

2. Those obligations which are statutorily free from state or local taxation under any act of New Jersey or under the laws of the United States.

(b) Net gains or income derived from the disposition of securities which evidence ownership in a qualified investment fund are excluded from gross income.

(c) A "qualified investment fund" is any investment company registered with the Securities and Exchange Commission or any series of such investment company which, for the calendar year in which the distribution is paid:

1. Has no investments other than the following:

i. Interest-bearing obligations;

ii. Obligations issued at a discount; and

iii. Cash and cash items, including receivables; and

2. At the close of each quarter of the taxable year has not less than 80 percent of the aggregate principal amount of all its investments in obligations described in (a)1 and 2 above.

i. The aggregate principal amount of investments shall not include cash and cash items, including receivables.

ii. For the purposes of determining aggregate principal amount, the investments of the fund shall be valued as follows:

(1) With respect to obligations for which market quotations are readily available, fair market value shall be used;

(2) With respect to other obligations, value shall mean the fair market value as determined in good faith by the board of directors of the investment fund.

(d) A "series" of an investment company means a segregated portfolio of assets, the beneficial interests in which are owned by the holders of a class or series of stock or shares of the investment company that is preferred over all other classes or series in respect to the portfolio of assets.

(e) The exclusions from gross income authorized by this section shall not apply to distributions of interest or gain from any qualified investment company, which does not meet the following requirements, it:

1. Was registered with the Securities and Exchange Commission;

2. Had no investments other than interest-bearing obligations issued at a discount, and cash and cash items, including receivables; and

3. Had not less than 80 percent of the aggregate principal amount of all its investments, excluding cash and cash items (including receivables) in obligations described in 54A:6-14 and 18:35-2.1(a)1 and 2.

(f) Subsection (e) above shall not apply with respect to distributions made for the calendar years 1987 and 1988 from an investment fund which otherwise satisfied the requirements of (c) above.

(g) Pursuant to 54A:8-6, a qualified investment fund must advise its shareholders on or before February 15 of each calendar year that its distributions qualify for exclusion from gross income pursuant to this section. A qualified investment fund must complete and retain Form IF-1, the Certification of Qualified Investment Fund, to be made available if requested by the Division of Taxation.

N.J. Admin. Code § 18:35-2.2

Amended by 48 N.J.R. 295(a), effective 2/16/2016