Tax Court: R.O.P. Aviation Inc. v. Director, Division of Taxation, Docket No. 001323-2018; opinion by Sundar, P.J.T.C., decided May 27, 2021. For plaintiff – Leah Robinson and Brian Kittle (Mayer Brown LLP, Esq.); for defendant – Michael J. Duffy (Gurbir S. Grewal, Attorney General of New Jersey, attorney).
Held: Plaintiff’s partial summary judgment motion to void defendant’s audit adjustment to its carried forward net operating loss (NOL) deduction is granted and defendant’s cross-motion to amend its expert report to substantiate such adjustment is denied. The NOL deduction in the open (i.e., within the statute of limitations) audited tax years 2012-2015 derive from losses generated in 2007-2011, closed tax years because they were beyond the statute of limitations for audit under N.J.S.A. 4:49-6. Since the closed tax years were never audited by defendant, disallowing the carried forward NOLs from those years is tantamount to reopening and auditing the closed years and indirectly collecting additional tax that flows from the closed years. This is impermissible and time barred under N.J.S.A. 54:49-6. Defendant’s broad discretion under N.J.S.A. 54:10A-10 to determine a taxpayer’s fair and reasonable corporation business tax is nevertheless limited by the four-year statute of limitations under N.J.S.A. 54:49-6. Since the NOL adjustment is time barred, defendant’s cross-motion for partial summary judgment to have its expert’s report amended to substantiate the validity of such adjustment is moot and thus denied.