The New Jersey Tax Court held that apportioning all of a company’s income to New Jersey for corporate business tax purposes, even with the allowance of a credit for taxes paid to separate-return states, failed to fairly reflect the company’s business activities in New Jersey. The court also rejected the company’s contention that it was entitled to use a three-factor formula. Prior to 2011, corporate taxpayers without a “regular place of business” outside New Jersey were required to use a 100% apportionment factor, while taxpayers that maintained a regular place of business outside the state were required to use a three-factor apportionment formula. The company in question, which was headquartered in New Jersey, did not have a regular place of business outside the state and so was required to use the 100% apportionment factor. The Division of Taxation responded to the company’s request for relief on audit by allowing a credit for taxes paid to separate-return states. The tax court concluded that the 100% apportionment factor, even with the credit, did not fairly reflect the company’s in-state business activities because it produced tax liabilities that were, depending on the year, double or triple the tax liabilities produced by the three-factor formula. Nonetheless, that in itself did not entitle the company to use the three-factor formula, the court said. The court agreed with the Division that strict application of the three-factor formula would have produced an unfair result because, while the company’s offices, employees and operations were in New Jersey, the three-factor formula would have resulted in apportionment factors of approximately 30%. The court noted, too, that because the company was in the business of offering equipment lease financing to customers of related entities, the leased equipment—located in all 50 states—reduced the company’s property factor. The court remanded the case to the Division so that further adjustments to the statutory apportionment factor could be considered. Canon Fin. Servs., Inc. v. Director, Div. of Taxation (N.J. Tax Ct. Oct. 13, 2016).