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Qualified Subchapter S Subsidiary
This information came from the State of New Jersey’s Web site.
Check with your accountant, lawyer or small business advisor for the most current information or changes to the tax law for this type of business organization.

Under The Small Business Job Protection Act of 1996, an
S Corporation is permitted to own a Qualified Subchapter S Subsidiary (QSSS) and effectively treat the subsidiary as if it were a division. The assets, liabilities, and items of income, deduction and credit would flow through to the parent retaining the same character.

To obtain recognition as a NJ QSSS, companies must file the revised  form CBT-2553 along with a copy of Federal Form 966 before the 16th day of the fourth month of the first tax year the election is to take place.

To maintain the separate entity principle, every qualified NJ QSSS must file a CBT-100S and pay the minimum tax of $200. Unless the NJ QSSS formally dissolves or withdraws with the Division of Revenue, Business Services Bureau, it will be required to file report with the NJ Division of Revenue and a Corporation Business Tax Return.

The parent corporation must consent to taxation by NJ by filing a CBT-100 or CBT-100S which includes the QSSS’s assets, liabilities, income, and expenses. The property, receipts, and payroll of the QSSS must be included in the parent corporation's allocation factor. Failure of the parent corporation to either consent/file a CBT-100/CBT-100S for a period will result in denial of status and the subsidiary will be subject to taxation in NJ as a C Corporation.