New Jersey Introduces Pilot Mediation Program for Corporate Business and Sales and Use Taxes

On April 15, the New Jersey Division of Taxation announced a pilot mediation program to begin October 1, 2025. The program will address only ongoing controversies in corporate business tax (CBT) and sales and use tax (SUT). 

The mediation program is meant to reduce state resources used in tax controversy, with the specific goal of reducing the number of protests progressing to the Division’s Conference and Appeals Branch and complaints filed with the New Jersey Tax Court. It is scheduled to conclude September 30, 2027, but could be extended to other tax types and/or made permanent.   

The program follows efforts in other states to manage tax controversy workloads more efficiently. For example, in 2024, Pennsylvania made legislative changes that added a mediated settlement option to its administrative appeals process. See our related Alert.

Eligible Participants

The Division will review program applications to make sure applicants are eligible candidates and have a reasonable opportunity for resolution. Eligible participants are CBT or SUT payers under audit that:

• have not yet been issued a final determination by the Division; and 
• have amounts in controversy of at least $5,000 (exclusive of penalties and interest, even though those amounts also are subject to mediation). 

Taxpayers under audit will be provided written notice of the mediation option during each post-audit conference. 

The mediation program will not handle matters involving ability to pay or payment plans (although a mediated settlement agreement may include a payment plan). The program may also reject applicants based on behavior exhibited during the audit, such as: 

• submitting the application in bad faith or to cause delay; 
• not providing requested documents in a timely or complete fashion; or
• having taken measures during audit to delay that process. 

The program is not available to payers of taxes other than the CBT and SUT, although the program could be extended to other types of taxes. 

Procedure

The mediator will be a Division employee who has undergone required training and will serve as an unbiased and impartial facilitator. Mediators do not have the authority to force a settlement between the parties. If no agreement is reached, taxpayers will still have the statutory methods of appeal available to them. Participation in the program does not waive a taxpayer’s ability to later pursue relief with the Division’s Conference and Appeals Branch or the state’s tax court.

Before the Division makes a final audit determination, it will provide eligible taxpayers the necessary documents, which will require the taxpayer’s consent to extend the statute of limitations on assessments, collections, and refunds for 210 days. 

The Division must notify the taxpayer of acceptance into the program within 30 calendar days of receiving the application. Rejected taxpayers will receive explanations for rejection and notifications of their appeal rights, including statutory timelines. Accepted taxpayers can expect in-person mediation unless all parties agree otherwise. A taxpayer that includes the proper form with its application for mediation may be represented by an advocate. 

Generally, if the controversy is not resolved within 180 days of filing the application for mediation, the mediation will be terminated unless an extension is agreed to by the parties and approved by the mediator. A mediator may also terminate proceedings if they believe the parties have reached an insurmountable impasse or any of the parties are acting in bad faith.

All mediation documents and communications are confidential and not admissible as evidence in any subsequent proceedings. Further, the mediator is prohibited from providing any information or testimony related to the mediation proceedings.

The mediation program does not need to resolve all matters pertaining to an audit (although the Division has said that the “overwhelming preference and goal of the mediation process” is to resolve all issues). If the parties resolve controversy matters through the program, they will memorialize the key terms and components thereof enter in a closing agreement. While the agreement binds the parties, it does not establish precedent. Taxpayers should evaluate whether the closing agreement restricts their ability to file refund claims for the affected period.