Schedule O: Nonoperational Activity Packet (Revision 2023-10)
New Jersey · NJ Division of Taxation · Used for tax years 2025
Schedule O separates a corporation’s operational and nonoperational income and deductions and calculates adjustments for nonoperational activity. It also reports nonoperational assets, asset reclassifications, and New Jersey’s taxable portion of nonoperational income.
Who files this form
A corporation must complete Schedule O and include it with Form CBT-100, CBT-100U, or CBT-100S if it seeks to treat income, expenses, or assets as nonoperational under N.J.S.A. 54:10A-6.1 and not subject to apportionment using the business allocation factor.
Combined groups must complete a separate Schedule O for each member claiming nonoperational income.
What you'll need
Have the corporation’s name, federal ID number, and unitary ID number, if applicable, ready. You will also need:
- Federal income and deduction amounts, separated into operational and nonoperational activity.
- Nonoperational asset details, including descriptions, acquisition dates, original federal tax basis, dispositions, and New Jersey nexus information.
- A statement explaining the basis and accounting controls used to assign direct and indirect expenses to nonoperational assets.
- Details of claims made to other taxing jurisdictions and expenses or liabilities related to nonoperational assets, as requested in Part II.
Attach these documents for the applicable entries:
- Federal Schedule D for net capital gain, Form 4797 for net gain or loss, Form 4562 for depreciation, and Form 7205 for the energy efficient commercial buildings deduction.
- Schedules for other income and other deductions.
- A separate rider explaining Part I, line 33 adjustments.
- A rider listing previously deducted expenses by year when assets previously treated as operational are reclassified as nonoperational.
- A rider showing the method and calculation for New Jersey’s taxable portion in Part III, line 31.
- Additional schedules if Part III covers more than two nonoperational activities.
How to file
Include the completed Schedule O with the corporation’s Form CBT-100, CBT-100U, or CBT-100S.
- Part I: Separate federal amounts into operational and nonoperational activity and calculate the adjustment to eliminate the effect of nonoperational activity.
- Part II: Declare nonoperational assets and report reclassifications. Answer all additional questions and provide requested details.
- Part III: Report each separate nonoperational activity and calculate the portion taxable by New Jersey.
Carry Part I, line 36 to:
- CBT-100, Schedule A, Part II, line 13a;
- CBT-100U, Schedule A, Section I, Part II, line 14a; or
- CBT-100S, Schedule A, Part I, line 38b.
The supplied text does not give a mailing address or e-file directions.
Common mistakes
- Columns do not balance: For Part I, lines 1 through 28, columns B and C must total column A.
- Part II questions are left blank: All questions must be answered. Add supplementary riders when more space is needed.
- Nonoperational receipts are included in the allocation factor: Only receipts attributable to operational activity are used to compute that factor.
- Nonoperational losses offset other income: Net nonoperational losses cannot offset taxable operational income in current, prior, or future periods. A loss from one separate nonoperational activity also cannot reduce another separate nonoperational activity’s net income or tax liability in those periods.
- A claim is assumed to lower tax: The text warns that assigning nonoperational income with New Jersey nexus may produce a higher New Jersey tax liability than if no nonoperational claim had been made.
Questions people ask
What is nonoperational income?
It is income from tangible or intangible property when its acquisition, management, use, or disposition was not an integral part of the corporation’s trade or business operations.
Is income automatically treated as nonoperational if the corporation claims it?
No. The text presumes that all activities of a separate corporate entity are operational. The taxpayer must overcome that presumption with clear and convincing evidence.
When should I answer “Yes” to New Jersey nexus for an asset in Part II?
Answer “Yes” if the asset was physically located in New Jersey, or if any activity related to its purpose, management, use, or disposition took place wholly or partly in New Jersey during any portion of its holding period.
What if another state taxed the nonoperational income?
List the other states in Part III, line 32. If a state taxed the income as operational income within a combined reporting group, place an asterisk beside that state’s name.