New Jersey Response to Depreciation Bonus

BNA, 3/28/03:

New Jersey.DOR Regulation Explains Disallowance Of Bonus Depreciation, Related Parties. New Jersey corporate taxpayers may not take the new federal bonus depreciation deduction against state tax, according to special adopted and concurrent proposed rules released by the New Jersey Division of Taxation.

Emergency and Proposed Regulations Sections 18:7-5.2 and -5.18, released Feb. 27, also implement another statutory change that disallows deductions for certain related party expenses and dividends received from a corporation in which the taxpayer has less than a 50 percent interest.

The amendments supply guidance to taxpayers so they can comply with the Business Tax Reform Act of 2002 (A.B. 2501), according to a summary accompanying the amendments.

The federal Job Creation and Worker Assistance Act of 2002 (Pub. L. No. 107-147) established a 30 percent depreciation bonus for qualified capital investments, effective for 36 months for property placed in service after Sept. 10, 2001. According to the rules, New Jersey corporate taxpayers may not claim the federal bonus deduction on state income tax returns for taxable years beginning on or after Jan. 1, 2002.
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Text of the amendments can be viewed at http://www.state.nj.us/treasury/taxation/pdf/cbtreform.pdf.