Late last week, the governors of New York and Pennsylvania submitted their selections for opportunity zone designations to the U.S. Department of Treasury. Those nominations are expected to be approved by Treasury to take advantage of the new federal tax incentive program.  The federal Opportunity Zone program is a new tax incentive designed to direct investor capital into various low-income and distressed areas around the country. The program affords investors the opportunity to defer and reduce capital gains that are invested in opportunity funds. In addition, an investor who holds an interest in an opportunity fund for 10 years or more does not pay any tax on the gain when the opportunity fund investment is sold or transferred.  Additional details can be found in an earlier article we published here.

A listing of New York’s 514 zone nominations can be found here.

A listing of Pennsylvania’s 300 zone nominations can be found here.

We will continue to keep you updated as more details emerge on this transformative program, including expected guidance from the Internal Revenue Service regarding qualified opportunity fund certification and qualified opportunity zone property.

The U.S. Department of Treasury’s Community Development Financial Institutions Fund has just released the list of New Jersey’s approved Opportunity Zones. The Opportunity Zones are identified by specific census tracts provided below.

The federal Opportunity Zone program is a new tax incentive designed to direct investor capital into various low-income and distressed areas around the country. On March 21, Governor Murphy submitted New Jersey’s list of eligible census tracts seeking Opportunity Zone designation.

Continue Reading New Jersey “Opportunity Zones” Just Revealed

New Opportunities for Urban and Distressed Areas

The newly enacted federal Opportunity Zone program could be a game changer for economic development and tax incentive policy here in New Jersey and across the country. The program provides a new avenue for directing investment into certain urban and distressed areas with significant tax benefits.

The Opportunity Zone program was enacted as part of the recently signed Tax Cuts and Jobs Act and provides an opportunity to defer current capital gains and reduce future gains for investing in certain funds organized to direct capital into businesses and property based in the specified zones. The designated zones are selected by the Governor of each state from certain eligible low-income community census tracts, or those eligible for New Market Tax Credit projects.

Continue Reading Gov. Murphy Announces “Opportunity Zones” Recommended to Federal Government

The New Jersey Division of Taxation has issued guidance pertaining to the state’s treatment of the federal Tax Cuts and Jobs Act’s one-time repatriation of certain foreign earnings and profits.  Under the federal Act, U.S. shareholders of controlled foreign corporations or corporations owning 10 percent or more of another foreign corporation are deemed to receive a repatriated dividend of accumulated post-1986 deferred foreign income in the last tax year beginning before January 1, 2018.

Continue Reading New Jersey Issues New Guidance on Federal Deemed Repatriation Rules

On March 13th, New Jersey Governor Murphy delivered his administration’s first budget address.  In the address and subsequent summary of the budget proposals, the Governor called for a number of different personal income tax, corporate tax and sales tax changes.  The corporate tax changes are being labeled as a “modernization” of business taxes.  Some of the key tax changes include the following:

  • Increasing the Gross Income Tax (“GIT”) deduction for property taxes paid from $10,000 to $15,000.
  • Closing the carried interest loophole in New Jersey tax.  At this point, it is not clear exactly what form this proposal will take but there is currently pending legislation which would impose a special surtax on such income and eliminate the exclusion from GIT for nonresidents performing investment/intangible management activities in New Jersey.

Continue Reading Governor Murphy Calls for Tax Reform

April 1st is almost here…
Have you filed a tax appeal on your over-assessed properties in New Jersey?

Believe it or not, April 1st is right around the corner.  And in New Jersey, that means it is time for filing real estate tax appeals for the current tax year.

New Jersey companies and property owners face some of the highest property tax burdens in the nation, thus driving up the cost of doing business in the Garden State.  Making matters worse, the federal tax changes set to take effect in 2018 are expected to affect office, retail, industrial, hospitality and multi-family property values in a significant way.

Furthermore, as the economy continues to shift away from traditional brick and mortar retail and vast corporate campuses in suburban areas, many properties have decreased in value and may need to be repurposed and reassessed for property tax purposes.  Of course, the converse is also true—in that many areas historically considered blighted or in need of redevelopment have welcomed new construction and development projects in recent years that will soon face increased property tax assessments.  In light of these issues, it is incumbent upon property owners and business tenants to review their tax bills to identify potential savings as well as possible risks of future tax increases.

Continue Reading Property Tax Appeals – Now Is the Time

In recent guidance issued by the Pennsylvania Department of Revenue in response to the passage of the Tax Cuts and Jobs Act, the Department indicates that the 100 percent depreciation deduction will not be available for property placed in service after September 27, 2017.  This marks a stark departure from the previous policies of the Department.

Accordingly, while federal income tax law provides for a 100 percent depreciation or expensing deduction to be available for assets placed in service after September 27, 2017, no such deduction will be available for Pennsylvania corporate net income (CNI) tax purposes.  The cost recovery for the property will only be available upon sale or disposition of the asset in question for CNI tax.  This represents a change in policy for the Department which did allow for 100 percent bonus depreciation provided for in 2010 and 2011.

Taxpayers will have to track federal and state basis carefully and make sure to claim the appropriate deduction for federal income tax versus CNI tax.  Proper record keeping will also ensure that the appropriate basis adjustment is made from federal basis in the year of sale or disposition to account for the state’s decoupling from federal law.

With the enactment of federal tax reform, otherwise known as the Tax Cuts and Jobs Act, there are a number of New Jersey state tax ramifications to consider stemming from the changes, including:

  • the deduction for state and local taxes (“SALT”) paid by individuals;
  • the limitation on the net operating loss deduction as applied to corporations; and
  • the dividends-received deduction.

There are also a number of policy and tax filing options New Jersey and its taxpayers can consider in response.

Continue Reading Federal Tax Reform with a Garden State of Mind

When it comes to New Jersey tax credits and incentives, many are familiar with the Grow New Jersey, Economic Redevelopment and Growth grant and Angel Investor Tax Credit programs.  However, an area that is often over-looked is that of sales tax exemptions—specifically for manufacturing, processing, telecom and research and development activities.  And these benefits can be substantial and taken advantage of while receiving other discretionary tax incentives offered by the New Jersey Economic Development Authority.

In general, sales tax is imposed on sales of tangible personal property and certain specified services that are not purchased for resale.  If sales tax is not collected on an otherwise taxable sale because the seller is not based in New Jersey and there is no available exemption from tax, the purchaser must report and pay use tax to the state, which is equivalent to the state sales tax.  The current sales/use tax rate in New Jersey is 6.625 percent.

Continue Reading Want to Save an Extra 6.625 Percent on Equipment Purchases and Replacement Parts?