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?

Since Governor-Elect Murphy is set to take office later this month, we thought it would be instructive to offer up a brief primer and some additional thoughts on the new administration’s corporate tax plan for the Garden State.  To be more specific, the Murphy team has repeatedly called for closing a “loophole” in the Corporation Business Tax (“CBT”) by adopting something called combined reporting.

Continue Reading Combined Reporting Coming to New Jersey-The Good, The Bad and Other Policy Issues

Businesses that purchase or sell software, cloud computing resources or digital information services face a host of challenges when it comes to sales/use tax compliance.  The potential for unforeseen tax liability will only increase over time as software products and services become even more intricate and prevalent in the business world.

Vendors and providers of consumer products and services know the basic rules for sales tax but in the case of software and related services, the rules can be trickier.

Continue Reading A Taste of SALT for Software and Data Providers

On November 28, the New Jersey Tax Court issued an opinion in Infosys Limited of India, Inc. v. Director, Division of Taxation, Dck. No. 012060-2016, that denied the Division of Taxation’s attempt to tax foreign income subject to an income tax treaty between India and the U.S. and thus, not taxable for federal income tax purposes.  In granting summary judgment and a significant refund in favor of the taxpayer, the Tax Court addressed New Jersey’s position on what is included in a taxpayer’s entire net income subject to the Corporation Business Tax (“CBT”).  Entire net income with state-specific adjustments is the tax base for CBT purposes.

Continue Reading New Jersey Tax Court Says No to Taxing Foreign-Source Income

After years of tax policy and planning discussions, and following debates within committee during the last few months, the U.S. House of Representatives’ Ways and Means Committee yesterday released the first draft of the “Tax Cuts & Jobs Act” or H.R. 1 of the 115th Congress. The tax proposals have implications for those in the real estate industry.

Continue Reading Industry News -Tax Reform Update