S3201

An Act providing businesses with a gross income tax or corporation business tax deduction for qualifying cleaning expenses incurred as a result of the COVID-19 pandemic.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. A taxpayer shall be allowed to deduct from gross income an amount equal to:

(1) 50 percent of the qualifying cleaning expenses incurred during the taxable year by the taxpayer; or

(2) 65 percent of the qualifying cleaning expenses incurred during the taxable year by a taxpayer that is an eligible small business.

b. The deduction allowed pursuant to this section shall be allowed in addition to any other exemptions, deductions, and credits that may be claimed by the taxpayer pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., including, but not limited to, ordinary and necessary business expenses for qualifying cleaning expenses.

c. (1) A taxpayer that is classified as a partnership shall not be allowed a deduction pursuant to this section directly, but the amount of deduction of a taxpayer in respect of a distributive share of partnership income shall be determined by allocating to the taxpayer that proportion of the deduction acquired by the partnership that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the partnership for its taxable year ending within or with the taxpayer's taxable year.

(2) The deduction for a taxpayer that is a corporation that has made a valid election as a New Jersey S corporation pursuant to section 3 of P.L.1993, c.173 (C.54:10A-5.22) may be applied by the shareholders of the S corporation against the tax liability otherwise due pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., provided that the amount of deduction that may be used by a shareholder of the S corporation shall be determined by allocating to each shareholder of the S corporation that proportion of the tax deduction of the S corporation that is equal to the shareholder's proportionate share of the S corporation, whether or not distributed, of the total distributive income or gain of the S corporation for its privilege period ending with or within the shareholder's taxable year, and the deduction may be applied by the shareholders against the tax liability otherwise due pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.

d. As used in this section:

“Eligible small business” means a business entity, including all entities related by common ownership or control, that is independently owned and operated, and that had an average weekly number of full-time employees of not more than 50 employees during the calendar year ending in the business entity’s taxable year.

“Qualifying cleaning expense” means amounts paid or incurred in the conduct of business for (1) any cleaning services, whether provided by a cleaning service provider or by one or more employees of the taxpayer, that shall be solely needed as a result of the COVID-19 pandemic; and (2) any cleaning products, tools, machinery, personal protective equipment, and other sanitary-related equipment that shall be solely needed as a result of the COVID-19 pandemic. The term “qualifying cleaning expenses” shall not include the cost of manufacturing, producing, importing, or acquiring for the purposes of resale, any cleaning products, tools, machinery, personal protective equipment, and other sanitary-related equipment.

2. a. A taxpayer shall be allowed to deduct from entire net income an amount equal to:

(1) 50 percent of the qualifying cleaning expenses incurred during the privilege period by the taxpayer; or

(2) 65 percent of the qualifying cleaning expenses incurred during the privilege period by a taxpayer that is an eligible small business.

b. The deduction allowed pursuant to this section shall be allowed in addition to any other exemptions, deductions, and credits that may be claimed by the taxpayer pursuant to the “Corporation Business Tax Act (1945),” P.L.1945, c.162 (C.54:10A-1 et seq.), including, but not limited to, ordinary and necessary business expenses for qualifying cleaning expenses.

c. As used in this section:

3. This act shall take effect immediately and shall apply to any taxable year or privilege period during which the Public Health Emergency and the State of Emergency declared by the Governor pursuant to Executive Order No. 103 of 2020, or any extension thereof, remain in effect.

STATEMENT

This bill permits business taxpayers to claim a gross income tax or corporation business tax deduction for qualifying cleaning expenses incurred as a result of the COVID-19 pandemic.

Under the bill, the amount of the gross income tax and corporation business tax deductions would equal 50 percent of the qualifying cleaning expenses incurred by the taxpayer during the taxable year or privilege period, as applicable. However, if the taxpayer qualifies as an eligible small business, the amount of the deduction would equal 65 percent of the qualifying cleaning expenses incurred during the taxable year or privilege period. The deduction permitted by this bill would be in addition to the 100 percent deduction that is already allowed for qualifying cleaning expenses pursuant to the ordinary and necessary business expense deduction.

To qualify as an “eligible small business,” a taxpayer is required to be a business entity, including all entities related by common ownership or control, that (1) is independently owned and operated, and (2) had an average weekly number of full-time employees not greater than 50 employees during the calendar year.

As defined in the bill, the term “qualifying cleaning expenses” includes amounts paid in the conduct of business for any cleaning services and cleaning products and equipment (e.g., personal protective equipment) that are solely needed as a result of the COVID-19 pandemic.

The bill would take effect on the date of enactment and apply to any taxable year or privilege period during which the Public Health Emergency and the State of Emergency declared by the Governor pursuant to Executive Order No. 103 of 2020, or any extension thereof, remain in effect.