Sponsored by:
Senator LATHAM TIVER
District 8 (Atlantic and Burlington)
SYNOPSIS
Allows farm operators to accelerate depreciation of certain expenditures under corporation business and gross income taxes.
CURRENT VERSION OF TEXT
As introduced.
An Act allowing farm operators to accelerate depreciation of certain expenditures under corporation business and gross income taxes, supplementing P.L.1945, c.162 and Title 54A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. Notwithstanding paragraph (12) of subsection (k) of section 4 of P.L.1945, c.162 (C.54:10A-4), a taxpayer who operates a farming enterprise shall be allowed the additional depreciation allowance of subsection (k) of section 168 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.168) for capital expenditures related to the operation of the farming enterprise.
b. Notwithstanding paragraph (13) of subsection (k) of section 4 of P.L.1945, c.162 (C.54:10A-4), a taxpayer who operates a farming enterprise shall be allowed to elect to treat the costs of section 179 property as an expense which is not chargeable to a capital account in accordance with the provisions of section 179 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.179) for capital expenditures related to operation of the farming enterprise.
c. The director shall prescribe the rules and regulations necessary to carry out the provisions of this section.
d. As used in this section:
“Director” means Director of the Division of Taxation in the Department of the Treasury.
“Farming enterprise” means a business or part of a business that, using land and improvements to the land, is engaged primarily in producing agricultural or horticultural commodities for sale.
2. a. Notwithstanding paragraph (1) of subsection a. of section 26 of P.L.2004, c.65 (C.54A:5-1.2), a taxpayer who operates a farming enterprise shall be allowed the additional depreciation allowance of subsection (k) of section 168 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.168) for capital expenditures related to operation of the farming enterprise.
b. Notwithstanding paragraph (2) of subsection a. of section 26 of P.L.2004, c.65 (C.54A:5-1.2), a taxpayer who operates a farming enterprise shall be allowed to elect to treat the costs of section 179 property as an expense which is not chargeable to a capital account in accordance with the provisions of section 179 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.179) for capital expenditures related to operation of the farming enterprise.
c. The director shall prescribe the rules and regulations necessary to carry out the provisions of this section.
d. As used in this section:
“Director” means Director of the Division of Taxation in the Department of the Treasury.
“Farming enterprise” means a business or part of a business that, using land and improvements to the land, is engaged primarily in producing agricultural or horticultural commodities for sale.
3. This act shall take effect immediately and shall apply to privilege periods and taxable years beginning on or after the effective date.
STATEMENT
This bill allows farm operators to accelerate certain tax deductions for business expenses for purposes of calculating State corporation business tax and gross income tax, matching two provisions of the federal tax code. Specifically, the bill allows the accelerated depreciation of assets to the extent allowed under section 168 of the federal Internal Revenue Code, and the immediate deduction of certain capital expenses to the extent allowed under section 179 of the federal Internal Revenue Code.
Generally, under section 167 of the federal Internal Revenue Code, taxpayers are allowed to deduct a reasonable allowance for the wear and tear, or depreciation, of an asset used in trade or business. Sections 168 and 179 allow an accelerated depreciation if certain conditions are met. New Jersey, however, decoupled its tax law from those provisions following changes to those provisions in the early 2000s. Instead of allowing depreciation as allowed under current federal law, the State currently allows depreciation as federal law allowed it in 2002 for section 179 and in 2001 for sections 167 and 168.
Since that time, further modifications were made to sections 168 and 179. Under current section 179, a taxpayer may deduct up to $1 million of qualified assets purchased and placed in service in the tax year. The deduction cannot exceed taxable income, and the deduction is phased out if a company’s total qualified assets placed in service during the year exceed $2.5 million. The limits and thresholds for the section 179 deduction are scheduled to be indexed for inflation in future years. Under current section 168, a taxpayer may depreciate an additional 60 percent of the adjusted cost of eligible property. This “bonus” depreciation is scheduled to decrease by 20 percent in 2025 and every year thereafter until it reaches 0 percent in 2027.