Sponsored by:
Assemblyman CLINTON CALABRESE
District 36 (Bergen and Passaic)
SYNOPSIS
Allows gross income taxpayers to claim deduction for certain losses for which federal theft loss deduction is allowed.
CURRENT VERSION OF TEXT
As introduced.
An Act allowing a gross income tax deduction for certain theft losses, and supplementing chapter 3 of Title 54A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. A resident taxpayer who sustains a loss arising from theft, for which a federal theft loss deduction is allowed pursuant to paragraphs (2) or (3) of subsection (c) of section 165 of the federal Internal Revenue Code, 26 U.S.C. s.165, shall be allowed a deduction from the taxpayer’s gross income for the taxable year in which the loss occurred, in the form and manner as shall be provided by the director. The amount of the deduction shall be equal to the amount of the federal theft loss deduction allowed pursuant to section 165 of the federal Internal Revenue Code, 26 U.S.C. s.165, for the taxable year in which the loss occurred.
b. No deduction shall be allowed pursuant to this section for any cost, expense, or loss included in the calculation of any category of income pursuant to N.J.S.54A:5-1 that is net of expenses, or in the calculation of any other deduction, credit, or exemption allowed by law, for the taxable year in which the deduction is claimed.
c. For purposes of this section, “theft” has the same meaning as defined for federal income tax purposes, including, but not limited to, any criminal appropriation of another’s property to the use of the taker, including theft by swindling, false pretenses, and any other form of guile, and including larceny and embezzlement.
2. This act shall take effect on January 1 next following the date of enactment.
STATEMENT
This bill allows a resident taxpayer who sustains a loss arising from theft, for which a federal theft loss deduction is allowed, to claim a deduction of the same amount for gross income tax purposes.
Under the bill, a taxpayer who is allowed to claim a theft loss deduction for federal tax purposes would also be permitted to claim a deduction, in the same amount, for State gross income tax purposes. However, the bill provides that no amount of the deduction would be allowed for any cost, expense, or loss that is also included in the calculation of any category of income that is net of expenses, or in the calculation of any other deduction, credit, or exemption that is allowed for the taxable year in which the deduction is claimed.
Under federal law, a theft loss deduction is generally allowed for individuals who sustain losses as part of a transaction entered into for profit, but not associated with a trade or business. Accordingly, individuals who fall victim to certain fraudulent schemes are permitted to claim the federal deduction, provided the fraudulent scheme involved a profit motive. The Internal Revenue Service has issued guidance concerning the types of fraudulent schemes and investment arrangements in which the theft loss deduction is generally permitted, which schemes may include those in which an individual has been defrauded into making withdrawals or transfers from existing investment arrangements, including Individual Retirement Accounts (IRAs), for the alleged purpose of safeguarding or reinvesting these funds.
Under the bill, “theft” has the same meaning as defined for federal income tax purposes, including, but not limited to, any appropriation of another’s property to the use of the taker, including theft by swindling, false pretenses, and any other form of guile, and includes larceny and embezzlement.