Bill Text: NJ A1373 | 2010-2011 | Regular Session | Introduced
Bill Title: Allows taxpayers to carryforward and deduct certain losses from net business profits, net gains or income from disposition of property, and distributive share of partnership income under New Jersey gross income tax.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2010-01-12 - Introduced, Referred to Assembly Appropriations Committee [A1373 Detail]
Download: New_Jersey-2010-A1373-Introduced.html
STATE OF NEW JERSEY
214th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2010 SESSION
Sponsored by:
Assemblyman JAY WEBBER
District 26 (Morris and Passaic)
Assemblyman DOMENICK DICICCO, JR.
District 4 (Camden and Gloucester)
SYNOPSIS
Allows taxpayers to carryforward and deduct certain losses from net business profits, net gains or income from disposition of property, and distributive share of partnership income under New Jersey gross income tax.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel
An Act allowing taxpayers to carryforward and deduct certain losses from net business profits, net gains or income from disposition of property, and distributive share of partnership income under the New Jersey gross income tax, supplementing chapter 3 of Title 54A of the New Jersey Statutes and amending N.J.S.54A:5-2.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) a. For purposes of determining the amount of net profits from business in accordance with subsection b. of N.J.S.54A:5-1, a taxpayer shall, for taxable years beginning on or after January 1, 2008, be allowed to deduct from the amount of net profits from business the amount of any net business loss carryover to that year as determined in accordance with the provisions of this section.
b. A net business loss for any taxable year beginning on or after January 1, 2008 shall be a net business loss carryover to each of the 20 taxable years following the year of the loss. The entire amount of the net business loss for any taxable year (the "loss year") shall be carried to the earliest of the taxable years to which the loss may be carried. The portion of the loss which shall be carried to each of the taxable years shall be the excess, if any, of the amount of the loss over the sum of the entire net profits from business, determined without the deduction allowed under subsection a. of this section.
c. For purposes of this section, "net business loss" means the excess of any business costs and expenses over the net income used in determining, in accordance with subsection b. of N.J.S.54A:5-1, net profits from business; provided however, that "net business loss" shall not include the amount of the deduction allowed in accordance with subsection a. of this section.
2. (New section) a. For purposes of determining the amount of net gains or income from disposition of property in accordance with subsection c. of N.J.S.54A:5-1, a taxpayer shall, for taxable years beginning on or after January 1, 2008, be allowed to deduct from the amount of net gains or income from disposition of property the amount of any net property loss carryover to that year as determined in accordance with the provisions of this section.
b. A net property loss for any taxable year beginning on or after January 1, 2008 shall be a net property loss carryover to each of the 20 taxable years following the year of the loss. The entire amount of the net property loss for any taxable year (the "loss year") shall be carried to the earliest of the taxable years to which the loss may be carried. The portion of the loss which shall be carried to each of the taxable years shall be the excess, if any, of the amount of the loss over the sum of the entire net gains or income from disposition of property, determined without the deduction allowed under subsection a. of this section.
c. For purposes of this section, "net property loss" means the excess of any losses derived from the sale, exchange, or other disposition of property over the net gains or income used in determining, in accordance with subsection c. of N.J.S.54A:5-1, net gains or income from disposition of property; provided however, that "net property loss" shall not include the amount of the deduction allowed in accordance with subsection a. of this section.
3. (New section) a. For purposes of determining the amount of distributive share of partnership income in accordance with subsection k. of N.J.S.54A:5-1, a taxpayer shall, for taxable years beginning on or after January 1, 2008, be allowed to deduct from the amount of distributive share of partnership income the amount of any net partnership loss carryover to that year as determined in accordance with the provisions of this section.
b. A net partnership loss for any taxable year beginning on or after January 1, 2008 shall be a net partnership loss carryover to each of the 20 taxable years following the year of the loss. The entire amount of the net partnership loss for any taxable year (the "loss year") shall be carried to the earliest of the taxable years to which the loss may be carried. The portion of the loss which shall be carried to each of the taxable years shall be the excess, if any, of the amount of the loss over the sum of the entire distributive share of partnership income, determined without the deduction allowed under subsection a. of this section.
c. For purposes of this section, "net partnership loss" means the excess of any losses derived from a partnership over the net income used in determining, in accordance with subsection k. of N.J.S.54A:5-1, distributive share of partnership income; provided however, that "net partnership loss" shall not include the amount of the deduction allowed in accordance with subsection a. of this section.
4. N.J.S.54A:5-2 is amended to read as follows:
54A:5-2. Losses. Losses which occur within one category of gross income may be applied against other sources of gross income within the same category of gross income during the taxable year, and during the taxable years following the year in which a net business loss, net property loss, or net partnership loss occurs may be applied as a loss carryover pursuant to the provisions of section 1, 2, or 3 of P.L. , c. (C. ) (pending before the Legislature as this bill). However, a net loss in one category of gross income may not be applied against gross income in another category of gross income.
(cf: P.L.1976, c.47, s.54A:5-2)
5. This act shall take effect immediately; provided however, that section 4 shall apply to taxable years beginning on or after January 1, 2008.
STATEMENT
This bill allows New Jersey gross income taxpayers to carryforward and deduct certain losses against income derived from certain categories of gross income subject to the New Jersey Gross Income Tax Act.
Under current law, losses sustained by a taxpayer during the taxable year may only be applied against an item of gross income if the loss is sustained within the same category of income. Current law also limits the application of those losses to income which the taxpayer realized in the same taxable year as the year in which the loss occurred. Taxpayers are prohibited from carrying losses back or forward and applying the amount of sustained loss against past or future tax liabilities.
This bill eliminates the current limitations on the carryforward of certain losses sustained in prior taxable years. Under its provisions, taxpayers that derive income from the following categories of gross income: (1) net profits from business, (2) net gains or income from the disposition of property, and (3) distributive share of partnership income, are permitted to carryforward and deduct the amount of any loss against the amount of any income realized in the same category of gross income for up to 20 years following the year in which the loss occurs.
The loss carryforward provisions provided by the bill are intended to reflect the carryforward provisions under the New Jersey corporation business tax, which permit corporation business taxpayers to carryforward certain losses for up to 20 years. In addition, the tax law changes provided by the bill are intended to more closely align New Jersey's tax treatment of business losses with the tax treatment of losses under the federal tax code, and to provide taxpayers with the ability to average income over a period of time that corresponds with their investment horizon.
