Bill Text: NJ A3997 | 2014-2015 | Regular Session | Introduced
Bill Title: Provides additional deduction and accelerated expensing under corporation business tax for certain purchase and installation of mechanical insulation property.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-12-15 - Introduced, Referred to Assembly Commerce and Economic Development Committee [A3997 Detail]
Download: New_Jersey-2014-A3997-Introduced.html
Sponsored by:
Assemblywoman BONNIE WATSON COLEMAN
District 15 (Hunterdon and Mercer)
SYNOPSIS
Provides additional deduction and accelerated expensing under corporation business tax for certain purchase and installation of mechanical insulation property.
CURRENT VERSION OF TEXT
As introduced.
An Act providing an additional deduction and accelerated expensing for certain purchase and installation of mechanical insulation property, supplementing P.L.1945, c.162 (C.54:10A-1 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. For privilege periods beginning in the five calendar years next beginning after the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill), in addition to any deductions allowed pursuant to subsection (k) of section 4 of P.L.1945, c.162 (54:10A-4) in computing entire net income, a taxpayer shall be allowed a deduction equal to the applicable percentage of the cost of mechanical insulation property, as certified pursuant to subsection d. of this section, placed in service during the privilege period.
b. For privilege periods beginning in the five calendar years next beginning after the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill), in the case of mechanical insulation property placed in service as a replacement for mechanical insulation property, the amount paid or incurred for the purchase and installation of the property, as certified pursuant to subsection d. of this section, shall be treated as an expense which is not chargeable to a capital account. Any amount so treated shall be allowed as a deduction for the privilege period in which the mechanical insulation property is placed in service. A deduction allowed by this subsection with respect to mechanical insulation property shall reduce the basis of that property by the amount of the deduction allowed.
c. As used in this section:
"Applicable Percentage" in the case of mechanical insulation property which is not placed in service as a replacement for mechanical insulation property means the lesser of:
(1) 30 percent, and
(2) the percentage reduction in energy loss from the installed mechanical insulation property compared to reference mechanical insulation property which meets the minimum requirements of ASHRAE standard 90.1-2007; and
in the case of mechanical insulation property placed in service as a replacement for mechanical insulation property means 30 percent.
"Cost" of mechanical insulation property includes:
(1) the amounts paid or incurred for that property that exceed the amounts that would be paid or incurred for reference mechanical insulation property which meets the minimum requirements of ASHRAE standard 90.1-2007, and the total amounts paid or incurred for that property for maintenance applications,
(2) in the case of removal and disposal of the old mechanical insulation property, 10 percent of the amounts paid or incurred for the new mechanical insulation property, and
(3) expenditures for labor costs properly allocable to the preparation, assembly, and installation of mechanical insulation property.
"Mechanical insulation property" means insulation materials, facings, and accessory products placed in service in connection with a mechanical system which is located in this State, which is of a character chargeable to a capital account and which is utilized for thermal requirements for mechanical piping and equipment, hot and cold applications, and heating, venting and air conditioning applications which can be used in a variety of facilities.
d. A taxpayer shall apply for a certification from the Commissioner of the Department of Environmental Protection that certifies that the property purchased and installed is mechanical insulation property and certifies the amount paid or incurred for the purchase and installation. In determining the applicable percentage of the cost of mechanical installation property pursuant to subsection a. of this section, the certification shall certify the percentage reduction in energy loss if the property is not replacement property and that the property is replacement property if the property is replacement property, and shall certify the amounts paid or incurred for that property that exceed the amounts that would be paid or incurred for reference mechanical insulation property which meets the minimum requirements of ASHRAE standard 90.1-2007 if the property is not for maintenance applications and that the property is for maintenance applications if that property is for maintenance applications.
Upon certification, the Commissioner of the Department of Environmental Protection shall submit a copy of the certification to the taxpayer and to the director. A tax return that includes a deduction pursuant to subsection a. or subsection b. of this section shall include a copy of the certification and statement that the property was put in service in this State in the applicable privilege period.
2. This act shall take effect immediately.
STATEMENT
This bill provides a five-year period during which commercial and industrial entities will be encouraged to go beyond minimum requirements and install or upgrade to high efficiency mechanical insulation. Mechanical insulation, thermal and acoustic insulation, are installed on piping and mechanical systems to achieve energy savings, personnel protection, process control, condensation control, noise reduction and reduction of greenhouse gas emissions. Mechanical insulation is a proven energy efficiency technology.
This bill allows an additional tax deduction for the cost of installing mechanical insulation property. This added deduction supplements the usual depreciation deductions. The bill limits the amount of the additional deduction to the lesser of 30% of "cost" or the percentage reduction in energy loss from the installed mechanical insulation property compared to property that meets the minimum requirements of American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) standard 90.1-2007.
This bill also allows the entire cost of replacing mechanical insulation property to be treated as a deductible business expense in the current taxable year.
The bill defines "mechanical insulation property" as insulation materials, facings, and accessory products: (1) placed in service in connection with a mechanical system which is located in this State and of a character subject to an allowance for depreciation; and (2) utilized for thermal, acoustical, and personnel safety requirements for mechanical piping and equipment, hot and cold applications, and heating, venting and air conditioning applications which can be used in a variety of facilities.
