Tax Relief for NJ Citizens and Businesses
  • Individuals
    Individuals
    • First-time Homebuyers Credit.
      The Act extends the existing credit to qualifying first-time home purchases made before December 1, 2009, increases the maximum credit amount to $8,000 ($4,000 for a married individual filing separately), and repeals repayment requirement under Housing and Economic Recovery Act of 2008. If the taxpayer disposes of the home or the home otherwise ceases to be the principal residence of the taxpayer within 36 months from the date of purchase, the present law rules for recapture of the credit will apply.

    • Tax Credit Assistance Program [pdf 24kB]
      Federal Funding is being provided in order to fill financial gaps in affordable housing developments that were awarded low income housing tax credits in federal fiscal years 2007, 2008 and 2009. Under ARRA, state Housing Credit agencies can provide assistance under this program to affordable housing developments in the same manner and subject to the same limitations as required under the Low Income Housing Tax Credit program. See the NJ Housing and Mortgage Finance Agency website for further details about the implementation of the Tax Credit Assistance Program.

    • Treasury Department Low-Income Housing Grants in Lieu of Tax Credits. 
      The ARRA would allow taxpayers to receive a grant from the Treasury Department in lieu of tax credits. Under this provision, States housing agencies would receive a grant equal to up to eighty-five percent (85%) of forty percent (40%) of the state’s low-income housing tax credit allocation in lieu of the low-income housing tax credits they would have received. The sub-awards are subject to the same requirements (including rent, income, and use restrictions on such buildings) as the low-income housing tax credit allocations. The grant program would apply to each state’s 2009 low-income housing tax credit allocation.
  • Education
    Education
    • American Opportunity Tax Credit
      The ARRA would provide financial assistance for individuals seeking a college education. For 2009 and 2010, the ARRA would provide taxpayers with a new “American Opportunity” tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit would be refundable. This tax credit will be subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).

      * About 77,000 students in NJ will be potentially helped by making this tax credit refundable. (margin of error is +/- 16,400).

      (Source: Center on Budget and Policy Priorities (CBPP). See http://www.cbpp.org/1-21-09tax.htm)

    • Computers as Qualified Education Expenses in 529 Education Plans.
      Section 529 Education Plans are tax-advantaged savings plans that cover all qualified education expenses, including: tuition, room & board, mandatory fees and books. The ARRA provides that computers and computer technology qualify as qualified education expenses.
  • Housing
    Housing
    • First-time Homebuyers Credit.
      The Act extends the existing credit to qualifying first-time home purchases made before December 1, 2009, increases the maximum credit amount to $8,000 ($4,000 for a married individual filing separately), and repeals repayment requirement under Housing and Economic Recovery Act of 2008. If the taxpayer disposes of the home or the home otherwise ceases to be the principal residence of the taxpayer within 36 months from the date of purchase, the present law rules for recapture of the credit will apply.

    • Tax Credit Assistance Program [pdf 24kB]
      Federal Funding is being provided in order to fill financial gaps in affordable housing developments that were awarded low income housing tax credits in federal fiscal years 2007, 2008 and 2009. Under ARRA, state Housing Credit agencies can provide assistance under this program to affordable housing developments in the same manner and subject to the same limitations as required under the Low Income Housing Tax Credit program. See the NJ Housing and Mortgage Finance Agency website for further details about the implementation of the Tax Credit Assistance Program.

    • Treasury Department Low-Income Housing Grants in Lieu of Tax Credits. 
      The ARRA would allow taxpayers to receive a grant from the Treasury Department in lieu of tax credits. Under this provision, States housing agencies would receive a grant equal to up to eighty-five percent (85%) of forty percent (40%) of the state’s low-income housing tax credit allocation in lieu of the low-income housing tax credits they would have received. The sub-awards are subject to the same requirements (including rent, income, and use restrictions on such buildings) as the low-income housing tax credit allocations. The grant program would apply to each state’s 2009 low-income housing tax credit allocation.
  • Business
    Business
    • Bonus depreciation 
      Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow by permitting these businesses to immediately write-off fifty percent of the cost of depreciable property (e.g., equipment, tractors, wind turbines, solar panels, and computers) acquired in 2008 for use in the United States. The ARRA would extend this temporary benefit for capital expenditures incurred in 2009.

    • 5-year carryback of net operating losses 
      Under current law, net operating losses may be carried back to the two years before the year that the loss arises (the “carryback period”) and carried forward to each of the succeeding twenty years after the year that the loss arises (the “carryforward period”). For 2008 and 2009, the ARRA would extend the maximum carryback period for net operating losses from two years to five years. This benefit is only available to companies with gross receipts of $15 million or less.

    • Extension of increased small business expensing

      Small business taxpayers may elect to write-off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Until the end of 2010, small business taxpayers are allowed to write-off up to $125,000 (indexed for inflation) of capital expenditures subject to a phase-out once capital expenditures exceed $500,000 (indexed for inflation). Last year, Congress temporarily increased the amount that small businesses could write-off for capital expenditures incurred in 2008 to $250,000 and increased the phase-out threshold for 2008 to $800,000. The ARRA would extend these temporary increases for capital expenditures incurred in 2009.

    • Expand work opportunity tax credit for disconnected youth and unemployed, recently-discharged veterans 
      Under current law, businesses are allowed to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to employees of one of nine targeted groups. The ARRA would create two new targeted groups of prospective employees: (1) unemployed veterans; and (2) disconnected youth. An individual would qualify as an unemployed veteran if they were discharged or released from active duty from the Armed Forces during 2008, 2009 or 2010 and received unemployment compensation for more than four weeks during the year before being hired. An individual qualifies as a disconnected youth if they are between the ages of 16 and 25 and have not been regularly employed or attended school in the past 6 months.

    • Prospectively repeal Treasury Section 382 ruling

      Last year, the Treasury Department issued Notice 2008-83, which liberalized rules in the tax code that are intended to prevent taxpayers that acquire companies from claiming losses that were incurred by the acquired company prior to the taxpayer’s ownership of the company. The ARRA would repeal this Notice prospectively.
  • State and Local Governments
    State and Local Governments
    • De Minimus Safe Harbor Exception
      Since 1986, financial institutions could deduct only the carrying costs of bank-qualified bonds. The ARRA allows banks to deduct 80 percent of the carrying costs of purchasing all types of newly issued bonds in 2009 and 2010 to the extent investment in the bonds does not exceed two percent (2%) of the bank’s total assets.

    • “Qualified Small Issuer” Exception 
      ARRA would encourage financial institutions to invest in tax-exempt bonds issued in 2009 and 2010 by raising the annual issuance threshold for qualified small issuers to $30 million from $10 million. Financial institutions may purchase bonds from these small issuers, which include states, local governments, and qualifying not-for-profit organizations, and still deduct interest costs on their investment. The small issuer exception would also apply to an issue if all of the ultimate borrowers in such issue would separately qualify for the exception.

    • Temporary Modification of AMT Limit 
      The ARRA eliminates the application of the AMT on all bonds issued in 2009 and 2010, including refunding of bonds that were initially issued after 2003.

    • Withholding Tax on Government Contractors 
      Delay until 2012 law requiring withholding at a three percent rate on certain payments to persons providing property or services made by Federal, State, and local governments.

    • Taxable Bond Option (“Build America” bonds) 
      State and local issuers may elect to issue either taxable tax-credit in lieu of tax-exempt bonds for governmental purposes for bonds issued in 2009 and 2010. The taxable bond option allows issuers to receive a 35 percent reimbursement of interest paid from the federal government, or provide a 35 percent tax credit to investors. All of the tax laws applicable to tax-exempt bonds apply to the taxable tax-credit governmental bonds.

    • Qualified School Construction Bonds 
      The ARRA creates a new category of tax credit bonds for the construction, rehabilitation, or repair of public school facilities or for the acquisition of land for construction of public school facilities. The Act authorizes $11 billion annually for 2009 and 2010, with 40 percent of the allocation dedicated to large school districts.

    • Qualified Zone Academy bonds (QZABs) 
      The Act would allow an additional $1.4 billion of QZAB issuing authority to State and local governments in 2009 and 2010, to finance renovations, equipment purchases, developing course material, and training teachers and personnel at a qualified zone academy.

    • Recovery Zone Bonds 
      The ARRA would authorize a new category of tax-exempt private activity bonds for use in designated areas with significant unemployment, poverty and home foreclosure rates: $10 billion in taxable recovery zone economic development bonds, where the state or local government would receive a 45 percent reimbursement of interest paid, with no option to apply the credit to investors; and, $15 billion in recovery zone facility private activity bonds allocated based on a proportion of a jurisdiction’s unemployment rate versus the national rate. States would receive a minimum allocation of one percent. Bonds must be issued by January 1, 2011.

    • Tribal Economic Development Bonds
      The Act allows tribal governments to issue $2 billion in tax-exempt bonds for projects on tribal lands, excluding gaming projects. Tribal economic development bonds issued by an Indian tribal government are treated as if such bond were issued by a State except that section 146 (relating to State volume limitations) does not apply. A tribal economic development bond is any bond issued by an Indian tribal government (1) the interest on which would be tax-exempt if issued by a State or local government, and (2) that is designated by the Indian tribal government as a tribal economic development bond.

    • Modify Speed Requirement for High-Speed Rail Exempt Facility Bonds. 
      Under current law, States are allowed to issue private activity bonds for high-speed rail facilities. Under current law, a high-speed rail facility is a facility for the transportation of passengers between metropolitan areas using vehicles that are reasonably expected to operate at speeds in excess of 150 miles per hour between scheduled stops. The ARRA would allow these bonds to be used to develop rail facilities that are used by trains that are capable of attaining speeds in excess of 150 miles per hour.

    • De Minimis Safe Harbor Exception for Tax-Exempt Interest Expense for Financial Institutions. 
      Under current law, financial institutions are not allowed to take a deduction for the portion of their interest expense that is allocable to such institution’s investments in tax-exempt municipal bonds. In determining the portion of interest expense that is allocable to investments in tax-exempt municipal bonds, the ARRA would exclude investments in tax-exempt municipal bonds issued during 2009 and 2010 to the extent that these investments constitute less than two percent (2%) of the average adjusted bases of all the assets of the financial institution.

    • Modification of Small Issuer Exception to Tax-Exempt Interest Expense Allocation Rules for Financial Institutions. 
      As described above, financial institutions are not allowed to take a deduction for the portion of their interest expense that is allocable to such institution’s investments in tax-exempt municipal bonds. For purposes of this interest disallowance rule, bonds that are issued by a “qualified small issuers” are not taken into account as investments in tax-exempt municipal bonds. The ARRA would increase this dollar threshold to $30,000,000 when determining whether a tax-exempt obligation issued in 2009 and 2010 qualifies for this small issuer exception. The small issuer exception would also apply to an issue if all of the ultimate borrowers in such issue would separately qualify for the exception.
  • Energy
    Energy
    • Advanced Energy Investment Credit. 
      The proposal establishes a new 30% investment tax credit for facilities engaged in the manufacture of advanced energy property. Credits are available only for projects certified by the Secretary of Treasury, in consultation with the Secretary of Energy, through a competitive bidding process.

    • New Markets Tax Credit. 
      Under current law, there are $3.5 billion of New Markets Tax Credits (NMTC) available for each of 2008 and 2009. The provision increases the available credits for 2008 to $5 billion and the available credits for 2009 to $5 billion.

    • Tax Credits for Energy-Efficient Improvements to Existing Homes.
      The ARRA would extend the tax credits for improvements to energy-efficient existing homes through 2010. For 2009 and 2010, the ARRA would increase the amount of the tax credit to thirty percent (30%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the taxable year. The ARRA would also eliminate the property-by-property dollar caps on this tax credit and provide an aggregate $1,500 cap on all property qualifying for the credit.

    • Plug-in Electric Drive Vehicle Credit. 
      The ARRA modifies and increases a tax credit passed into law at the end of last Congress for each qualified plug-in electric drive vehicle placed in service during the taxable year. The credit is allowed against the alternative minimum tax (AMT). The ARRA also restores and updates the electric vehicle credit for plug-in electric vehicles that would not otherwise qualify for the larger plug-in electric drive vehicle credit and provides a tax credit for plug-in electric drive conversion kits.

    • Production Tax Credit
      Extend the placed-in-service date for wind facilities for three years (through December 31, 2012). The ARRA would also extend the placed-in-service date for three years (through December 31, 2013) for certain other qualifying facilities: closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; waste-to-energy; and marine renewable facilities.

    • Temporary election to claim the investment tax credit in lieu of the production tax credit
      Under current law, facilities that produce electricity from solar facilities are eligible to take a thirty percent investment tax credit in the year that the facility is placed in service. Facilities that produce electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy, and marine renewable facilities are eligible for a production tax credit. The production tax credit is payable over a ten-year period. The ARRA would allow facilities that are placed-in-service in 2009 and 2010 to elect to claim the investment tax credit in lieu of the production tax credit.

    • Repeal subsidized energy financing limitation on the investment tax credit 
      The ARRA would repeal this subsidized energy financing limitation on the investment tax credit to allow those that were financed with industrial development bonds or other federal, state or local financing program.

    • Removal of dollar limitations on certain energy credits
      The ARRA would repeal the individual dollar caps for qualified small energy property, qualified solar water heating property, qualified geothermal heat pumps making them eligible for an uncapped thirty percent credit.

    • Clean Renewable Energy Bonds (“CREBs”)
      The ARRA authorizes an additional $1.6 billion of new clean renewable energy bonds to finance facilities that generate electricity from the following resources: wind; closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; marine renewable; and trash combustion facilities. 1/3 will be available for qualifying projects of State/local/tribal governments

    • Qualified Energy Conservation Bonds 
      The ARRA authorizes an addition $2.4 billion of qualified energy conservation bonds to finance State, municipal and tribal government programs and initiatives designed to reduce greenhouse gas emissions.

    • Tax credits for energy-efficient improvements to existing homes. 
      The ARRA would extend the tax credits for improvements to energy-efficient existing homes through 2010. Under current law, individuals are allowed a tax credit equal to ten percent (10%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the taxable year.

    • Tax credits for alternative fuel pumps.
      The ARRA will increase the alternative refueling property credit for businesses that install alternative fuel pumps. For 2009 and 2010, the ARRA would increase the 30% alternative refueling property credit for businesses (capped at $30,000) to 50% (capped at $50,000). Hydrogen refueling pumps would remain at a 30% credit percentage, but will be increased to $200,000. In addition, the ARRA would increase the 30% alternative refueling property credit for individuals (capped at $1,000) to 50% (capped at $2,000).

    • Addition of Permanent Sequestration Requirement to CO2 Capture Tax Credit.
      Last year, Congress provided a $10 credit per ton for the first 75 million metric tons of carbon dioxide captured and transported from an industrial source for use in enhanced oil recovery, and $20 credit per ton for carbon dioxide captured and transported from an industrial source for permanent storage in a geologic formation. Facilities were required to capture at least 500,000 metric tons of carbon dioxide per year to qualify. The ARRA would require that any taxpayer claiming the $10 credit per ton for carbon dioxide captured and transported for use in enhanced oil recovery must also ensure that such carbon dioxide is permanently stored in a geologic formation.

    • Parity for Transit Benefits. 
      This provision would equalize the tax-free benefit employers can provide for transit and parking. The proposal sets both the parking and transit benefits at $230 a month for 2009, indexes them equally for 2010, and clarifies that certain transit benefits apply to federal employees.

    • Treasury Department Energy Grants in Lieu of Tax Credits. 
      The ARRA would allow taxpayers to receive a grant from the Treasury Department in lieu of tax credits. This grant will operate like the current-law investment tax credit. The Treasury Department will issue a grant in an amount equal to thirty percent (30%) of the cost of the renewable energy facility within sixty days of the facility being placed in service or, if later, within sixty days of receiving an application for such grant.

     

    Note: Information provided by the National Governors' Association