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Division of Taxation

Significant Changes to CBT Administration 7/13/04

Significant changes in the Corporation Business Tax Act have been recently enacted. They address net operating loss limitations for the years 2004 and 2005 and decoupling from federal statutes regarding deductions under IRC section 179 and bonus depreciation.

Section 1 of Assembly Bill 3110 (P.L 2004, c. 47) provides that for privilege periods beginning during calendar year 2004 and calendar year 2005 a limited net operating loss (“NOL”) deduction is allowed for the privilege period. The deduction permits a reduction of entire net income by up to 50%. To the extent that any NOL is disallowed by reason of this limiting provision, the date on which the disallowed deduction would otherwise expire is extended by a period equal to the period of disallowance.

Section 24 of Assembly Bill 3111 (P.L. 2004, c. 65) takes effect immediately upon signing and affects depreciation and certain expense deductions permitted for purposes of New Jersey Corporation Business Tax. For property placed in service on and after 1/1/04, the law decouples the federal ceiling allowable under IRC section 179, from the amount permitted to be deducted as an expense for New Jersey corporation business tax purposes. Returns for reporting periods ending after 12/31/03 are affected, for property that has been placed in service on or after 1/1/04. The decoupling limits the amount that may be deducted for CBT purposes to the amount of the deduction allowed under the Internal Revenue Code that was in effect on December 31, 2002. This amount is $25,000.

With regard to federal bonus depreciation, the law also clarifies that property placed in service after September 10, 2001 will not receive the bonus depreciation treatment. The new law includes a technical correction that will maintain the limitation on and after September 11, 2004.

Last Updated: Thursday, 02/13/20