New Jersey Bonus Depreciation Decoupling Regulation Declared Invalid

On October 23, 2017 , the Superior Court of New Jersey, Appellate Division, issued an opinion affirming the New Jersey Tax Court’s decision in Toyota Motor Credit Corp. v. Director, Division of Taxation , No. 002021-2010, August 1, 2014 (TAXDAY, 2014/08/06, S.11 ). At issue was the application period of the decoupling from federal bonus depreciation on the property acquired after September 10, 2001, and before September 11, 2004. The Tax Court clarified that the Legislature expressly provided that the decoupling from federal bonus depreciation was applicable to property acquired after September 10, 2001, and before September 11, 2004. Thus, the regulation limiting such decoupling to property acquired after January 1, 2002, and during a fiscal year that commenced on or after January 1, 2002, was an unreasonable exercise of authority and invalid. Additionally the court determined that (1) the holding in Moroney v. Director, Division of Taxation , 376 N.J. Super. 1 (2005), concerning adjustments to federal basis when determining gain from the sale of property for gross income tax purposes, applied to the calculation of the taxpayer’s entire net income from the sale of its property under the New Jersey corporate business tax (CBT) and (2) the Director’s removal under the former throw-out rule of the taxpayer’s receipts sourced to Nevada, South Dakota, and Wyoming from the denominator of the receipts fraction used to determine the taxpayer’s CBT liability was erroneous.

Docket No. A-5189-14T3, Appellate Division, Superior Court of New Jersey, October 23, 2017

Login to read more tax news on CCH® AnswerConnect or CCH® Intelliconnect®.

Not a subscriber? Sign up for a free trial or contact us for a representative.

AUTHOR

CCHTaxGroup

All stories by: CCHTaxGroup